NSA: Lease for residential purposes with lower property tax
Residential buildings and parts thereof, intended to be leased as part of business activities, if they serve to satisfy the residential needs of the tenants, are not subject to the higher real estate tax rate provided for business activities. It is the satisfaction of housing needs that is important, regardless of who fulfils them, the Supreme Administrative Court stated in a Monday resolution (ref. III FPS 2/24), as reported by the Prawo.pl portal.
Marcin Bodziony of Thedy & Partners commented on the case for the Portal. He emphasised that the NSA’s resolution – seemingly paradoxically – should most please those who live in rented houses or flats. If the NSA were to share the view expressed by the Attorney General in his request for a resolution, landlords would incur additional investment costs in residential rental properties, which – with high probability – would be passed on to tenants.
On the other hand, municipalities, for which property tax is one of the key budget items, will have to get a taste of it. If the NSA were to follow the arguments of the Attorney General, this would give them grounds to apply a property tax rate that is almost thirty times higher. This is a substantial difference, especially for so-called metropolitan municipalities. Increased (at times significant) inflation, a significant and prolonged recovery in the construction industry and economic growth have made the purchase of flats (often wholesale) for rent in large urban centres a very popular investment model in recent years.
All is not lost, however. Although the written justification for the resolution is not yet known, its oral recitals indicate that it is of a ‘Solomon’ nature. For it seems that municipalities will be able to apply an increased real estate tax rate to, for example, so-called investment vacancies, i.e. flats or houses that are not rented out and the profit from the investment is to be made as a result of an increase in their value. How to distinguish whether a flat is an investment vacancy or not? My experience in audits suggests that the ‘ally’ of the tax authorities here will be the utility bills.
You can read the entire article on Prawo.pl