Real estates for foreigners – step by step

Legal acts tend to evolve or change extremely quickly in continental law systems, but sometimes we can encounter some old artifacts of legislation that somehow remained in force particularly long. In Poland, for example, the oldest still binding act of law is an Act on Purchasing of Real Estates by Foreigners, which dates back to 24th of March 1920. Obviously, the act has been fundamentally changed and expanded since then, but today it is still an extremely important act in Polish business environment. For foreign entities willing to start their business in Poland it is a particularly important act, which deserves attention.

Who is really the foreigner?

To begin with, we must determine who fits into the definition of foreigner as laid out in the act. The definition contains following groups:

  • people without Polish citizenship – people with more than one citizenship with one of them being Polish, are therefore treated as any other Pole;
  • legal persons with their registered seats outside of Poland – particularly limited liability companies or anonymous companies, as well as foundations or organisations seated outside of Poland;
  • companies of subjects mentioned above, without legal capacity, seated outside of Poland and created on basis of foreign law;
  • legal persons or companies without legal capacity seated in Poland, effectively controlled by foreigners, either directly or indirectly.

Foreigners coming from countries of European Economic Area (EEA: the EU, Norway, Iceland and Liechtenstein) as well as Switzerland, are still considered foreigners, but they do not require any permission to buy real estates in Poland in any case. Those entities will not face any additional obstacles based on their foreigner statute, regardless of capital or control of the entity coming from outside of the EEA.

The term “control” over legal persons and companies has been explained in detail by lawmakers, but strangely enough, this definition is completely irrelevant in relation to purchase of real estate. This is a result of legal norms mentioned above, which declare that any foreigner based in EEA not required to file for permission to purchase real estates, regardless of control held over it. Consequently, companies based in Poland may be considered foreigners, but no matter how they are connected to foreign capital or foreign entities, they will still be able to buy real estates freely. It is therefore childishly simple to bypass the whole permission procedure by creating a limited liability company (spółka z ograniczoną odpowiedzialnością, sp. z o.o.) with its registered seat anywhere in Poland.

If we are considered foreigners by the act, we should in principle file for permission to buy any real estate, as described further. There are, however, a few situations when foreigners do not need permission. Those exceptions do not apply to real estates located in a border zone (which roughly consists of Polish municipalities along national borders, including the whole Tricity area and every other coastal municipality) and to agricultural estates larger than one hectare. If none of the two exclusions apply, we will not need permission to buy:

  • an independent apartment, which means an apartment consisting of rooms and additional spaces such as kitchen or bathroom, which provides adequate housing;
  • a garage or a share in garage, if we require it as buyers or owners of an apartment in order to provide adequate housing;
  • real estate, if we have been living in Poland for five years since receiving permanent resident permit or becoming a long-term resident of the EU;
  • real estate, if it will become a joint property of spouses, if the buyer is a spouse of a Polish citizen and have been living in Poland for two years since receiving permanent resident permit or becoming a long-term resident of the EU;
  • real estate from its owner or perpetual user, if the seller has been an owner or perpetual user for at least five years, if we are entitled to inheritance from the seller based on Polish law – this way, we can easily buy real estates from our close Polish relatives.

The overall structure indicating entities which require permission to buy estates is complicated, but crucial if we want to make a purchase.

To-do list

In order to receive a permission, we must file for it to the Ministry of Internal Affairs and Administration. The procedure is lengthy, and we may wait for an answer for even four months, so it would be wise to file for permission as early as possible. We may expect faster response, if we want to buy something in one of Polish Special Economic Zones – one of them consists of eastern part of Pomeranian voivodship, including the Tricity and Hel Peninsula, and of complete Kuyavian-Pomeranian Voivodeship – the Ministry is then obliged by law to either issue a permission or decline within one month. Basic data which we should include in our document include data of an entity asking for permission, precise information on the real estate in question, according to its type, information on seller, type of legal action resulting in transfer of rights to property (e.g. sale, exchange, donation), purpose of the purchase, and information on sources of financing of the transaction.

