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DGP: There will be a problem with taxation of many buildings

The NSA's resolution of 29 September this year may cause disputes over taxation of not only tanks, but also sports halls, warehouses, sewage treatment plants, water treatment stations and other facilities - Dziennik Gazeta Prawna writes.

In his comment for the newspaper, Michał Nielepkowicz, a tax adviser and partner at Thedy & Partners, pointed out that the resolution was theoretically adopted against the background of a case concerning taxation of silos, but its operative part is much broader and does not concern only this type of facilities – which, in a way, is the result of a question posed by the adjudicating panel of the NSA. What is also important is that the effects of the resolution may be much broader in the future than only with respect to the objects covered directly by its operative part.
Let me explain what I mean. In accordance with the resolution, a structure (and not a silo) within the meaning of the Construction Law may be deemed to be a building for the purposes of property tax if – in the opinion of the NSA – it fulfils the condition formulated by the NSA in the form of the distinguishing feature, which is the usable area of such a facility. At the same time, we know from the oral recitals of the justification that, in the NSA’s view, what is actually important here is the relation of the usable area to other features of the object, such as its capacity or space.
On the one hand, someone may say that nothing of the sort has happened – the NSA confirmed that a silo, which is a structure within the meaning of the construction law, may be subject to real estate tax as a building only if it fulfils these additional conditions in the form of the distinguishing feature being the usable area of such a structure, and not – its capacity or space. And here we know from the oral justification that, in the NSA’s opinion, since in the case of silos or elevators they are characterised by the latter features and not by their surface area, they should constitute structures.
However, the problem is much more complex. First and foremost because, once again, the operative part of the NSA resolution in no way refers only to silos. Another thing is that even in the case of silos – the fate of their taxation is not determined at all. For two reasons.
In accordance with the resolution, a silo – if it is a structure on the grounds of the construction law – could be taxed as a building, but since in its particular case the NSA “does not see” the usable area as the dominant feature, but only the capacity / space, in the NSA’s opinion such a silo should be taxed as a structure. This immediately raises another question – what about silos which are buildings within the meaning of the construction law? It is unclear whether the NSA analysed such a case or whether it assumed in advance that such objects must be classified as structures under the construction law (which would not be true). Moreover, since the resolution does not apply only to silos, the exact same question may be applied to objects other than silos which are classified as buildings under the construction law (more on this in a moment).
And the second reason: the condition formulated by the NSA is not supported by the definitions of a building and a structure. In essence, therefore, once again after the NSA ruled consistently just a few years ago that “a building may become a structure” on account of its equipment or filling it with devices, and which the Constitutional Tribunal rightly unambiguously seemed to have put a stop to – the NSA once again “played” ineptly with the legislator by formulating an additional condition, which is not present in the regulations. What is also important is that the NSA formulated this condition in a terrible way, using vague and imprecise criteria. If, therefore, the NSA wanted to dispel doubts here, the chosen method had the opposite effect, and this is true for everyone: not only for taxpayers, but also for tax authorities. What should it mean that in the case of a given facility, its “distinguishing” feature is its usable area? In accordance with the operative part of the resolution, should we look only at the usable floor area and relate its size to some objective values, e.g. assume that a facility with an area of 1000 m2 is after all a building, but one with 999 m2 is not? Or should we compare the size of the surface area in a given case to other features, and if so – which ones? The capacity or space of the building cited by the NSA in its oral reasons? If so, why? And how are they defined? Can the oral reasons for the resolution of the Supreme Administrative Court be a sufficient legal basis in practice? At the very least, one may have significant doubts in this regard. Plus, who is to decide on these characteristics anyway? What certainty of taxation can a taxpayer have now, assuming that a given object is a building – if the area of the object is, in the taxpayer’s opinion, its distinguishing or even dominant feature? If the taxpayer so assesses it subjectively, does this not expose him to a challenge to the tax authorities? The NSA resolution does not provide answers to any of these questions, which were raised only briefly.

Since such questions are legitimate after the resolution, it may already be predicted that the practical consequence of the NSA resolution will be simply chaos. And not only on the side of taxpayers, but in the same way – the tax authorities.
For example, can it be said of almost every sports facility that its distinguishing feature is its usable area? On the contrary – after all, we talk about many stadiums, sports halls or swimming pools from the perspective of their “capacity”. Exactly the same applies to various types of cultural facilities – such as theatres or cinemas. Nobody, but nobody, thinks about them in terms of their “usable area”. Another example is the warehouses of logistics centres, especially high-bay warehouses, which usually have one floor and use very high racks to store goods. Can it not be said in their case that capacity/space is their dominant feature rather than surface area?
Someone may say here that extending the effects of the NSA’s resolution to such facilities would be an abuse, because after all they are buildings within the meaning of the construction law. Ok, that is indeed the case, but why then, after the indicated NSA resolution, is there not a temptation to extend this position also to buildings within the meaning of the construction law? After all, if a building within the meaning of tax law is to meet the conditions indicated by NSA in the form of usable floor area as its dominant feature (in fact, then according to NSA we should have no doubts that it is a “real” building), then perhaps this should apply to all buildings – also those which are buildings within the meaning of construction law. It may rightly be argued here that since an object which has 4 features from the statutory definition of a building in the construction law will not be a “real” building, on tax grounds – this “real” building will be an object which meets the 4 features from the statutory tax definition of a building, but only if its distinguishing feature is additionally its usable area.
Therefore, despite the verdict of the NSA resolution, it may be used to reclassify very many objects, and this by various parties to the legal and tax relationship – both by taxpayers and tax authorities. Therefore, I am convinced that even the issue concerning taxation of silos is not a foregone conclusion and the whole hope lies in the Constitutional Tribunal that we will return to the path of definitions in the regulations. It is completely incomprehensible why the NSA did not stop at four features from the definition of a building contained both in the construction law and the tax act, which relate to the structure of an object, i.e. objective criteria easy to verify in practice. After all, if in the opinion of NSA judges – in plain language – an elevator, silo or other facility is for some reason a building, one must not forget that the role of administrative courts as courts reviewing the legality of decisions of public administration bodies is to review such decisions for their compliance with the law, and then it does not matter whether, in my own opinion, an elevator, silo or anything else is a building, but only until the statutory definitions are changed by the legislature, I must consider it to be a building.
So what might the NSA resolution mean in practice? First and foremost, chaos. And it is chaos, the limits of which no one is yet aware: neither the NSA, nor taxpayers, tax authorities or tax advisors.

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