Real property tax: a line of favourable rulings

 

 

 

The SAC issued on 22 November 2023 a judgment on the taxation of housing units rented for residential purposes (III FSK 250/23). 

 

The case concerned a company which rented out flats to individuals, but also offered flats for rent to businesses which provided them to their employees for residential purposes. In the company's opinion, the flats should have been taxed at the rate applicable to residential buildings. Revenue authorities claimed that the flats should have been taxed at the rate applicable to buildings used for commercial purposes. 

 

The SAC ultimately agreed with the company, stating that the parts of a residential building used for residential purposes, that is, used to permanently satisfy the housing needs of the flat's resident, could not be treated as used for commercial purposes. According to the SAC, this interpretation is also valid when the taxpayer rents out flats for residential purposes as part of its business activity. 

 

The judgment is of particular relevance, especially in view of the tax rate, which amounts to maximum 1.15 zloty per 1 m2 for residential buildings and to 33.10 zloty per 1 m2 for commercial buildings. The difference is almost thirtyfold.

 

 

The Constitutional Tribunal challenged on 18 October 2023 (SK 23/19) the laws which make the real property tax rates dependent on whether the garage situated in a residential building is a separate property. 

 

To date, when setting the real property tax rate on garages representing legally separate properties situated in multifamily residentials, municipalities have claimed that the garage is an independent, non-residential property. Consequently, taxpayers who have held separate land and mortgage registers for the flat and for the garage have had to pay for the garage a tax rate that is almost ten times higher than the rate applicable to the flat. 

 

The Constitutional Tribunal found that there were no legal grounds for treating garages situated in multifamily residentials differently, and to make their treatment dependent on whether they are separate legally or only physically. This means that real property tax payers owning garage spaces should be treated equally before the law. The Constitutional Tribunal decided to postpone the effective date of the judgment. Thus, the provisions found to be unconstitutional will cease to apply on 31 December 2024.

 

 

The aforementioned landmark judgments have favourable consequences and imply lower taxes for:

 

– entities renting out housing premises for residential purposes as part of their business (their savings may even be thirtyfold),

– owners of spaces in a garage situated in a residential building – regardless of whether or not a separate land and mortgage register is kept for the garage space (their savings may even be tenfold).

 

If you are interested in further information about or support in real property tax, please contact​ our experts.