Definition of 'structure' declared unconstitutional. A real property tax revolution is coming

Definition of ‘structure’ declared unconstitutional. A real property tax revolution is coming

2023 / 07 / 19

On 4 July 2023, at a sitting in camera in case SK 14/21, in response to a complaint lodged by a taxpayer for examining compliance of the definition of ‘structure’ for the purpose of real property tax, the Constitutional Tribunal held as follows:

section 1a(1)(2) of the Act on Local Taxes and Fees of 12 January 1991 (which contains a legal definition of ‘structure’ for the purpose of real property tax) is not compliant with Art. 84 and Art. 217 of the Constitution of the Republic of Poland;
this provision will become void 18 (eighteen) months after promulgation of the judgment in the Journal of Laws.

UNCONSITUTIONAL DEFINITION OF ‘STRUCTURE’

In its judgment, the Tribunal focused on constitutionality of the definition of ‘structure’

The major problem is that, according to the current regulations, to determine the object of taxation, taxpayers must refer to provisions of the building law. The Constitutional Tribunal declared that this legislative solution was not consistent with the Constitution because:

taxpayers should be able to determine the object taxed with real property tax on the basis of the tax law with no need to refer to other legal acts;
reference to provisions of the building law is highly imprecise because there is no certainty as to whether such reference applies to primary legislation only or to subordinate legislation as well.
it is inadmissible to define the object of taxation, which is an essential element of tax, in an act of non-tax nature.

More details will be known when the written statement of reasons for the judgment is published.

IMPLICATIONS OF THE JUDGMENT

In practice, the judgment will have the following implications:

the legislator should amend the provisions of the Act by introducing a new definition of ‘structure’.
based on the judgment, taxpayers who are in dispute with tax authorities may argue that the presumed constitutionality of the regulation defining ‘structure’ has been disproved, which should lead to resolving doubts in their favor.

The implications of the judgment can be of practical importance in proceedings before tax authorities and administrative courts. For many years now, there have been disputes regarding the status of facilities as ‘buildings’ or ‘structures’ for the purpose of real property tax. This classification is essential in terms of tax assessment, because buildings are taxed according to their usable area while structures – according to their value.

REVOLUTION IN REAL ESTATE TAX

Declaring the legal definition of ‘structure’ unconstitutional means that taxpayers are about to see a real tax revolution. However, the time given by the Constitutional Tribunal to the legislator for making the relevant amendment is 18 months. Therefore, in 2025 the real property tax will be subject to significant changes which can be seen as revolutionary.

We will keep you informed on the legislative work relating to the judgment. Should you have any doubts, you are welcome to contact our experts.

KONTAKT