The property tax rate for buildings varies depending on whether they are related to business activity or occupied for business purposes. In 2023, the maximum tax rate is PLN 1.00 per square meter of usable floor area for residential buildings or parts thereof, and PLN 28.78 per square meter of usable floor area for buildings or parts thereof related to business activity and for residential buildings or parts thereof occupied for business purposes.
But what if the business activity is conducted in a residential building or if the activity involves renting such buildings?
The Supreme Administrative Court addressed this issue in case file III FSK 250/23. After lengthy administrative court proceedings related to the reopening of the trial, on July 12, 2023, the Court issued a judgment in which it found that since the statutory provision stipulates that land, buildings, and structures related to business activities do not include, among others, residential buildings and land associated with such buildings, the higher tax rate cannot apply to residential buildings related to business activities, even if they are owned by an entrepreneur whose activities involve exclusively business activities. Therefore, it can only apply to buildings used for business activities.
The Supreme Administrative Court further stated that those parts of a residential building that are used (occupied) for residential purposes, which should be understood as permanently satisfying the basic housing needs of the owner of the premises, cannot be considered as occupied for business purposes, even if their transfer by the taxpayer (e.g., a developer, a housing cooperative, a municipal company, an entity operating as a social rental agency or social housing initiative, or another owner acting as an entrepreneur) for use by third parties for the performance of this function (occupancy for residential purposes) occurred as part of the taxpayer's business activity (e.g., commercial lease). It is essential that the residential building (premises) serves the purpose of satisfying residential needs, as defined above. Whether the residential function is performed by the taxpayer or their tenant is irrelevant.
However, the recurring (in principle) short-term paid rental of residential premises (for a day or several days), unrelated to meeting the housing needs of the taxpayer and their family or third parties, is different. It is essentially similar to the provision of hotel services and therefore such activity results in the occupation of the residential premises (building) for business purposes.
This ruling has significant implications for the taxation of real estate owned by entrepreneurs where they conduct business activities, as well as real estate that is made available to meet the residential needs of third parties. The residential purpose takes precedence over the use of the building for business purposes, and therefore the lower tax rate will apply.
This is also relevant to the Announcement of the Minister of Finance of 1 August 2023 (MP of 2023, item 774), which announced the maximum real estate tax rates applicable in 2024. The rate for residential buildings or parts thereof will be PLN 1.15 (an increase of PLN 0.15), while the rate for residential buildings or parts thereof occupied for business purposes will be PLN 33.10 (an increase of PLN 4.32).
This article is for informational purposes only and does not constitute legal advice.
Legal status as of September 15, 2023
author/editor of the series:
