In today's article from the series entitled " Tuesday Mornings for the Construction Industry ", we analyze a topic that has been very engaging for developers in recent days, namely real estate tax - residential premises owned by the developer.
Let's begin with the fact that property tax is a local tax. This means that each municipality can independently set its rate, limited only by its upper limit. Differentiating tax rates based on building type has been common since the interwar period. This structure was known and used since the partitions. For example, the rate of the fire tax in the former Russian partition depended on the area of the building's land; in the former Austrian partition, on the number of residential units; and in the former Prussian partition, on the building's class. Later, the law differentiated the tax rate based on factors such as whether the building was part of a farm or whether it was rented/leased.
Currently, the Act distinguishes buildings:
- residential;
- related to running a business;
- used for conducting business activities in the field of trade in certified seed;
- related to the provision of health services;
- the remaining.
Each category may be taxed at a different maximum rate.
It is common practice for residential premises owned by development companies to be taxed at the rate applicable to residential buildings. The exception is when the premises are used for business purposes.
This practice was recently challenged by the Katowice authorities. They concluded that a residential unit, until sold by the developer, is occupied by the developer for business purposes. The basis for this action is the resolution of the Supreme Administrative Court of October 21, 2024 (ref. III FPS 2/24). In this ruling, the court stated that the appropriate tax rate for apartments owned by entrepreneurs whose business activity involves renting them out for residential purposes will be the rate designated for residential buildings . The Katowice authorities conclude from this that an apartment that is currently unoccupied should be taxed as being connected with business activity.
The City of Katowice's position, however, is inconsistent with the judgment of the Supreme Administrative Court of May 23, 2013 (ref. II FSK 1880/11). In this judgment, the court presented an interpretation later confirmed by the Constitutional Tribunal in its judgment of February 24, 2021 (ref. SK 39/1), according to which the connection of a building with economic activity is not solely determined by the entrepreneur's possession of it . Administrative court case law has recognized that this connection may also be determined by the inclusion of the property in the fixed assets register, conducting business activity there, or taking actions aimed at preparing, preserving, or securing the property for future (planned) business activity or for the continuation of interrupted business activity.
It follows from the above that the possession of unsold premises by development companies does not necessarily constitute business activity. This could be considered true if the premises were used as a company office or for short-term rentals.
The resolution that served as the basis for changing the classification of unsold residential units does mention "permanent vacancies," which are treated as long-term capital investments. While such a phenomenon may occur among businesses outside the development industry, it should be noted that holding unsold units is not in the developer's best interest. It results in the need to incur maintenance costs and the tying up of funds that could be allocated to further investments.
In its aforementioned ruling, the Supreme Administrative Court itself notes that this practice is known, among other things, from the activities of investment funds. This practice is undoubtedly harmful, as it leads to the financialization of the housing market. Instead of a place of residence, apartments become a financial instrument. The goal of development companies, however, is not to artificially generate supply and demand, but to maximize the housing needs of society.
To sum up, in our opinion, the position of the city of Katowice is incorrect and should not become common practice of tax authorities – in this case municipalities.
This article is for informational purposes only and does not constitute legal advice.
Legal status as of September 9, 2025
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