Definition of structures incompatible with the Constitution – an important judgment of the Constitutional Court

Definition of structures incompatible with the Constitution – an important judgment of the Constitutional Court. The request for a resumption of the tax procedure must be submitted to 10 August 2023? We answer

On 4 July 2023 The Constitutional Court issued an important judgment on reference no. SK 14/21 as regards the definition of a legal building for real estate tax purposes. The Court held that the provision Article 1a(1)(2) (definition of structures) of the Local Taxes and Charges Act (i.e. Journal of Laws of 2023, item 70), is incompatible with Article 84[1] and Article 217[2] Constitution.

The judgment was delivered in the Official Journal of the Republic of Poland on 10 July 2023 (under heading 1313). According to the judgment of the Constitutional Tribunal, the loss of force of that provision will take place after the expiry of 18 months from the date of delivery of the judgment.

The provisions on the possibility of reopening the tax proceedings relating to the rulings of the Constitutional Tribunal are ambiguous. Different positions appear even at the level of the Supreme Administrative Court

As indicated in the oral justification of the judgment, this time is intended to allow the legislator to prepare and introduce a new regulation of the definition of a legal structure for the purpose of determining the subject matter of the property tax. The judgment also states that the legislator should also change the definition of a building which now refers to building law[3]. It is also necessary to wait for the written justification of the judgment.

Taxing property tax on buildings

Consequently, it is not known how the definition of structures will shape in the future. However, it should be pointed out that, in the current state of the law, property tax on the building is more favourable than construction. The tax base for the building is the usable area, and for the buildings, in principle, the initial value for depreciation on income taxes (not mentioned for depreciation).

For example – when a transformer station with usable space 10 m2 and baseline 100,000 PLN will be considered a building, then the tax will amount to 173.1 PLN, establishing the maximum rate resulting from the Act which at the date 21 July 2023 is 17.31 PLN.

In turn, if the transformer station is a building, then the tax will be 2,000 PLN, because the rate of property tax for the building is set percentage (not amount) and is maximum 2% the tax base. The municipal council may determine other rates (whether they are amounts or percentages), but may not exceed the statutory maximum rate.

Consequently, in the event of a dispute with the tax authority regarding the classification of the property in question as a building instead of buildings, it is possible, in view of the judgment of the Constitutional Tribunal, to accept the argument in dubio pro tributario. This is the principle of settling doubts in favour of the taxpayer. By recipe Article 2a Tax Ordinance the questionable content of tax law is settled in favour of the taxpayer.

This also applies to cases concluded before the tax authority, i.e. final and final decisions. In this case, however, the decision should be moved up using the institution to resume the tax procedure. Tax Ordinance contains several reasons for this. one they are linked to the Constitutional Court's ruling. According to Article 240(1)(8) Tax Ordinance (the following:

In this respect, the reopening initiative shall only take place at the request of the party made within one month of the entry into force of the Constitutional Court ruling (Article 241(2)(2) OP).

Request for reopening the tax procedure – when should it be submitted?

This is where the problem arises as to how to understand the word "since the entry into force of the Constitutional Court ruling". According to the NSA judgment dated 12 September 2018 reference no.

II FSK 1898/17: „The date of entry into force of the Constitutional Court’s ruling is only the date of its publication, and therefore the time limit specified under Article 241(2)(2) Act dated 29 August 1997 - Tax Ordinance begins running on the date of notification of that decision.’ This seems to be an overwhelming position (see NSA judgments: dated 7 December 2017 reference no.

II FSK 3276/15 and dated 15 February 2018 reference no. II FSK 2367/16).

It should be stressed that the caselaw also sets out the view that the request to resume proceedings should be pending until the non-constitutional rule has ceased to apply. According to the NSA judgment dated 26 January 2018 reference no. II FSK 194/17:

„It should be reiterated that, in the event of a postponement of the expiry of the existing provision on the basis of which a final judicial decision or a final administrative decision was issued, the admissibility of reopening of administrative or administrative proceedings (Article 190(4) The Constitution of the Republic of Poland) will occur only after the postponement period has expired if the legislature has not previously amended or repealed the provision.

Thus, the effects of the judgment of the Constitutional Court declaring that a provision is incompatible with the Constitution and the effect of such a judgment on the tax decisions already taken (the individual application of the law in the case at issue) will be different, depending on whether the Court will use the possibility to specify a period other than the date of publication of the judgment of the date of the loss of power of the act under assessment and, if so, whether the legislator is able to amend the act challenged by the Court within the prescribed period.’

In the light of the considerations set out above, we agree in this respect to the position expressed in the NSA judgment cited above. dated 12 September 2018 reference no.

II FSK 1898/17, according to which the date of entry into force of the Constitutional Court’s ruling is only the date of its publication, and the postponement of the non-Constitutional rule is therefore irrelevant for the purposes of resumption of the tax procedure. This is a safer approach than the opposite view presented.

Consequently, taking such a view as correct, it must be pointed out that the possibility of reopening the tax proceedings on the matter will end on 10 August 2023

In summary

As you can see, the provisions on the possibility of resuming tax proceedings related to the decisions of the Constitutional Tribunal are ambiguous. Different positions appear even at the level of the Supreme Administrative Court.

We would like to stress that we have extensive experience in conducting tax proceedings, including with regard to the possibility of moving the final decision, either because of the grounds for resumption of tax proceedings (Article 240 Tax Ordinance), whether it is because of the grounds for annulment Article 247 Tax Ordinance).

Therefore we invite you to contact our law firm.