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Polish REITs: Are We Finally Getting Closer to Launch?

REAL ESTATEPolish REITs: Are We Finally Getting Closer to Launch?

Many people interested in the topic of launching so-called REITs in Poland may have become indifferent to the news over time. It is not surprising, as news regarding government plans to prepare the appropriate regulations has been appearing for about eight years. Since 2016, we have also repeatedly heard about new obstacles and changes to earlier intentions. Despite this situation, which may increase skepticism, it is worth once again considering the topic of launching special, favorably taxed companies investing in the real estate market, i.e., REITs, in Poland. In the spring of 2024, new reports emerged related to the preparation of the appropriate regulations. Could REITs finally launch after the elections and a change in the political landscape? We decided to answer this question.

Our article in brief:

  • The law regarding the creation of REITs once (in 2018) reached the Sejm, but there was no political will to pass it. The topic briefly resurfaced after the COVID-19 pandemic (in the second half of 2021), but about two years ago, the then-government announced the “freezing” of work.
  • This year brought information about government plans to adopt the appropriate regulations, but unfortunately, specifics are still lacking. For now, we know the first, general assumptions of the regulations enabling the launch of typical REITs in Poland.
  • While awaiting legal changes, Poles can invest in foreign REITs. This is facilitated, for example, by one of the closed-end investment funds listed on the Warsaw Stock Exchange.

Below, we present more information about the government’s plans to launch Polish REITs.

Polish REITs: tax exemption, but under conditions…

At the beginning of April this year, earlier reports about the government’s plans regarding REITs were officially confirmed, which certainly increases the chances of preparing the appropriate regulations. On April 3, 2024, the press office of the Ministry of Development and Technology announced that Deputy Minister Jacek Tomczak presented the preliminary assumptions for regulations on companies investing in real estate rental (modeled after foreign REITs). For now, we only know very general information. “More detailed solutions are to be developed through the cooperation of the Ministry of Development and Technology and the Ministry of Finance,” adds Magdalena Markiewicz, an expert from the portal.

For now, we know that the dividend paid by SINNs (companies investing in real estate rental), i.e., domestic REITs, will be exempt from tax on the recipient’s side, which would be attractive to investors. However, the condition for the tax exemption will be the payment of at least 90% of revenues as a dividend after deducting costs other than depreciation. It is also known that SINNs will be able to invest in properties from various segments (not just residential or commercial). “It is worth remembering that the potentially excessive exposure of REITs to the housing market previously raised concerns and was one of the declared reasons for suspending work on the appropriate regulations,” reminds Magdalena Markiewicz, an expert from the portal.

Investment in domestic REITs is to be certain and safe

Other assumptions disclosed to the media indicate that each Polish REIT will have to meet high share capital requirements. We are talking about an amount of up to PLN 100 million. Moreover, the government initially assumes that companies investing in real estate rental will be listed on the Warsaw Stock Exchange and managed by a qualified team of asset managers. “This is another solution aimed at ensuring a high level of security for investors. It is worth adding that in 2018, a minimum share capital of PLN 50 million was proposed, half the current amount,” comments Magdalena Markiewicz, an expert from the portal.

A safeguard for investors will also be the obligation for REITs (SINNs) to invest the raised funds exclusively in income-generating assets. The limit for non-real estate revenues of the company has been initially set at 10%. It is worth noting that a similar solution was envisaged in the government’s draft law on companies investing in real estate rental from 2018 (see: Sejm print number 2855). Work on this draft stopped after the first reading in the Sejm. The 2018 draft assumed taxation on the REITs’ side at a rate of 8.5% of income. “This year’s assumptions, on the other hand, speak of a rate of 10%,” informs Magdalena Markiewicz, an expert from the portal.

For now, Poles are left with investing in foreign REITs

It is naturally worth remembering that all the above information is very preliminary, which means the possibility of adjustments to the assumptions adopted by the government. Previous experiences with the topic of Polish REITs also urge caution. However, if a concrete draft law appears this year, it can be said that the situation is moving in a direction desired by many investors. “For now, they can invest in foreign REITs. Interestingly, a closed-end investment fund (FIZ) focused on such entities has recently been listed on the Warsaw Stock Exchange,” summarizes Magdalena Markiewicz, an expert from the portal.

Source: Magdalena Markiewicz, an expert from the portal.

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