Recent Constitutional Tribunal’s judgment on real estate tax
On 24 February 2021 Polish Constitutional Tribunal issued a judgment (no. SK 39/19) that may significantly impact the real estate tax (RET) charged on land, buildings and structures owned by entrepreneurs
REal Knowledge about the Polish real estate market 1/2021
The Constitutional Tribunal decided that the provision of the Local Taxes and Duties Act determining the connection of land, building or structure with their use for business purposes exclusively based on the ownership title held by an entrepreneur or other business entity was unconstitutional.
Even though the said judgment of the Constitutional Tribunal concerned real estate tax on assets belonging to a natural person owning a business, the justification is broad enough to be applied to legal persons as well.
Consequently, applying a higher rate of real estate tax (on assets which are not used and cannot be used for business purposes) solely on the grounds on an ownership title held by an entrepreneur is deemed unconstitutional and serving purposes other than fiscal ones. It is considered a disproportionate tax burden consisting in equal treatment of taxpayers who own real estate but do not and cannot use it for business purposes and those who use their real estate for such purposes.
Such interpretation of the provisions of Local Taxes and Duties Act provides taxpayers with an opportunity to reduce the amount of real estate tax on property that is not and cannot be used for business purposes (e.g. due to pandemic restrictions, an order to shut down the facility from production, flooding of the building, etc.).
Moreover, the decision of the Constitutional Tribunal has already been cited in the judgment of the Supreme Administrative Court (file no. III FSK 895/21), which confirmed that the assumption that an entrepreneur "owns" property is unconstitutional both with regard to natural and to legal persons. The confirmation by the Supreme Administrative Court increases the probability of effective recovery of overpaid real estate tax on facilities that cannot be used for business purposes in a given period.
Entrepreneurs should therefore check whether the latest jurisprudence changes affect real estate tax amount they pay and whether the overpaid amount (if any) may be recovered.