The taxpayer must take care of his interests

Michał Nielepkowicz, tax adviser, partner in Thedy & Partners, commented on the verdict in the newspaper, noting that there are three issues in this case. The first one is a procedural issue, i.e. the lack of representation raised by the taxpayer and taking – despite this – actions by the tax authorities. The second is the general approach to cooperation between the taxpayer and the authority during the tax proceedings, the possibility to act actively, the use of the taxpayer’s rights. The third substantive issue – concerns the exemption of special divisions of agricultural production from real estate tax.

As regards the procedural issue, the circumstances and the state of the case cited in the justification of the judgment unfortunately do not give us a full picture of the case to what extent the issues raised by the taxpayer concerning the lack of representation of the taxpayer in the tax proceedings actually should have been taken into account by the tax authority. The taxpayer’s actions were negatively assessed here by the tax authorities and the administrative court, and unfortunately there is insufficient knowledge to assess whether the taxpayer could actually have done more in the proceedings.

The second issue, also procedural in a sense, but related to the substantive ruling, concerns the late – in the opinion of the authority and the court – i.e. argument shown only in the complaint regarding the necessity of applying the real estate tax exemption in the case. Here again, the tax authorities and the court regarded this allegation as “late”, because it was raised only in the complaint, and therefore in their view, also for this reason, it could not be taken into account. This is in line with the practice in tax disputes, in particular real estate tax disputes, where substantive arguments, documentation and evidence supporting one’s case should be presented early enough, at the stage of tax proceedings, preferably before the authority of first instance, so as not to be exposed to the accusation of raising arguments too late, i.e. at the stage where the possibility of taking evidence is very limited or even inadmissible.

When analysing the last issue, i.e. the circumstances concerning the occupation of the disputed building for conducting special divisions of agricultural production, it should be stressed that this exemption as an exception to the principle of universality of taxation of buildings should be interpreted strictly and, here, a given building must be actually occupied for conducting special divisions of agricultural production, i.e. it must be actually used for this activity and not potentially. In this respect, the educational activity claimed by the taxpayer may not fall within the scope of exemption, unless it is demonstrated that it actually constitutes an element of conducting actual activity within the scope of special sections of agricultural production.

Incidentally, it should be mentioned that, admittedly only by the authorities, the mere possession of real property means that it is connected with the conducted activity, which results in its taxation at the highest real property tax rate.

This standpoint is contrary to the ruling of the Constitutional Tribunal issued earlier this year (SK 39/19), which indicated that the mere fact of holding real property by entrepreneurs, no matter whether they are natural or legal persons, cannot determine the highest tax rate. It is also necessary to be able to use a given facility in business activity and to actually use it in this activity to the full extent, which was rightly mentioned by the court briefly in its judgment. Nevertheless, one cannot blame the tax authorities for not raising this issue in their decisions, as they were issued long before the ECJ judgment. Currently issued decisions of the tax authorities must already take into account this aspect of the CT judgment. And if they fail to do so, such decisions will be burdened with the defect of their inconsistency with the provisions of substantive law.

The entire article can be read in Rzeczpospolita of 29 September 2021, page H7