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The Warsaw Voice » Real Estate » February 23, 2010
The Real Estate Voice
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Discontinued Construction Projects as Allowable Expenses
February 23, 2010   
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The global economic crisis has not spared the Polish building industry. Limited access to funding in particular has forced developers to change their investment plans. In many cases, land that developers bought is lying vacant and construction designs lie buried in filing cabinets.

Until the end of 2008, developers who gave up on construction projects they had earlier planned had little possibility of putting down the costs they incurred in the process as allowable expenses. The Polish parliament eventually responded to the needs of the market and as of Jan. 1, 2009, the law on personal and corporate income tax was changed so that the costs of canceled projects can be put down as allowable expenses. This means that a developer who plans a project, pays the costs of producing or purchasing fixed assets (such as real estate) or immaterial and legal assets (such as copyright to a construction design) and then due to the market situation is forced to abandon the project while it is being carried out, can put down the costs as allowable expenses. The right to do so is effective from the day the project is disposed of or canceled. Both cases need to be certified (documented) by an invoice or a cancellation protocol respectively.

The notion of a project being disposed of is fairly easy to interpret, but it has to be remembered that this cannot take place without a charge, as a donation for example. There is, on the other hand, some uncertainty about defining the cancellation of a project. Neither the parliament nor the tax authorities have decided if this should be physical cancellation, such as demolition of the part of the building that has already been built, or if the key factor is the developer's decision to discontinue the project. It seems more rational to conclude that when a project gets canceled, the physical effects of the construction do not necessarily have to be removed. However, the cancellation must be permanent rather than a developer just putting a project on hold, even if for a long period.

Renata Robaszewska, Counsellor at law

LENGIEWICZ WROŃSKA BEREZOWSKA & PARTNERS Law Office l TEL. +48-22 826 30 33, 828 14 73; e-mail:lwb@lwb.com.pl
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