Property Rental and Accounting - What You Need to Know

Renting out apartments and commercial premises is one of the most popular sources of additional income in Poland. Whether you rent out a single flat privately or run a business managing several properties, you must properly account for your rental income. This guide covers the differences between private and business rental, available tax forms, deductible costs, and practical advice for landlords.

Private Rental vs Business Activity

The first decision you need to make concerns the form of rental. This determines your tax obligations, deduction options, and filing requirements.

Private Rental

Private rental is the simplest form - it does not require registering a business. You simply report your income in your annual tax return. Since 2023, the only available tax form for private rental is the lump sum tax on recorded revenue (ryczalt). This means you cannot deduct business costs, but you benefit from low tax rates.

Rental as a Business Activity

If you rent out multiple properties, actively manage short-term rentals (e.g., through platforms like Airbnb), or want to deduct costs, consider registering a business activity. As a business, you have access to the progressive tax scale or the 19% flat tax, which allow you to deduct business expenses, including depreciation of properties acquired before 2022.

Lump Sum Tax on Private Rental - 8.5% and 12.5% Rates

The lump sum tax is currently the only option for private rental income. Two rates apply:

  • 8.5% - on rental revenue up to 100,000 PLN per year
  • 12.5% - on rental revenue exceeding 100,000 PLN per year

The 100,000 PLN threshold applies to the combined rental income of both spouses. If you rent jointly with your spouse, you may file a declaration to have all income taxed under one spouse's name - but the limit remains 100,000 PLN.

You file lump sum tax on the PIT-28 form, due by April 30 of the following year. Advance payments are made monthly (by the 20th of the following month) or quarterly.

Learn more about the differences between lump sum and progressive tax in our article on choosing your tax form.

Costs You Can Deduct with Business Rental

Under the private lump sum tax, you cannot deduct costs. However, when renting as part of a registered business, you have access to a wide range of deductible business expenses:

Property Maintenance

  • Repairs and renovations (painting, plumbing, appliance repairs)
  • Property insurance (fire, flood, liability)
  • Property management fees (if you use a management company)
  • Building maintenance fees and renovation fund contributions

Financing Costs

  • Mortgage interest payments (note: only interest, not principal repayments)
  • Bank fees and commissions related to the property loan
  • Property valuation and notary fees at purchase

Operating Costs

  • Advertising and listing fees
  • Real estate agent commissions
  • Accounting and tax advisory costs
  • Travel to the property for inspections and repairs

Property Depreciation for Rental

Depreciation allows you to spread the purchase cost of a property over time and deduct it from revenue. However, since January 1, 2022, important restrictions apply:

  • Residential properties (residential buildings and apartments) acquired or constructed after December 31, 2021 are not eligible for tax depreciation
  • Residential properties acquired earlier could be depreciated until the end of 2022 - from 2023, depreciation write-offs can no longer be included in costs
  • Non-residential properties (commercial premises, offices) remain eligible for depreciation

For non-residential properties, the standard depreciation rate is 2.5% per year (40-year depreciation period). When purchasing a used commercial property, an individual depreciation rate may be applied - up to 10% per year (minimum 10-year period).

PIT-28 or PIT-36 - Which Tax Return to File

The type of annual return depends on your chosen tax form:

  • PIT-28 - filed when you report private rental income under the lump sum tax (deadline: April 30)
  • PIT-36 - filed when you report rental income as a business under the progressive tax scale
  • PIT-36L - filed when you chose the 19% flat tax for your business

On PIT-28, you report revenue without deducting costs. On PIT-36 and PIT-36L, you report income (revenue minus costs), which - when facing high renovation costs or mortgage interest - can mean significantly lower tax.

When to Register a Business for Rental

Business rental is particularly worthwhile when you:

  • Rent out more than 2-3 properties
  • Incur high renovation or modernization costs
  • Are repaying a mortgage and want to deduct interest
  • Operate short-term rentals (Airbnb, Booking)
  • Plan to expand your property portfolio

Keep in mind that running a business requires paying ZUS social security contributions, which increases fixed costs. For modest rental income, the private lump sum tax may prove more favorable. Check real figures using our lump sum calculator.

Learn more about the startup relief and preferential ZUS contributions.

Practical Tips for Landlords

Documentation

Maintain thorough records of all income and expenses. Even under the lump sum tax where you cannot deduct costs, it is wise to archive rental agreements, payment confirmations, and repair invoices - in case of a tax audit.

Rental Agreement

A well-drafted rental agreement is essential. It should include: parties' details, property description, rent amount, payment deadline, rental period, utility settlement rules, and termination conditions. Consider an occasional rental agreement (najem okazjonalny) - it provides better protection for the landlord in case of eviction issues.

Security Deposit

A security deposit collected from the tenant is not income when received - it becomes taxable only when you retain it (e.g., to cover damage repairs). A deposit returned to the tenant is not subject to taxation.

Utility Billing

If the tenant pays utilities directly to the providers, those amounts do not constitute your income. If, however, you include utilities in the rent or collect utility payments and pay them yourself, the entire amount counts as your revenue under the lump sum tax.

Summary

Property rental in Poland requires informed tax decisions. For private rental, the only option is the lump sum tax at 8.5% (up to 100,000 PLN) and 12.5% (above), while business rental offers the ability to deduct costs at the expense of greater administrative duties and ZUS contributions. The key is analyzing your individual situation - number of properties, cost levels, and growth plans. The specialists at LinTax in Wroclaw will help you choose the optimal rental tax structure and ensure proper accounting. Contact us to discuss your situation.