Tax on apartment rental. The Supreme Administrative Court resolved the doubts
The Prosecutor General asked the Supreme Administrative Court to decide what tax rate to apply when a company rents an apartment to a natural person. So far, tax authorities have used two lines of case law.
What tax rate should be applied when the owner of the apartment is a company and the tenant is an individual? The Prosecutor General indicated in his application to the Supreme Administrative Court that there were two divergent lines of jurisprudence in the court’s jurisprudence.
How to tax apartments owned by companies?
Some courts believed that since renting an apartment is a business activity, the owner of the apartment (usually an institutional investor) should pay tax at the highest rate appropriate for business activity. In other rulings, the courts indicated that what was happening in the apartment was crucial. If the tenant uses it exclusively for housing and does not run a business there, the low residential rate applies.
The tax rate for apartments occupied for residential purposes is a maximum of PLN 1.15 per 1 sq m, and PLN 33.10 per 1 sq m for those occupied for business purposes – so this is a huge discrepancy.
The Supreme Administrative Court’s resolution is reported by Business Insider.
Meeting housing needs is important
The Prosecutor General asked the Supreme Administrative Court to issue a resolution that would resolve the doubts. An expanded seven-person panel of judges of the Supreme Administrative Court ruled that buildings classified in the land and building register as residential buildings intended for rent (business activity) to the extent that they serve to meet the housing needs of tenants are taxed at the residential rate. Therefore, if the tenant uses the apartment for his or her own housing needs, the low housing rate applies.
— It is important that housing needs are met. It does not matter whether it is done by the owner, the tenant or someone else, said Krzysztof Winiarski, judge of the Supreme Administrative Court.
Rafał Kran, a tax advisor and partner in the MDDP Real Estate Team, quoted by “BI”, is of the opinion that the resolution is generally beneficial to owners of buildings or residential premises who run a business involving renting them. “The mere fact of renting cannot automatically mean that the highest property tax rate is due,” he said.
