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The Supreme Administrative Court confirms: legal entities can also pay lower property tax.


The mere fact that a legal person conducts business does not mean that all of its properties are connected with that business. Such a conclusion is drawn from a judgement of the Supreme Administrative Court issued after a crucial ruling of the Constitutional Tribunal.

The taxation of real estate owned by a business, but not used by it to conduct its business activity has been controversial and breeding disputes for a long time. Let us remind you that initially tax authorities were of the opinion that the mere fact of a business holding real estate determines its connection with the economic activity performed. This entailed imposition of real estate tax at the highest rate. The justification for this was the use, even if potential, of the subject of taxation to obtain revenue.

However, such a standpoint has changed. The cornerstone became a ruling of the Constitutional Tribunal of December 12, 2017 (file no. SK 13/15), in which it was stated that the conduct of a business activity by an individual being a co-owner of land is not sufficient to qualify it as  land connected with conducting business. It is required in such a case to establish the actual use of the taxable land. The ruling had a considerable impact on the future line of interpretation; however, it concerned only natural persons.

New light was shed in this respect on the provisions of the Act on Local Taxes and Fees by the judgment of the Constitutional Tribunal of February 24, 2021 ( file no. SK 39/19). The Tribunal ruled that the mere possession of land, a building or a structure by  a sole trader or another entity conducting a business activity cannot determine its connection with the conduct of such activity. Due to a lack of reference exclusively to sole traders, it has generally been accepted that this ruling is of universal importance and may also be applied to legal persons.

In the light of this line of reasoning, on March 4, 2021 the Supreme Administrative Court issued a judgment (file no. III FSK 896/21) in which it explicitly stated that where in the operations of a legal person one can distinguish between the business activity and the activity which does not meet the definition, then in the light of the judgment of the Constitutional Tribunal of February 24, 2021, the mere fact that a legal person conducts business does not justify the assertion that all the properties held by it are connected with the conduct of such activity. Thus, properties that are not related to business should not be taxed at the highest tax rate.

The Supreme Administrative Court did not indicate what determines the connection of a real property with business. In addition to sharing the view of the Constitutional Tribunal that the mere fact that a business holds real estate is not sufficient to justify such a standpoint, so it is difficult to indicate universal criteria in that respect. Thus, each time the specific factual circumstances should be taken into account. Particular attention should be given to actual or potential use of the property in a business activity. Circumstances such as, for example, entering the real property in the register of fixed assets, recognising expenditure on its purchase or construction and maintenance in tax costs, may be useful for this purpose. The very nature of the real property may also prove the existence of such a relationship.


Wojciech Jasiński, Tax Consultant, ATA Tax Sp. z o.o.

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