Amending a lease agreement and selling the leased item – general tax ruling

19 March 2021 

by Urszula Zimon

The Minister of Finance, Funds and Regional Policy issued on 15 February 2021 a general tax ruling (file no. DD6.8202.4.2020.) on the possible amendments to lease agreements and the consequences of the sale of the leased item to a third party during the effective term of the agreement.

Acceptable amendments to the agreement

The Minister of Finance has indicated a list of amendments which will not violate, under the PIT and CIT Acts, the conditions for considering an agreement an operating or financial lease. The amendments may affect, in particular, changes in the payment schedule.

However, the agreement must not be amended in a way that would result in the lease agreement of one type changing into the other (changing the agreement classification) – the party depreciating the leased tangible asset for tax purposes must remain the same.

Changing the parties to the agreement

The Minister of Finance described also circumstances under which an amendment to the lease agreement changes the parties to the agreement by way of assignment of or subrogation to the lease relationship. If the party/parties to the agreement change, the original agreement lifetime remains the same, provided that other provisions of the agreement have not changed. The Minister of Finance has confirmed that “a change of the other provisions of the agreement” means exclusively a change as a result of which the agreement would no longer meet the conditions for being considered a lease agreement for tax purposes.

Sale of the leased item

Sale of the leased item during the effective term of the agreement changes the party to the agreement. The buyer replaces the lessor (seller) in the lease relationship. This has caused problems with correct determination of the lessor’s revenue. The Minister has explained that the lessor’s revenue is the amount specified in the agreement, however, if the sales price equals the amount payable by the lessee, it should be considered to be at arm’s length.