Michał Nielepkowicz in an interview for DGP: NSA’s resolution on buildings opens a new field of disputes

It follows from the resolution of the NSA (file No. III FPS 1/21) that, for tax purposes, an object whose distinguishing feature is, for example, its capacity, and not – as in the case of buildings – its usable area, may be regarded as a structure. The NSA indicated that a tank which has all the features of a building, but its distinguishing feature is its capacity, should be taxed as a structure. Do you agree with this?
No. The NSA indicated that an object must have some distinguishing feature and this must be taken into account when assessing whether we are dealing with a building or a structure. The problem is that this does not follow from the definition of a building or a structure in the Local Tax and Fees Act. Once again, the NSA decided that a building may de facto become a structure. And yet the Constitutional Tribunal ruled on 13 December 2017. (ref. SK 48/15) clearly that if a building object is permanently connected to the ground, separated from the space and has foundations and a roof, it is a building. Its usable area should therefore be taxed. The Constitutional Tribunal held that the interpretation of Art. 1a Section 1 (1) of the Local Taxes and Fees Act, which leads to the classification of a building as a structure, is unconstitutional.

Was the NSA’s resolution a surprise to you?
Not only for me, but also for taxpayers and tax authorities. Everyone expected the NSA to cite the 2017 CT ruling and explain that a silo – because that was the subject of the dispute in the case in which the court questioned the resolution – is taxed as a building if it meets all the features listed in Article 1a(1)(1) of the Local Taxes and Fees Act. Such a ruling would have ended many years of disputes over the functions and purpose of a building. This did not happen, however, and now taxpayers and municipalities will examine whether the distinguishing feature of a building is its usable area, capacity, space, or perhaps some other feature.

How can these be understood?
Very differently, that is the problem. It is not clear what is meant by the fact that in the case of a given building its “distinguishing” feature is its usable floor area. In accordance with the operative part of the resolution, should we relate it to some objective value, for example assume that a building with an area of 1000 m2 is a building, but one with 999 m2 is not? Or are we to 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 facility? If so, why? Who is to decide 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 subjectively assesses it in this way, will it not expose him to questioning of the settlements by the tax authorities? The NSA resolution does not provide answers to any of these questions.

However, the resolution may be to the advantage of municipalities. They may decide that if the cubic capacity of a building is more important than its usable area, then the tax should be paid as for a structure. What are taxpayers to do in such a situation?
The key is to establish the factual situation. Following the resolution, taxpayers have a number of tools to argue in their favour, i.e. to defend the previous manner of taxing a facility as a building. Obviously, this applies to structures which meet the four conditions of the Local Taxes and Fees Act, i.e. they are permanently connected to the ground, separated from the space by means of building partitions, have foundations and a roof.
It is still possible to appoint experts with appropriate technical knowledge, who can confirm that a given object is a building, and therefore its structural features meet the statutory definition.

The rest of the interview can be read in Dziennik Gazeta Prawna dated 25 October 2021, page C2