Property tax is a local tax, meaning its rate is set by the local government and constitutes its entire revenue. However, municipalities do not have complete discretion in setting the tax rate, as they are limited by a maximum rate, which is announced annually by the Minister of Finance.
In the case of taxation of buildings, the maximum rates vary depending on whether the building is residential (maximum rate in 2025 – PLN 1.19/m2) or is used for business purposes (maximum rate in 2025 – PLN 34/m2 – does not apply to business activities in the field of trading in qualified seeds, providing health services and activities of public benefit organizations).
There is no doubt that renting out residential premises and buildings is a business activity. However, this raises the question of which tax rate will apply to properties rented by businesses.
Administrative court case law has presented two divergent positions. On the one hand, courts have held that the rental of real estate entered in the fixed asset register determines its connection with business activity, and therefore it should be taxed at a higher tax rate (e.g., the Supreme Administrative Court in its judgment of 4 October 2022, file reference III FSK 967/21).
However, a different view holds that the permanent satisfaction of the basic housing needs of the owner of a premises/building precludes its being deemed occupied for business purposes. Whether the residential function is performed by the taxpayer (property owner) or its tenant is irrelevant. The opposite view not only contradicts the essence of the regulations on property taxation of residential buildings and premises, but is also difficult to accept for social reasons (e.g., the Supreme Administrative Court in its judgment of 12 July 2023, file reference III FSK 250/23).
Due to the discrepancy in case law, the Prosecutor General requested the Supreme Administrative Court to resolve, in the form of a resolution of seven judges, the legal issue: "Should residential buildings or parts thereof intended for lease to meet the housing needs of tenants as part of the business activity conducted by the property tax payer be treated as residential buildings or parts thereof referred to in Art. 5 sec. 1 item 2 letter a of the Act of 12 January 1991 on local taxes and fees (consolidated text: Journal of Laws of 2023, item 70, as amended). "
In its resolution of October 21, 2024, file reference III FPS 2/24, the Supreme Administrative Court supported the latter position. It indicated that those parts of a building that are actually occupied for residential purposes, meaning those in which residential purposes are actually carried out, are not considered occupied for business purposes, even if the owner of such a residential building is an entrepreneur.
The adopted resolution therefore stipulates that all properties meeting housing needs are subject to a preferential tax rate. It is irrelevant whether the property meets the housing needs of the owner or others, or whether it constitutes a source of rental income. However, it should be noted that vacant properties or properties rented out on a short-term basis will not be used to meet housing needs.
This article is for informational purposes only and does not constitute legal advice.
Legal status as of November 15, 2024
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