Selling several plots of land?

The sale of real estate by individuals can raise numerous tax concerns. Many landowners wonder whether the sale of several or even a dozen plots of land will be considered business activity by tax authorities. Such a classification can have far-reaching consequences for both the Value Added Tax (VAT) and Personal Income Tax (PIT).

So, does every sale of multiple plots mean that the seller becomes an entrepreneur for tax purposes? The answer depends on all the circumstances of the specific case.

VAT – when does the sale of plots become a business activity?

The starting point is the judgment of the Court of Justice of the European Union of 15 September 2011 in Joined Cases C-180/10 and C-181/10. The CJEU indicated that a natural person selling land belonging to their private property does not automatically become a VAT payer solely because they sell it.

However, the Court emphasized that the situation is different if the owner engages in active activities typical of professional real estate transactions, employing resources similar to those used by manufacturers, traders, or service providers. In such a case, the sale may be considered an economic activity subject to VAT.

This means that simply owning multiple plots or even dividing them doesn’t necessarily mean you’re running a business. The seller’s proactive approach is crucial.

Circumstances that may support the recognition of sales as business activities include, among others:

• development of the area (utility connections, construction of infrastructure),
• separation of internal roads,
• conducting extensive marketing activities,
• taking actions to increase the attractiveness of the property with the intention of selling it commercially,
• sales organization in a manner typical of professional participants in the real estate market.

At the same time, none of these elements are decisive on their own. Tax authorities and administrative courts each analyze the entirety of the circumstances of the case.

The position of the administrative courts

The above principles are reflected in the current case law of administrative courts.

A good example is the judgment of the Supreme Administrative Court of 28 April 2023, file reference I FSK 624/20. The case concerned a farmer who purchased agricultural land in 1998 and used it for his own needs for many years. Only after a change in the local zoning plan did the property become a building plot. The owner divided the land into 11 plots, sold four of them, and planned to pass the remaining plots on to his children or potentially sell them in the future.

Importantly, he did not conduct any business activity, did not undertake any intensive marketing activities, and did not invest in land development beyond obtaining a permit for the construction of a water supply system. The proceeds from the sale were to be used for residential purposes.

The Supreme Administrative Court found that the taxpayer’s actions fell within the scope of ordinary private property management. The court emphasized that merely dividing real estate or carrying out individual preparatory activities does not constitute conducting a business activity. Consequently, the sale of the plots was not considered a VAT-registered activity.

The Supreme Administrative Court also took a similar position in its judgment of 8 October 2025, file reference I FSK 1597/22. In this case, the taxpayer purchased three agricultural plots in the years 1983–1996, established an orchard on them, and then, after a change in the local development plan, sold all three plots to a single buyer.

Of particular interest was the fact that the land had previously been subject to a paid lease. In an individual tax ruling dated August 4, 2021, file reference number: 0112-KDIL1-1.4012.249.2021.3.EB, the Director of the National Tax Inspectorate (KIS) found that the lease constitutes the provision of services for consideration and is subject to VAT. Thus, it meets the definition of a business activity set out in Article 15, paragraph 2 of the VAT Act.

However, the tax authority’s position was not shared by either the Provincial Administrative Court or the Supreme Administrative Court. The Supreme Administrative Court indicated that a paid lease alone does not constitute business activity if the owner does not actively engage in professional real estate transactions. The decisive factor is an analysis of all the circumstances of a given case.

Also in other individual interpretations issued, the Director of the National Tax Information (KIS) emphasizes that the sale of plots of land does not constitute an economic activity if the taxpayer does not engage in funds typical of entrepreneurs engaged in professional real estate trading.

What is the situation regarding PIT?

Similar criteria are also used when assessing the effects of the sale of plots of land on personal income tax grounds.

In its judgment of 25 September 2015, file reference II FSK 2042/13, the Supreme Administrative Court emphasized that the boundary between the ordinary exercise of property rights and economic activity is fluid and requires an individual assessment of the factual circumstances in each case.

The Supreme Administrative Court (NSA) indicated that selling plots of land many years after their acquisition, without active marketing efforts and without organizing a professional sales process, falls within the scope of private property management. The court noted that business activity cannot be automatically equated with the mere division of real estate or generating a profit from the sale.

This does not mean, however, that every sale will benefit from such protection.

For example, the Provincial Administrative Court in Bydgoszcz, in its judgment of 16 January 2018, file reference I SA/Bd 978/17, found that multiple divisions of real estate, preparation of plots for sale, provision of technical infrastructure and systematic sale of subsequent plots indicate the conduct of business activity.

The court emphasized that the characteristics of a business, such as its organization, continuity, and the profit-making nature of its activities, are decisive. In such a situation, the proceeds from the sale should be classified as income from a business activity, and not as income from the sale of private property for consideration.

Conclusions

The cited rulings demonstrate that the number of plots sold does not, in itself, determine whether a property is a business. Tax treatment is primarily determined by the owner’s method of operation and the degree of their involvement in preparing the property for sale.

However, the line between ordinary private property management and commercial activity is very thin. Activities that, from the owner’s perspective, may seem like normal preparation for sale, may, under certain circumstances, be considered professional real estate transactions by tax authorities.

For this reason, before planning to sell one or more plots of land, it’s worth analyzing your tax situation and, in cases of doubt, considering applying for an individual tax ruling. However, if the sale has already taken place, you shouldn’t passively wait for a potential tax audit.

Early analysis of your own situation, gathering documentation and adapting your actions to the authorities’ guidelines can significantly reduce the risk of a dispute with the tax authorities.

As the decisions cited above demonstrate, the outcome of a case is often determined not by general assumptions, but by seemingly minor factual elements. Therefore, each real estate sale transaction should be assessed individually, taking into account all the circumstances of the specific case.

Are you planning to sell a plot of land or several properties? Before making a decision, check the tax implications of the transaction. A properly conducted analysis can help avoid costly mistakes and tax disputes. Contact our team for a personalized assessment of your situation and to protect your interests before the sale.