Real Estate Investment Trusts in Poland – New draft legislation

On May 26th the Ministry of Finance announced a new draft of the legislation introducing real estate investment trust (REIT) structures into Poland. The new draft was prepared following industry consultation and feedback on the previous draft of October 2016.

Key features:

  • Polish REITs (its Polish name: “SWRN”) will operate in form of joint stock companies with registered office or centre of management in Poland, a minimum share capital of PLN 50M (approximately EUR 12.5M) and must have shares listed on the Warsaw Stock Exchange;
  • The type of real estate that may be owned by REITs is all existing rent producing asset classes (residential buildings and apartments are not excluded unlike in the previous draft);
  • At least 70% of the REIT’s assets book value must be qualifying real estate assets or shares in qualifying subsidiaries or other REITs;
  • Profits distributed from REITs to their investors will be taxed at the level of the REIT at the rate of 8.5 per cent at the time of distribution;
  • Dividends paid out by REITs will be exempt from both corporate and private income tax (CIT or PIT) in the hands of the recipient;
  • REITs’ liabilities cannot exceed 70% of their total assets;
  • REITs will be obliged to distribute 90 % of their profits derived from the lease or sale of real properties to their investors by the end of third quarter of the following year or reinvest it.

Further requirements for a REIT

Besides having its registered office or management board in Poland, a REIT will need to have share capital of at least PLN 50,000,000 (approx. EUR 12.5M) and will need to be incorporated for an indefinite period. All the shares in its share capital have to be bearer shares.

The draft legislation also provides for supervision by the Polish Financial Supervision Authority and sets requirements in relation to management board members (the management board must comprise at least three members, including one certified valuer, no Polish citizenship is required but members must have at least five years' experience in conducting investment activity in the Polish real estate sector).

REIT assets

A REIT’s revenue must be generated at least 70 per cent. from real estate lease income or sale of assets.  Although there are no restrictions on the type of existing real estate that may be owned by REITs, the draft requires the articles of association of a REIT to specify certain types of real estate in which the REIT is authorised to invest.

Additionally, a REIT’s portfolio should be diversified and should consist of at least three properties. Similarly to closed-end investment funds, a REIT may acquire only real estate assets with clear ownership title, which are not subject to enforcement proceedings or third party rights which if enforced could result in loss of title.

REIT subsidiaries

REITs’ subsidiaries have to meet certain criteria in order for the REIT to treat dividend income as exempt from income tax.

A subsidiary may operate in the form of a joint-stock company (an S.A.), limited liability company (an sp. z o,o) or limited joint-stock partnership (an sp.k.a) in which the REIT holds at least 95 per cent of the shares. At least 70 per cent of the subsidiary’s assets should be real estate and at least 80 per cent of its revenue should arise from real estate leasing or sale. Similarly to a REIT, a subsidiary is obliged to distribute an annual dividend of no less than 90 per cent of profits.

Further information on distribution of REIT profits

A REIT will be obliged to distribute annual dividends of no less than 90 per cent of its profit derived from the lease or sale of real properties over the previous financial year increased by undistributed profits for previous years. At the management board’s request, profit allocated for dividend may be reduced by the profit made on the sale of real estate if that profit is intended for the purpose of acquiring other real estate within two years from the date of the sale. The final decision regarding distribution of profit can only be made by the shareholders meeting.


The introduction of REIT structures in Poland has been eagerly anticipated by the real estate industry and is expected to have a positive impact on the real estate investment and development market. It will stimulate activity in the real estate sector in Poland and will increase domestic participation in the Polish real estate market, which is currently dominated by foreign investors.

The draft will be now subject to government and public consultations, therefore may still be subject to certain amendments. The legislation is expected to enter into force in January 2018.