In today's article from the series "Tuesday Mornings for Construction Workers", we will discuss the issue of the obligation to pay property tax in the event of joint ownership of the property covered by such a public law levy.
As we've pointed out so far, co-owners generally have identical rights to real estate. Does this mean that co-owners also have identical obligations, including the payment of public fees? Furthermore, do public administration bodies take into account the individual shares of co-owners when assessing tax liabilities?
The obligation to pay real estate tax is regulated by the Act of January 12, 1991, on Local Taxes and Fees (hereinafter referred to as the "Local Tax Act" ). Pursuant to Article 3, Section 4 of the Local Tax Act, when a real estate or building is jointly owned or held by two or more entities, it constitutes a separate subject of taxation, and the tax obligation on the real estate or building rests jointly and severally on all co-owners or possessors. The legislator has provided an exception to the above, according to which the principle of joint and several liability of co-owners does not apply:
a) in the case of joint ownership of fractional parts of a commercial premises – a multi-car garage in a residential building together with the land, constituting a separate object of ownership – in such a situation, the tax obligation rests on the joint owners to the extent corresponding to their share in the ownership right,
b) in the case of separation of ownership of premises , the obligation to pay property tax on the land and on the parts of the building constituting the common property is imposed on the owners to the extent corresponding to their share in the common property,
c) if one or more co-owners or possessors are exempt from real estate tax or are not subject to this tax, then the tax liability shall lie jointly and severally on the co-owners or possessors who are subject to real estate tax and are not exempt from this tax, to the extent corresponding to their joint share in the right of ownership or possession.
Pursuant to the above-mentioned legal basis, each co-owner is obliged to pay real estate tax, and the full payment of this tax by one of the co-owners releases the others from this obligation .
This means that if one co-owner pays a portion of the tax in the amount calculated based on their share, they remain obligated to pay the full amount of the property tax assessed by the tax authority in their decision until the remaining amount is paid by the other co-owners. An exception to the above is if one of the co-owners has not been served with the decision assessing the property tax . In such a case, that co-owner is not jointly and severally liable with the other co-owners to pay the tax until the decision determining the tax amount for the jointly owned property is effectively served on them.
It is important that when assessing property tax in an administrative decision, the tax authority does not determine the tax amount for each co-owner based on their share . Therefore, it is irrelevant to the tax authority whether the co-owners have reached a civil agreement regarding the extent to which they will be obligated to pay the assessed tax.
The joint and several obligation of co-owners to pay property tax also makes it irrelevant that only one co-owner receives benefits from such a property, assuming that the property is jointly owned by all co-owners. At the same time, the issue of receiving benefits from the property can significantly impact the tax obligations of co-owners who do not receive benefits from the property.
We also note that if a property is used for business purposes, all co-owners may be required to pay tax at an increased rate. This position is confirmed, among others, by the judgment of the Provincial Administrative Court in Rzeszów of September 24, 2010, file reference I SA/Rz 401/10: "The tax authority's interpretation of the law, which amounts to stating that an individual who co-owns real estate with a legal entity conducting business activity is obligated to pay real estate tax at the increased rates applicable to land used for business purposes, does not violate the provisions of the Act." In addition, the Court noted that: "Since the choice of the tax rate is determined by the economic nature of the taxable object , not the subjective characteristics of the taxpayers, and the tax liability is jointly and severally binding on all co-owners of the taxable object, there are no justified grounds for differentiating the tax rate based on subjective criteria . The joint and several nature of this liability excludes the possibility of dividing it among individual taxpayers, applying tax rates that differ depending on the subjective characteristics of the individual taxpayers. Therefore, the liability burdening all co-owners should be determined based on the jointly owned taxable object, applying a single tax rate appropriate to the taxable object."
It should be noted, however, that the obligation to pay this public levy is different in a situation where only one co-owner holds the jointly owned property . As stated in Article 3, Section 3 of the Local Tax Act, the obligation to pay real estate tax rests with the sole possessor. Therefore, only the co-owner who is the sole possessor of the jointly owned property will be liable for the real estate tax .
In summary, the principle is that under tax law, each co-owner , except for cases expressly indicated in the act, is obligated to pay the full amount of real estate tax in the amount assessed in the tax authority's decision . This obligation rests with the co-owner until the tax is paid in full. For the tax authority, the amount of the co-owner's share, or an agreement between the co-owners under civil law regarding their obligation to pay such tax in the amount corresponding to the amount of their share, as well as the fact that only one co-owner derives benefits from the property, are irrelevant.
Taking advantage of this morning's last article in this series before Christmas, the Real Estate Team would like to wish you a healthy and happy holiday season. May the coming year be full of successful investments, realized opportunities, and fantastic projects. All the best!
This article is for informational purposes only and does not constitute legal advice.
Legal status as of December 18, 2023
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