When determining the tax rate, the purpose of the use of the property is important
If an entrepreneur rents out a property which is used for residential purposes, the highest property tax rate cannot be applied to that property. This is because the purpose for which the property is used is of key importance, not the fact that the entrepreneur rents the property, according to the judgment of the NSA of 12 July 2023 (case ref. III FSK 250/23).
– This is a very important ruling for taxpayers. This is because it shows that a residential building can be taxed at different rates of property tax. The rule is a relatively low rate, which, however, is increased if the building is deemed to be occupied for the purpose of conducting business activity, points out Paweł Wyporski, senior consultant at Thedy & Partners.
It is worth noting that the NSA stressed that in order to apply the highest rate of real estate tax to residential buildings or parts thereof, the fact of their actual ‘occupation for the conduct of business activity’ will be of decisive and exclusive importance. This refers to the actual, physical use of all or part of the residential building for the conduct of an activity, i.e. its conduct in that part of the building.
It is also important to note that those parts of a residential building which are used (occupied) for residential purposes will not be deemed to be occupied for business purposes. What are these purposes? Well, those related to permanent satisfaction of the basic residential needs of the owner of the premises, even if their provision by the taxpayer for use by third parties in order to fulfil this function (occupation for residential purposes), took place within the framework of his/her activity (e.g. commercial lease).
– In the NSA’s view, repeated (intended) short-term renting of residential premises for a fee (for a day or a few days), not related to meeting the housing needs of the taxpayer and his family or third parties, is in fact similar to the provision of hotel services and, therefore, such activity results in the occupation of a residential premises (building) for the purpose of conducting business activity, adds Paweł Wyporski.