Resolution passed by seven judges of SAC on the classification of buildings and structures for real property tax purposes

by Jakub Wajs

4 November 2021​

A seven-judge panel of the Supreme Administrative Court (SAC) passed on 29 September 2021 a resolution (file no. III FPS 1/2) that resolves an issue which has raised serious doubts: "Can a construction which is a structure as defined in Article 3(3) of the Construction Act of 7 July 1994 (Journal of Laws of 2010 No. 243, item 1623, as amended) read together with Article 1a(1)(2) of the Local Taxes and Fees Act of 12 January 1991 (Journal of Laws of 2010 No. 63, item 613, as amended) be classified as a building as defined in Article 1a(1)(1) of the Local Taxes and Fees Act for the purposes of real property tax?"

SAC has resolved this issue in its resolution as follows:

"A construction which is a structure as defined in Article 3(3) of the Construction Act of 7 July 1994 (Journal of Laws of 2010 No. 243, item 1623, as amended) read together with Article 1a(1)(2) of the Local Taxes and Fees Act of 12 January 1991 (Journal of Laws of 2010 No. 63, item 613, as amended) can be classified as a building as defined in Article 1a(1)(1) of the Local Taxes and Fees Act for the purposes of real property tax, provided that it meets the criteria of a building listed in that provision and its distinguishing feature is the usable area mentioned in Article 4(1)(2) of the Local Taxes and Charges Act."

In the statement of reasons to the ruling, SAC comprehensively reviewed the issue of classifying a construction as a building or structure for tax purposes.

When explaining the reasons for the resolution, SAC, among other things:

• reviewed the case law from previous years and the changing approach to that issue as well as indicated discrepancies in the case law;
  
• pointed out to the lawmakers that the interpretation problems were real and that taxpayers had concerns about the applicable tax law and its effects;
  
• emphasised the autonomy of tax law and its concepts in relation to other branches of law, including construction law;
  
• pointed out that the same concepts could be interpreted in a different way under tax law and construction law;
  
• emphasised that the Local Taxes and Fees Act was fiscally oriented and thus concluded that an item subject to tax should be identified taking into account the taxable base;
  
• pointed out how the concept “being affixed to the ground” should be interpreted for the purposes of real property tax;
  
• explained that architectural and technical parameters (usable area vs. capacity) constituted the key criterion for classification of a construction for the purposes of real property tax.
  

"Building" and "structure" under construction law and tax law

SAC concluded that the Local Taxes and Fees Act directly refers to construction law for the "construction" concept only; therefore the concepts "building" and "structure" do not have to be the same under construction law and tax law. Please note that SAC in no way questioned the principle according to which tax laws must specify taxes and dues in a manner sufficiently clear to taxpayers [zasada określoności]. On the one hand, SAC did not agree with the view that a construction that fits the definition of a building cannot be classified as a structure. On the other hand, it did not agree with the view that a construction that has the features of a building as defined in the statute could be classified as a structure only because it is explicitly listed in Article 3(3) of the Construction Act. 

SAC pointed out that a typical warehouse building that is used in business practice as a silo (e.g. for grain and other bulk products) but whose technical distinguishing feature is its usable area and a construction that is designed and used exclusively as a silo (tank) for specific bulk, liquid or gaseous products should be treated differently for real tax purposes. SAC's opinion suggests that the former warehouse may be taxed as a building and the latter warehouse may be taxed as a structure.

On the one hand, the resolution puts certain order into the existing case law and provides some guidance on interpreting real property tax regulations. On the other hand, it gives room for further discussions and disputes. 

However, it undoubtedly puts a clear end to a trend which has developed for some time and which has been extremely friendly to taxpayers, namely, to classify various constructions as buildings because they only meet the technical criteria listed in Article 1a(1)(1) of the Local Taxes and Fees Act. The resolution highlights that when interpreting the Local Taxes and Fees Act we should remember that it is fiscally oriented and that we must determine the basic construction parameter of a construction being assessed.

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