Rzeczpospolita: Fewer metres with tax

Asked by the editorial team to comment on this ruling, Michał Nielepkowicz, tax adviser and partner at Thedy & Partners, pointed out that it is very valuable. Firstly, it resolves the doubts that have been outlined in case law. Until now, it has been disputed whether the height of rooms or storeys is counted from the floor to the lowest or highest point. If the height in a given room was different, it was sometimes assumed that we should divide it into parts by calculating the area for different room heights separately. Depending on whether this height is lower than 2.2 m or even 1.4 m, it can be counted as 50% of the usable area or not at all for property tax purposes.

Secondly, in practice, such an approach used to be very burdensome for taxpayers, particularly in situations where there were numerous elements permanently connected to the ceiling of a given room, such as structural beams or installations distributing utilities inside the building.

The NSA ruling is also valuable in that the Court decided to resolve these doubts in favour of the taxpayers. The NSA ruled that the lowest height, i.e. the height calculated from the floor to the lowest permanent ceiling element, is relevant for the entire room or storey.

This approach of the NSA is valid and justified in practice for at least two reasons. Firstly, it is sufficient for taxpayers to check this lowest height of a room or storey and no longer need to shred a room – in extreme cases – even into several thousand parts and determine the height of the room separately for each of them. Secondly, the NSA rightly pointed out that we are talking here about the usable area usable by the taxpayer and also from this perspective we should take into account the height of the entire room and, consequently, the usable area of a building cannot depend on the type of activity carried out by a given taxpayer, but should be objectivised for the purposes of calculating property tax. Whether we organise a kindergarten or a locker room for a basketball team in a particular room should have no relevance from the perspective of property taxation of that room.

This case, like basically every property tax case, is an example once again of flawed property tax legislation. Until we see this law rewritten, it is no wonder that practically every now and then (every year) the SAC and WSA settle long-standing disputes often in favour of taxpayers. And, as a consequence, taxpayers are correcting their accounts for all periods that are not time-barred and claiming refunds of overpayments. Such a situation hits the finances of municipalities. But once again, I will repeat, the reason is faulty legislation, not judgments of administrative courts or actions of taxpayers. The rulings of administrative courts often in favour of taxpayers are only a consequence of faulty regulations.

The entire article can be read in Rzeczpospolita of 19 August 2022, page N2