On October 21, 2024, the Supreme Administrative Court (NSA) issued a significant verdict for the PRS sector (file reference III FPS 2/24). The Court clarified that residential buildings or units leased to individuals as part of business operations should be taxed at the lower, ‘residential’ property tax rate rather than the substantially higher business activity rate.
This matter has long been a subject of debate and inconsistent judicial interpretation.
Our goal is to help you navigate the complex world of accounting, tax, and compliance, so you can focus on what you do best – running your business.
The issue
Under the Local Taxes and Fees Act, residential buildings and flats generally qualify for a lower real estate tax rate (up to PLN 1.15 per square meter), except when used for business purposes, which increases the rate to PLN 33.10 per square meter—nearly 30 times more.
A key point of contention was the phrase “occupied for business purposes.” Some court decisions suggested that companies owning leased properties should apply the higher rate, while others indicated that the lower rate could apply as long as the tenant did not conduct business in the premises.
Details of the verdict
In a nutshell, the Supreme Administrative Court determined that:
- residential-use buildings in the land and building register should be taxed at the lower rate when they meet tenants’ residential needs, even if leased as part of a business
- actual use of the premises, not the business status of the lessor, determines the applicable tax rate.
This verdict has a potentially positive impact on rental businesses by significantly reducing property tax costs and enhancing profitability.
Important nuances
While positive overall, the verdict may introduce new uncertainties regarding the scope of taxation and documentation requirements, especially regarding:
- vacant properties (due to tenant turnover)
- common areas within buildings
- spaces with potential residential use (e.g., leased by a business tenant)
- distinctions between residence and temporary stay
- evidence required to verify that a lower rate applies based on the premises’ actual residential use.
Next steps
This verdict favors business owners, but as tax authority practices evolve, some practical challenges are expected—particularly with documenting conditions to qualify for the lower tax rate.
Potential actions include:
- tax overpayment claims for the previous five years
- requests for tax rulings tailored to your specific circumstances.
How we can help
We will be happy to support you in analysing and identifying properties that qualify for the low (residential) property tax rate, support you in formulating and submitting applications for overpayment of tax and for issuing tax law interpretations.
We invite you to contact us. We are here to make running your business easier.
Need more details? Do not hesitate to check out our scope of services dedicated to the real estate market to learn more.
Making business easier.
