NEWSLETTER
No. 25, December 2022
Malinowski & Associates. Legal Advisors. Partnership
Table of contents
More increases in the minimum wage.
Simpler conversion of real estate perpetual usufruct into ownership.
Individual depreciation rates for new non-residential buildings and structures.
Individual rates and shorter depreciation period
Guarantees and warranties of the Bank Gospodarstwa Krajowego.
More increases in the minimum wage
The minimum wage and the minimum hourly wage will be doubled over the course of 2023.
The first increase will take effect on Jan. 1, 2023. (minimum wage rates are respectively: PLN 3,490/month and PLN 22.80/hour), and the second – from 1.07.2023. (minimum wage rates are respectively: PLN 3,600/month and PLN 23.50/hour).
Simpler conversion of real estate perpetual usufruct into ownership
Genesis
The Polish government plans to introduce key changes aimed at entrepreneurs soon. This is to be achieved by amending the land-use regulations. On November 21, on the initiative of the Ministry of Development and Technology, a bill was drafted to amend the law
On real estate management and some other laws. The amendment is motivated by encouraging entrepreneurs to invest in commercial land under perpetual usufruct. The constant updating of annual fees, the cyclical change in land values, the difficulty of finding potential foreign buyers for whom the institution of perpetual usufruct is incomprehensible, and the imposed purpose and timing of development effectively deter entrepreneurs from investing in these properties. Accordingly, a breakthrough is planned in terms of the continued fate of perpetual usufruct, thereby strengthening the legal position of users by facilitating the replacement of temporary usufruct with ownership.
Proposed solutions
The project proponent intends to grant existing perpetual users the right to
to acquire ownership of the land held from the State Treasury or local government units.
The price of land not used for business will be calculated according to the formula:
Where:
S – previous percentage rate of annual fee for perpetual usufruct
W – the value of the land property determined as of the date of the sale agreement
– and therefore the price of such land is, in simple terms, 20 times the annual fee.
The cent of land used for business will be calculated according to the formula:
Where:
S – previous percentage rate of annual fee for perpetual usufruct
W – the value of the land property determined as of the date of the sale agreement
C – price
– and therefore a cent of such land will constitute no less than 20 times the annual fee,
but no more than the equivalent value of the property.
Perpetual users of Treasury land who choose to pay in installments, on the other hand, will pay the equivalent of 25 annual fees.
The purchase of real estate from local government units will be carried out on the same basis or as a result of negotiations.
In summary, the perpetual usufructuary will pay for the ownership of the land the equivalent of 6%, 20%, 40%, 60% or more of the market value of the land, respectively, but no more than this value. Detailed conditions for the sale of real estate will be determined by the relevant provincial governor, council or assembly
By resolution or order.
If the property or part of it will be included in the register of historical monuments, the price may be reduced
o 50%.
Exceptions
In some cases, it will be impossible to demand a contract for the sale of real estate. Land will be excluded from the claim:
1) undeveloped,
2) used for the operation of allotment gardens,
3) remaining in perpetual usufruct of seaports and marinas,
4) given in perpetual usufruct during the 10 years preceding the sale of the property,
5) in respect of which the perpetual usufructuary has not performed the obligations set forth in the perpetual usufruct agreement,
6) for which proceedings for termination of the perpetual usufruct contract are pending.
Undeveloped land may be subject to sale if the perpetual usufructuary undertakes to develop a housing project on such land. Such an obligation may be secured by establishing a contractual right of repurchase.
Time limitation
Within one year from the date of entry into force of the law, the perpetual usufructuary will be able to request a contract for the sale of the land.
Anticipated consequences
The project’s assumptions, aimed at making it easier for entrepreneurs to file claims
for the sale of real estate previously covered by perpetual usufruct, should be assessed overall positively.
It should be noted, however, that entity transformations from real estate ownership require disclosure in the real estate registry in each case. This could lead to an excessive workload for the land and mortgage registry departments in the district courts, and thus to delays in making entries and processing applications.
The project raises some questions on tax issues. According to experts, the changes could result in the introduction of a property value tax (cadastral tax) in the near future. The new levy shows a higher value than the existing property tax, which could put a significant burden on the budget of entrepreneurs. However, the Government’s current position does not provide for the introduction of such a solution.
Individual depreciation rates for new non-residential buildings and structures
Genesis
On October 5, 2022, on the initiative of Law and Justice and KUKIZ 15 MPs, a draft bill amending the personal income tax (PIT) law and the law was submitted to the Sejm.
On corporate income tax (CIT).
The planners’ idea is to introduce tax optimization solutions for micro-, small- and medium-sized entrepreneurs from areas with high unemployment and low per capita income into the Polish legal order.
Individual rates and shorter depreciation period
Depreciation of fixed assets consists of accounting for the wear and tear (reduction in value) of fixed assets.