One of the key elements is a demonstration of foreigner’s connection with Poland, as such a connection is a legal requirement for the permission. Such connection might be established by Polish ancestry, marriage with Polish citizen, a permanent residence permit, or – most importantly for an entrepreneur – a position in management board of a Polish company or a business activity in Poland. This list, present in the act, is in no way a full list, so we may use a little bit of creativity to come up with other convincing connections. Keep in mind that the list mentions an already lasting business activity, and not just a plan to launch such an activity. It will be therefore useful to provide documents demonstrating, that our business activity in Poland has already begun and purchase of a real estate is a natural next step for our company – any kind of Polish business permissions or concessions would be very helpful here. If we indicate business connections with Poland, we should also indicate how the subject of potential purchase answers the needs of said business. In short, the real estate must fit our business. It is hardly possible to get a permission for a company to buy an apartment, as long as it is not for tourism.

We cannot forget about compulsory attachments, either. They are listed in an ordinance of the Minister of Internal Affairs and Administration and depend on multiple aspects, but in general, the attachments should be related to:

  • the foreigner himself – in case of natural persons, we will need a confirmed copy of an ID, whereas in case of legal persons, copies from relevant national registries will be necessary;
  • the real estate – an excerpt from a land register entry, from the cadastral map or other relevant land registry in Poland, depending on type of real estate. All copies and excerpts should be issued no sooner than six months before filing for the permission;
  • documents on sources of financing of the purchase, as well as – in case of business activity – on financial possibilities to conduct business activity, issued no sooner than three months before filing. Such documents may include attestations from banks or relevant tax authorities;
  • documents demonstrating connection to Poland, such as confirmed copy of marriage certificate, residence permit copy, or documents related to business activity in Poland;
  • confirmation of payment of stamp duty.

Confirmed copies are copies confirmed either by notary or by legal counsel, tax advisor, patent attorney or attorney, acting as plenipotentiary. Documents written in foreign language must be attached together with translation to Polish, made by certified translator. The stamp duty mentioned above amounts to 1570 PLN and should be paid to City Hall of Warsaw, as all stamp duties are paid in relevant municipal offices. High cost of permission is a result of complicated procedure, engaging multiple bodies – the Minister of Internal Affairs is obliged to ask Ministry of Defence for their opinion, and if the real estate in question is agricultural, then the Ministry of Agriculture is also obliged to issue an opinion.

Purchase of agricultural estate leads to further complications, as in most cases an Act on the Formation of Agricultural System will apply to such transaction. According to this act, if the agricultural estate is to be sold to anyone or anything other than individual farmer, a permission from the Agricultural Property Agency will be required. The permission requires a specific proceeding described in the act.

Promise – a promising option?

An interesting option – but not an alternative to permission itself – is a promise, described in Article 3d of the act. The promise is fairly inexpensive, as the stamp duty is only 98 PLN, and if the promise is granted, we will have a year to file for permission itself, while being assured that the permission will be granted as long as facts relevant to the case will not change (for example, the promise might be rejected if the company ceases its business activity in Poland or suffers losses which render it unable to conduct activity related to the estate in question). When filing for the promise, we have to provide the same required information and documents as when filing for the permission itself, yet we will still have to file for permission again. Before issuing a promise, the Ministry of Internal Affairs and other interested bodies must examine the case just as before issuing a permission, so in reality the promise will not be provided much quicker than a permission would be. All of this renders the institution of promise questionable at least, especially with regards to Special Economic Zones, where we should receive either the permission or the promise within one month.

Rejection

Throughout the proceeding, the minister may request additional information from the foreigner, mostly in order to check if the purchase will not affect national security, internal safety or other interest of the Republic od Poland. If the motion is declared to fulfil all requirements and receives positive opinions from all relevant organs, the permission will be issued, valid for two years.

In case of rejection of our motion, there is a possibility to file for a second investigation of the case to the minister, which should be done within 14 days after a negative decision is delivered. This motion requires a statement and explanation, in which aspects we disagree with the decision issued. It is also possible to bring the case directly to administrative court. Luckily, the 100-year-old Article 4 of the act, stating that the decision of the minister “shall not require any explanation and shall be final” is no longer in power.

A task for professionals

Procedure leading to permission for purchase of real estates is sadly both complicated and expensive. Apart from the stamp duty, we must keep in mind related costs of translations of foreign documents, fees for relevant documents regarding the estate, and costs of confirmation of copies. All that can be easily avoided simply by creation of a company in Poland, although this is not a universal solution helpful in every case. If there is no chance to make use of numerous exclusions and exceptions, we should let the professionals handle the case for us. Knowledge and experience will allow to manage the procedure effectively and without unnecessary problems.

Author: Filip Walczak
19.11.2020

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