LOWER PROPERTY TAX FOR RESIDENTIAL LETTINGS
NTAX - Tax advisory & Accounting
The only??tax experts from Cracow in GGI Global - international alliance of law, tax & accounting firms around the world
On 21 October 2024, the Supreme Administrative Court issued a resolution (ref. III FPS 2/24) concerning the taxation of real estate intended for rental as part of business activity. The resolution represents a breakthrough for entrepreneurs renting out flats - if the real estate is used to satisfy the housing needs of tenants, a lower real estate tax rate applies, rather than the one attributed to business activity, which is almost 30 times higher.
The Supreme Administrative Court based its resolution on the wording of Article 5(1)(2)(a) of the Local Taxes and Fees Act of 12 January 1991. This provision states that buildings or their parts intended for residential purposes are subject to a lower real estate tax rate. In turn, Article 1a(1)(3) of the said Act defines the concept of real estate connected with business activity, and more precisely specifies that these are buildings used directly in the activity of the entrepreneur who is their owner or dependent holder.
The Constitutional Court, in its judgment of 24 February 2021 (ref. SK 39/19) ruled that the mere possession of real estate by an entrepreneur is not sufficient to attribute its connection to economic activity, which is of great importance for determining the amount of real estate tax. This judgment forced a reinterpretation of the definition of real estate connected with economic activity, leaving the Supreme Administrative Court to further clarify in subsequent rulings what criteria should be followed.
In the resolution in question, the Supreme Administrative Court also referred to Article 21(1) of the Act of 17 May 1989. Geodetic and Cartographic Law, which stipulates that buildings classified in the land and building register as residential and intended to satisfy residential needs may be taxed at a lower tax rate. This classification makes it possible to determine whether the premises in question are intended for residential purposes and therefore qualify for a reduced tax rate. The Supreme Administrative Court made it clear that the distinction between buildings occupied for business activity and buildings related to business activity is of fundamental importance for determining the applicable tax rate.
The Supreme Administrative Court also referred to the concept of ‘related to economic activity’ in the context of Article 1a(1)(3) of the Local Taxes and Fees Act. The resolution emphasised that the association of real property with business activities must result from its actual use and not from the mere fact of its possession by an entrepreneur.
领英推荐
The resolution issued by the Supreme Administrative Court is in line with the line of jurisprudence initiated by the 2021 Constitutional Court judgment. The resolution, ultimately based on the interpretation of Article 5(1)(2)(a) of the Local Taxes and Fees Act, strengthens the stability of the rental market and gives entrepreneurs greater legal certainty regarding the taxation of residential property. Despite the challenges for municipalities, the resolution can be seen as a step towards legal uniformity and the protection of the interests of both tenants and property owners.
Write to us for a consultation - we are here to help you!