If the law enters into force, it will be possible to determine the depreciation rate for self-made non-residential buildings (premises) by entrepreneurs on an individual basis
and structures. The regulation is to apply to entities with the status of micro-, small- and medium-sized entrepreneurs.
Fixed assets as defined by the project are buildings, premises and civil engineering structures.
It seems that the solutions being implemented will largely have an effect on the construction industry
From underdeveloped areas and entities that undertake investments in real estate
for profit.
The application of the individual depreciation rate will depend on the location of the entrepreneur’s property. A prerequisite is that it is located in a county where the average unemployment rate corresponds to at least 150% of the average rate in the country, and the per capita income of the municipality is less than 80% of the per capita income for the country as a whole.
The amortization period will depend on the average unemployment rate for the country. Property located in a county where the average unemployment rate for the country is between 150% and 200% will have a depreciation period of not less than 10 years, while for property located in a county with an average unemployment rate for the country above 200%, the depreciation period will be not less than 5 years.
It is worth noting that only fixed assets not entered in the records before December 31, 2022 will be eligible for depreciation under the new terms.
Guarantees and sureties of Bank Gospodarstwa Krajowego
Bank Gospodarstwa Krajowego is a Polish development bank, wholly owned by the State Treasury. It has the authority to provide, in its own name and on its own account, sureties or guarantees under the government’s surety and guarantee programs. The BGK operates on the basis of the Law of May 8, 1997. On sureties and guarantees issued by the State Treasury and certain legal entities (Journal of Laws 2022, item 1613).
According to the Government Legislation Center website, on December 5, 2022. A draft amendment to the aforementioned has gone out for consultation. Law.
Two government programs are currently being implemented: “Supporting Entrepreneurship with Guarantees and Guarantees of Bank Gospodarstwa Krajowego” and “Clean Air Guarantee Program with Guarantees of Bank Gospodarstwa Krajowego”. Since 2010. BGK’s offer also includes instruments related to the implementation of the government program “Support for privatization through the provision of guarantees and sureties to companies with the participation of employees and local government units (civic activity companies)”.
The goal of the first program is to help micro, small and medium-sized entrepreneurs access external sources of financing through a system of guarantees and warranties, using, among other things, the following. funds from the European Union. The “Clean Air” guarantee program using the guarantee of the Bank of National Economy is designed to assist in the replacement of heat sources or thermal modernization of single-family houses and detached single-family dwellings financed by a BGK-guaranteed loan.
However, BGK’s surety and guarantee activities are currently carried out not only under the Law on Sureties and Guarantees, but also under funds created or operating in BGK under other laws, such as: Liquidity Guarantee Fund, Government Housing Fund, Ecological Surety and Guarantee Fund, and Crisis Guarantee Fund, which do not require the adoption of a government program (with the exception of the Ecological Surety and Guarantee Fund) to carry out their tasks. Hence the need to take this state of affairs into account in the provisions of the law
On sureties and guarantees.
Proposals to amend the law
Among the solutions proposed by the Ministry of Finance is the inclusion in the regulations of sureties and guarantees issued by Bank Gospodarstwa Krajowego under funds created or operating in BGK under separate laws.
The amendments also include allowing employees of banks cooperating with the BGK, who are not attorneys or legal advisors, to be entrusted with debt collection as part of their tasks. This is to enable seamless cooperation in claiming performance of guarantees
with other financial institutions on the basis of an agreement to entrust collection activities to banks or other financial institutions that cooperate with BGK in offering guarantee and surety products.
The bill supplements the law with provisions for conducting evaluation studies of BGK’s surety and guarantee programs to verify the effectiveness of the aid distributed. The BGK will have the opportunity to report on such activities. As the law currently stands, the evaluation of an aid measure depends only on the will of the beneficiary and on obtaining permission to process personal data. The proposed modification of Art. 34i will allow the exclusion of the need to obtain consent to contact respondents through the various channels of communication. Of course, these are not marketing studies but only evaluation studies, the necessity of which may arise from agreements with project sponsors.
Amendment of the Law of August 29, 1997. – The Banking Law (Journal of Laws 2021, item 2439, as amended) will provide the possibility of requesting the Financial Supervision Commission to entrust financial institutions other than banks to assess the repayment capacity of financing provided in a form other than credit, such as a factoring institution’s factoring limit guarantee.
Further in the plans is the expansion of the possibility of granting guarantees or sureties for obligations other than loans, in particular factoring and leasing.
The proposed law does not apply to the property rights and obligations of entrepreneurs or the rights of
and obligations of entrepreneurs to public administration bodies. The project does not affect SMEs in this regard. The proposed amendment to the law will expand the guarantee and surety offerings for SMEs and allow large entrepreneurs to be covered by these offerings and will have a positive impact
on the ability to adapt this offering to current market needs and challenges.
