The Constitutional Court ruled that the ownership of a real property by a person engaged in business activity does not, by itself, determine a higher real property tax rate | TAX Alert


According to the decision of the Constitutional Court of 12 December 2017, case file no. SK 13/15, the fact of running business activity does not, by itself determine a higher real property tax rate.

The Constitutional Court concluded that the actual use of the real property should be assessed on a case by case basis, the rationale for a higher tax rate being the possibility of generating income from the real property. If the real property is not used for the purposes of the business activity, the very fact that it is owned by a person engaged in business activity is not sufficient for the application of a higher tax rate.

Accordingly, the Court questioned the constitutionality of the provisions of Article 1a(1)(3) in connection with Article 5(1)(1)(a) of the Act on Local Taxes and Charges, which treat the real property as connected with business activity just because of the fact that its owner was an entrepreneur. The decision will have major financial significance for entrepreneurs who find themselves in such situation – the tax rates in case of real property related to the business activity are much higher than those applicable to real property used for private purposes.

The decision of the Constitutional Court offers the opportunity for reopening of legally and finally closed proceedings, in which the decision was made on the basis of the interpretation of the relevant provisions which was found unconstitutional. A motion for the reopening of fiscal proceedings should be filed within one month, and a motion for the reopening of court proceedings within three months of the effective date of the decision of the Constitutional Court.

We encourage you to contact us should you have any questions as to the influence of the decision of the Constitutional Court on the taxation of your real property.

Patrycja Goździowska – Partner, Tax Advisor
Tomasz Wickel – Partner, Attorney at Law, Tax Advisor
Marcin Muchowski – Senior Associate, Tax Advisor