Trouble interpreting the occupation of a residential building for business purposes
A residential building may be taxed at the maximum property tax rate of PLN 1.15 per square metre of floor space. On the other hand, a residential building occupied for the purpose of conducting business activity may be taxed at a tax rate almost thirty times higher, in the amount of - PLN 33.10 per 1 m2 of usable floor area
As Wojciech Jesusek, a real estate tax expert, explains, in practice, fierce disputes between taxpayers and tax authorities arise over the concept of ‘occupation of a residential building for business purposes’. The most frequent disputes against this background arise in the case of the taxation of flats for rent managed by developers or real estate agencies, and more recently also in the case of commercial dormitories.
In both cases, disputes between taxpayers and the tax authorities in this area have been resolved before the Supreme Administrative Court.
In the case of flats intended for lease managed by developers, the NSA ruled on 22 November 2023 (case ref. no.: III FSK 3831/21) that in this case, permanent satisfaction of housing needs is realised, and the fact that this purpose is realised by third parties and not the taxpayer itself, as well as the fact that the taxpayer conducts business activity in the scope of flat rental, is of no significance here. The NSA concluded that, in this case, the flats are only related to business activities and not occupied for business purposes, and should therefore be taxed at the rate of tax as for a residential building.
On the other hand, when considering a case concerning the taxation of a residential building serving as a dormitory, the NSA, in a judgement of 22 November 2023 (ref. No.: III FSK 358/23), came to the conclusion that such use of the building is only for the purpose of temporarily satisfying residential needs, and in connection with the fact that the rental of residential premises in the building is carried out within the scope of commercial business activity, the building will be treated as occupied for the purpose of conducting business activity and therefore taxed at a higher rate.
The inconsistent approach of the Supreme Administrative Court raises quite a lot of controversy in the practice of tax law, it is still difficult to determine which residential buildings will be able to be considered occupied for business activity and which will only be related to business activity. This issue is still likely to give rise to numerous disputes between taxpayers and tax administration authorities.