On 24 February 2021 The Constitutional Tribunal issued a judgment in which it found partial non-compliance with the Constitution of a provision which makes the application of the property tax rate applicable to real estate related to economic activity dependent on the exclusive fact that the taxable person who is an entrepreneur owns the property.
The issue of compliance with the Constitution was examined by the Constitutional Tribunal in this case. Article 1a(3) Local Taxes and Charges Act according to which land, buildings and structures related to the conduct of business activity – land, buildings and structures owned by an entrepreneur or by another operator.
The judgment cited by the Constitutional Tribunal will apply only to natural persons who are entrepreneurs, will not apply to companies and other legal persons
In the context of such a provision, the tax authorities issued decisions on the property tax, assuming that in any case when the property was held by an entrepreneur the appropriate rate for its taxation would be the rate applicable to real estate related to economic activities, which is usually higher than in the case of a property of another purpose (the final rate is set within the legal limits of the municipality).
The same was the case in the case of the situation in which the TK spoke — the tax authority issued the decision by adopting a rate specific to real estate related to business activities for the taxable person who bought the property for personal purposes and in no way used it in his business activity, as the nature of his business had nothing to do with those properties.
Both the Local Board of Appeal in Krakow, the Provincial Administrative Court in Krakow and the Supreme Administrative Court agreed with the assessment of the facts adopted by the tax authority, indicating that since there is a real possibility of using the property purchased by the taxpayer for business activities (which results from the destination of the property and entries in land and building records) and the taxpayer is an entrepreneur, the rate applicable to the property related to the activity should be applied, regardless of what the taxpayer actually does with the property purchased.
The Constitutional Court examined the question of conformity Article 1a(3) Local Taxes and Charges Act with the principle of protecting property rights and the possibility of reducing them and the principle of proportionality of public burdens (Article 64(1) with regard to Article 31(3) and Article 84 Constitution of the Republic of Poland).
According to the sentiment of the judgment of the Constitutional Tribunal of 24 February 2021 the stated provision of the Act on Local Taxes and Fees is incompatible with the constitutional principles cited above.
The Court has taken the view that in order to preserve these constitutional principles it is necessary to examine the actual use of these properties.
How Important the Constitutional Court’s Judgment
A wider answer to this question can be given after publication of the statement of reasons for the judgment in question. However, for the moment, it can be concluded that this judgment will be of great importance for entrepreneurs with real estate that are not used in their activities.
Importantly, the judgment of the Constitutional Tribunal will apply only to natural persons who are traders, will not apply to companies and other legal persons.
The practice of applying the property tax rules shows that the case law of the administrative courts and the Court of Justice is of great importance for the interpretation of the rules of the authorities.
After first It can therefore be expected that, when assessing the correct basis for determining the amount of the property tax will be taken into account by the Court of Justice.
After second, in my opinion, on the basis of that judgment, taxpayers have the basis for submitting an amendment to the declaration or resumption of proceedings in the case of decisions already taken concerning their property and for verifying fixed amounts of property tax for previous periods which have not yet expired.
How to proceed and whether it will be reasonable to take action towards a possible change in the amount of the property tax already paid will prejudge the specific circumstances which may vary for each taxpayer. From such analysis it is worth starting to prepare arguments for your own individual situation.
Judgment of the Constitutional Court of 24 February 2021, reference no. SK 39/19