Home » Tax Highlights for Real Estate – October 2023

Tax Highlights for Real Estate – October 2023

November 2023

Polish Constitutional Court: Various property tax rates for garages are unconstitutional

On October 18, 2023, the Polish Constitutional Court issued a judgment regarding the application of property tax rates for garages.

In the opinion of the Court, the Real Estate Tax provisions that allow the classification of a separate garage located within a residential building as a part of the building with a different character than residential are considered unconstitutional.

According to the Constitutional Court, the Real Estate Tax provisions are also unconstitutional to the extent that they link the application of the appropriate tax rates to a garage within a residential building based on whether it is separated or not as a separate property object. Currently, this results in the application of a higher tax rate to a multi-space garage located within a residential building that constitutes a separate property object.

In accordance with the judgment, such garages should be subject to the tax intended for residential buildings. This is a very favorable judgment from the taxpayers’ perspective because the maximum tax rate for residential buildings is currently 1.00 PLN per 1 square meter of usable area, while when applying the maximum rate for other types of buildings, as contested in this case by the Court, the taxpayer is obliged to pay a tax of 9.71 PLN per 1 square meter of usable area.

The mentioned provisions, in the specified areas mentioned above, will cease to be in force after December 31, 2024.

Minimum Tax from the beginning of 2024 After a two-year suspension period, the provisions regarding the so-called “minimum tax” will come into effect from January 1, 2024.

Companies and tax capital groups that, during the tax year:

  1. incurred a tax loss from a source of income other than capital gains, or
  2. had their share of income in revenues not exceeding 2% (this condition applies exclusively to income and operating revenues),

will be required to pay this tax. Additionally, taxpayers conducting business through a foreign establishment located in Poland will also be liable to pay the minimum tax.

The minimum tax rate is 10%. According to the provisions of the Corporate Income Tax (CIT) Act, there are two alternative methods for determining the tax base for the minimum tax:

  1. The sum of: 
    – an amount equal to 1.5% of the value of income (other than capital gains) earned by the taxpayer in the tax year;
    – the amount of interest expenses incurred with related entities exceeding 30% of the taxpayer’s EBITDA
    – and the amount of expenses for services or intangible rights paid to related entities exceeding 3 million PLN or 5% of the taxpayer’s EBITDA
  2. Alternatively, the simplified method involves calculating 3% of the value of income derived by the taxpayer from sources other than capital gains.

In the CIT Act there are several exemptions from the minimum tax, including: 

  1. Taxpayers commencing a new business – in the tax year in which the business begins and in the two subsequent years.
  2. Taxpayers whose revenues have decreased by at least 30% compared to the previous tax year.
  3. Small CIT taxpayers.
  4. Taxpayers whose profitability ratio (calculated in accordance with minimum tax provisions) was at least 2% in one of the last three years.

The minimum tax paid for a given tax year can be deducted from the overall calculated CIT for the following 3 tax years immediately following the year in which the taxpayer paid the new tax. Taxpayers will be required to pay the minimum tax for the first time in 2025.

Tax Base in the tax on revenues from buildings cannot be reduced by depreciation charges

In accordance with Corporate Income Tax (CIT) regulations, the tax base for the tax on revenues from buildings is determined as of the first day of each month and is based on the initial value of the depreciable asset subject to taxation, as indicated in the records maintained. Given the wording of this provision, taxpayers often draw the conclusion that since income, which simultaneously serves as the tax base, should be determined at the beginning of each month, the initial value of the building should fluctuate over time and should gradually be reduced by the amount of depreciation charges. In other words, according to taxpayers, the tax base should be the net value of the building rather than the gross value.

However, administrative courts hold a different view on this matter. In a recent unfavorable judgment, case no. II FSK 214/21 dated August 9, 2023, the Supreme Administrative Court (NSA) upheld the position of the provincial administrative court and stated that, in accordance with the provisions of the CIT Act, the initial value is determined only once, upon the asset’s entry into use.

According to NSA’s opinion, whenever the legislator intended to attribute a different meaning and scope to the initial value, including considering depreciation allowances, it clearly indicated this in the provisions of the CIT Act.

This issue can be characterized as a consistent line of jurisprudence, as NSA has presented a similar stance in previous judgments, including II FSK 2190/20, II FSK 2400/20, II FSK 2183/20 dated March 15, 2023, II FSK 2173/19, and II FSK 2172/19 dated April 28, 2022, as well as in the recent judgment II FSK 361/21 dated October 26, 2023.

Further Increase Real Estate Tax rates in 2024

In the announcement dated July 21 regarding the upper limits of real estate taxes for the year 2024, the Minister of Finance declared the maximum real estate tax rates for the upcoming year. These rates are annually determined based on the inflation rate from the first half of the year compared to the corresponding period of the previous year.

For the year 2024, these rates will include:

The maximum rates serve as the upper limit for the rates established by local governments. Decisions on the actual rates that will apply within a particular city or municipality will be made in the coming weeks.

National Tax Administration has provided an individual tax ruling form generator

On November 6, 2023, the Ministry of Finance announced that the National Tax Administration (Krajowa Administracja Skarbowa – KAS) has made available a tool for generating individual tax rulings. The tool developed by KAS is designed to facilitate the process for taxpayers when preparing a request for an individual tax ruling (ORD-IN form) to resolve doubts related to the interpretation of tax regulations.

The generator made accessible to taxpayers includes helpful guidelines to assist in completing the interpretation request form. These guidelines pertain to the information that should be provided in the various fields of the ORD-IN form.

This tool is exclusively intended for generating ORD-IN requests. Users of the generator can save the request and choose to: (a) print and send it via traditional mail to the address of the National Tax Information; (b) electronically sign and submit it.

The generator can be accessed at https://ord-in.podatki.gov.pl/.

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