EXCLUSIVE: In 18 months, the current definitions of structure and building will go in the bin
The legislator must change the definition of a building so that it does not contain references to the construction law. The definition of a building for property tax purposes should also be redefined, as it also causes interpretation problems, says Paweł Wyporski, senior consultant at Thedy & Partners, in an interview with Forum Polskiej Gospodarki.
The CT has issued a very important ruling on the taxation of structures in a case represented by Thedy & Partners. What exactly is the result of this ruling?
On Tuesday, 4 July 2023, the Constitutional Court, in its judgment SK 14/21, ruled that the definition of a structure in Article 1a(1)(2) of the Local Taxes and Fees Act is unconstitutional and will expire in 18 months. The incompatibility, according to the Court, consists in a violation of the principle of statutory exclusivity in tax law, according to which, inter alia, the subject of taxation should be regulated by law (Article 217 in conjunction with Article 84 of the Constitution).
At the oral pronouncement of the judgment, the judges emphasised that ‘such an important matter for the taxpayer as the subject of taxation should not be defined in a non-tax law or even in acts of a lower rank’. TK Judge Rafał Wojciechowski also pointed out that today the definition of a structure in the Local Taxes and Fees Act refers to the construction law in a broad sense (not only to the Construction Law). In the judge’s opinion, taxpayers should know, based on the very wording of the provisions of the Tax Act, without much doubt whether a given structure is taxable or not. At present, however, in the case of structures, it is not possible to determine the subject of taxation solely on the basis of the Tax Act – in doing so, it is necessary to refer to the provisions of the Construction Law, which also do not make it possible to determine precisely whether an object is taxable as a structure or not.
As a result of the judgment, the legislator will have to amend the definition of a structure within 18 months in such a way that it does not contain references to the construction law. Importantly, in the opinion of the Constitutional Tribunal, the legislator should also reformulate the definition of a building for property tax purposes, as it too causes interpretation problems. However, we will know the exact assumptions of the Constitutional Tribunal in this respect only after the publication of a written justification of the judgment.
Judgement has been postponed for several months and the decisions already made remain in force.What does this mean in practice?
Pursuant to the judgment, Art. 1a(1)(2) of the Local Taxes and Fees Act, which introduces a definition of a structure, will cease to be in force only after 18 months from the date of publication of the judgment in the Dziennik Ustaw of the Republic of Poland.The repeal of the defective provision by the Constitutional Tribunal means that the legislator has no choice – it will have to amend, within 18 months, the definitions of a structure, but also of a building found in the Local Taxes and Fees Act. Until the amendment comes into force, taxpayers, as well as tax authorities and courts, must continue to use the current wording of the provision and issue decisions and rulings based on it.Taxpayers may not conclude that due to the defectiveness of the provision and the ruling before the Constitutional Tribunal, they will not pay the construction tax due – such a situation, of course, theoretically could occur if the legislator does not manage to introduce the amendment in time, in which case construction tax could not be collected at all.
The entire interview can be read at this link: Za 18 miesięcy obecne definicje budowli i budynku trafią do kosza [WYWIAD] – Forum Polskiej Gospodarki (fpg24.pl)
The taxpayer was represented by Experts Thedy & Partners in the case in which the CT ruling in question was made.