Poland's tax authorities are ramping up scrutiny on individuals renting out tourist accommodations through popular online platforms like Booking.com and Airbnb, especially those who fail to share their profits with the tax office. This increased oversight comes in the wake of a new law that took effect in July 2024, implementing a Brussels directive aimed at regulating the grey area of short-term rentals.
The reason short-term rentals have come under the tax office's microscope is straightforward: unlike the sale of used goods, which enjoys certain tax exemptions, short-term rentals do not benefit from any such limits. This means every transaction—no matter how small—is reported. The tax office treats short-term rentals as hotel services, and if they are deemed organized and continuous, they may require formal business registration.
Tax experts caution that even occasional rentals could be classified as business activity if they meet specific criteria of regularity. Although the EU directive mandates reporting of transactions from 2023 to 2024, tax authorities have the power to conduct audits going back as far as five years if they suspect tax evasion.
The consequences of tax evasion can be severe, potentially leading to financial penalties, interest charges, and, in extreme cases, penal-fiscal sanctions. Income derived from short-term rentals is subject to an 8% VAT, with PIT or CIT applicable depending on the taxation form, alongside a 23% VAT on the import of services from foreign advertising portals, known as reverse payment. Additionally, unpaid social security contributions and local government fees must also be factored in.
As of now, short-term rentals on platforms like Booking.com and Airbnb account for approximately one-quarter of all tourist accommodations in the European Union. In Poland, the trend is growing rapidly; for instance, there are over 7,000 rental offers available in Warsaw alone, with a similar number in Krakow. Coastal towns see even higher demand during the summer months, where prices per night can be several times higher than long-term rentals.
However, the risks associated with illegal rentals extend beyond tax penalties. Those who operate a business without proper registration face fines of up to 5,000 PLN. Failure to register guests or provide necessary data to the population register can lead to penalties of up to 1,000 PLN. Moreover, violations of fire safety regulations can incur fines as high as 10,000 PLN, while tax fraud can result in penalties reaching up to 720 daily rates, which could total as much as 21.6 million PLN at the maximum rate.
Interestingly, the tax offices in Poland have seen a significant decline in the number of inspections conducted. In 2024, they carried out 25% fewer inspections compared to the previous year. This trend has been consistent for several years, raising concerns about the effectiveness of tax collection, which hovers around 40%.
According to data from the Ministry of Finance, tax offices completed nearly 2.4 million verification activities in 2024, a slight increase from 2.3 million in 2023. The detected irregularities amounted to 8.6 billion PLN, compared to almost 7.6 billion PLN the previous year. Despite the decrease in audits, the effectiveness of these audits remains high, maintaining a success rate of 97-98% over the last three years.
In 2024, tax offices detected irregularities worth 10.3 billion PLN, surpassing the previous year's total of approximately 9.5 billion PLN. The Warsaw administrative chamber notably identified irregularities totaling nearly 3.8 billion PLN.
Despite the high detection rate of irregularities, the actual collection of owed taxes remains a challenge. In 2024, the enforcement authorities of the National Revenue Administration (KAS) collected almost 9.1 billion PLN, an increase of over 945.7 million PLN compared to 2023. Specifically, they collected over 7.7 billion PLN in tax arrears, which is 690.6 million PLN more than the previous year.
However, the effectiveness of tax collection, defined as the ratio of processed enforcement orders to the total number of orders, remains relatively low, at 42.6% in 2024, up from 41.2% in 2023. This indicates that while the detection of tax evasion is high, translating that into actual collection is still a work in progress.
On a positive note, the speed of enforcement actions has improved. In 2024, the average time taken from when enforcement actions could be initiated to the issuance of a reminder or enforcement order was 20 days. This is an improvement from an average of 24 days in 2023 and significantly faster than the 95 days recorded in 2020 during the pandemic.
As Poland continues to navigate the complexities of tax regulation in the burgeoning short-term rental market, the balance between encouraging tourism and ensuring compliance with tax laws remains delicate. The ongoing scrutiny from tax authorities signals a shift towards stricter enforcement, aiming to close loopholes and ensure that all operators contribute their fair share.
