"Pałacyk Plus" - Boom for castles and mansions on the Polish real estate market?

Mon, 02/14/2022

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Many people dream of living in a castle, in a beautiful historic villa or in a small manor in the countryside. What usually remains a pipe dream for normal earners could now become reality in Poland. At least in theory, because only the future will show whether the offer will be a big seller for the middle class, how often it will be claimed, and who will ultimately benefit from this "royal bonus" and in what form.

Poland adopts support program for lovers and savers of old houses

As if out of nowhere: Suddenly it was there, without any noticeable debate about it: The talk is of a special depreciation option that the Polish government is providing for buyers and owners of castles, chateaus and manor houses in Poland. Under the heading Pałacyk Plus the purchase and preservation of Polish cultural monuments is to be promoted to a special degree from 01.01.2022. The offer entices with generous, so far unprecedented benefits. Critics have described the new program as a "tax gift for the rich while neglecting other grievances in the country" and it is therefore not without political explosive power.

Exemplary renovated manor house - whoever is planning to buy or renovate a monument in Poland anyway, now gets the prospect of generous subsidies.

Background: many abandoned listed properties in the rural areas

They characterize Poland's countryside to an impressive extent: thousands of castles, manors and country estates are still scattered throughout the country's voivodeships. They are not only the cultural heritage of the Kingdom of Prussia, in the noble Republic of Poland-Lithuania it was influential Polish magnates as well as the Polish lesser nobility who had numerous palaces and parks built in the historic centers of Mazovia and Lublin.

Although the country has permanently shown impressive examples of reconstruction and rehabilitation of destroyed castles since the post-war period, the list of threatened monuments is still long. The reasons for the widespread vacancy and decay, especially in rural areas, are not always a lack of financial resources, because there is no shortage of solvent prospective buyers for historic houses. Who plans however to prepare an old manor house for private purposes, attaches importance to an "undisturbed surrounding". Thus, manors for sale without a significant plot size on sprawling estates with farms in the immediate vicinity are difficult to market. The situation is even more difficult with long-standing legal disputes between municipalities and heirs that make marketing impossible. Local politics can also make preservation and investment difficult, as municipal land-use plans often set tight parameters for investors on the future use of a rural development property.

Will this new package of measures be the savior of all problem properties? That is not to be assumed, but: The list of properties and land that could benefit from it is just as large. Prospective buyers polish castles and manor houses should therefore familiarize themselves with the most important regulations and seek tax advice.

Who benefits from "Pałacyk Plus"? - The most important in brief

The tax reform addresses all buyers, owners and co-owners of a historic property in Poland, regardless of their assets, position or source of income. The only requirement is that the property must be a registered monument.

All acquisition costs related to the monument property may be deducted at a maximum rate of PLN 500 per 1 m² of usable space, up to a maximum of PLN 500,000 per year.

In addition, up to 50% of all expenses for construction services can be claimed against tax, with no maximum limits as things stand: An investor who invests 6 million Złoty, can deduct 3 million Złoty

The new law thus makes it possible to limit one's income while paying significantly less tax.

Previous monument protection ordinances remain unaffected by this: Only those who have carried out construction activities with the necessary permits from the responsible monument authority are entitled to this bonus.

Can everyone afford a castle or a manor now?

Although it is to be expected that there will be a marketing push and new purchase offers in the near future, it is unlikely whether the tax relief, which has been widely publicized in the media, will actually lead to a rapid increase in the number of castle owners. Acquisition, renovation and preservation of a castle will not become an everyday business, even with considerable tax relief. Moreover, it is impossible at this point in time to estimate how much substance and long-term suitability there is in this new law, especially with regard to the interaction with authorities. And Poland's bureaucratic mills grind slowly.

However, if you are planning to buy a listed property in Poland or are already an owner of such a property, Pałacyk Plus will certainly not be a negative transaction.

As soon as we have first experiences from practice, we will report about it and update this article. Our newsletter will keep you up to date!

Update June 2022: "Pałacyk Plus" will no longer exist in 2023

Several sources reported an imminent abolition of "Pałacyk Plus" tax relief. According to the Polish Ministry of Finance, the program will cease to exist as early as next year 2023. This information has since been confirmed by official authorities.