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I am considering buying an apartment in Poland costing €190,000. I should be able to rent it for 1,000 per month. What are my income tax liabilities and what would the situation if I should decide to sell?

You will be liable to 2% transfer tax €3,800.  You will be liable to Irish income tax on the rental income less deduction such as the annual interest cost, say 10,000 and depreciation of  4,750 for the building and say 4,000 on fixture and fittings and equipment, with other allowable costs 2,000, which should leave you in a rental loss situation for the first couple of years.  When a profit situation occurs you will be liable to Irish income tax, PRSI and levies effective rate of 25 or 47%, (46% from March 2007).  You must file an Irish self-assessment tax return declaring the rent from the property, even if you have not been requested to do so by Revenue.

Depreciation is allowable at the following rates:

Buildings                                   2.5%

Facilities                                    4.5%

Machinery and equipment         7-25%

Computers                                30%

Vehicles                                    20%

In general, there is no special tax rate for capital gains in Poland. Capital gains are usually added to the regular income of an individual/company and based on the normal tax rates.  If real estate is sold more than 5 years after it was purchased the capital gain is exempt from tax, therefore if you sell within 5 years you will not incur a tax liability. 

An individual pays tax on his income as a wage earner or as a self-employed person. The tax for an individual who meets the criteria of a "permanent resident" in Poland will be calculated on his income in Poland and abroad. A foreign resident who is employed in Poland pays tax only on his income earned in Poland.  A  Permanent resident of Poland is liable to Polish tax on his worldwide income. A Non-resident may apply for limited tax liability and be treated only liable to Polish tax on Polish income sources, even if his stay in Poland exceeds 183 days in the tax year.

Poland Individual income tax rates 2006 are as follows earnings up to 37,024 are taxed at 19%, from 37,025 to 74,058 at 30% and exceeding 74,049 at 40%.  Individual's capital gain from sale of shares is taxed at a final tax rate of 19%. Dividend income is taxed at 19% rate as is corporation tax.

Louise Carey is an Accountant/Tax Consultant based at 32 The Square, Listowel, Co Kerry, tel: 068 21109, email:lc@taxconsultant.ie, www.taxconsultant.ie