According to the Commissioner for Human Rights, the problem of defining the concept of “building” for tax purposes has remained unresolved for years. Despite the judgments of the Constitutional Tribunal indicating the need to introduce such a legal definition. As a result, disputes between entrepreneurs from various industries and the tax office over what objects can be considered “buildings” are mounting in courts.
- The problem of defining the concept of “building” for tax purposes has remained unresolved for years.
- Despite the judgments of the Constitutional Tribunal indicating the urgent need to create an autonomous definition for tax purposes, the legislative work has still not been completed.
- As a result, disputes between entrepreneurs from various industries and tax authorities continue to pile up in the courts, and more cases are brought to the Constitutional Tribunal.
The current regulations on local taxes are anachronistic and do not correspond to reality. Therefore, it is necessary to carry out a reform consisting in the creation of new legal regulations in the area of real estate tax. The change in regulations should be comprehensive and systemic.
It has been repeatedly emphasized that the definitional provisions regarding buildings should be clear, precise, predictable and understandable to citizens. Case law should not decide what is subject to taxation. This is a matter reserved for the legislator.
In the discussion on the effective definition of buildings, the need to link the tax base with the subject of taxation was also pointed out. However, there were concerns that each new definition of “building” could result in new disputes.
There is no definition of a structure in the Act on Local Taxes and Fees
The issue of the lack of a precise definition of “building” for real estate taxation has remained unresolved for over a decade.
A significant shortcoming of the Act on Local Taxes and Fees (Upol) in this respect is the reference to the provisions of the construction law. This is an example of the negative effects of faulty legislation – both for taxpayers and tax authorities (e.g. mining communes).
Despite subsequent judgments of the Constitutional Tribunal and many general speeches of subsequent Ombudsmen, calling for urgent changes to the law, no effective corrective actions were taken.
The Ministry of Finance pointed out that the issue is very complicated, and changing the definition requires reconciling significant, divergent interests of taxpayers, including small and medium-sized enterprises and local government units that are beneficiaries of real estate tax.
The legislator must introduce a definition of a legal structure for tax purposes
On July 4, 2023, another judgment of the Constitutional Tribunal was passed, stating that Art. 1a section 1 point 2 of the Act is inconsistent with Art. 84 and art. 217 of the Constitution. At the same time, the Tribunal ruled that this provision would lose its binding force 18 months after the judgment was announced in the Journal of Laws.
The justification stated that such a postponement would allow the legislator to prepare and introduce a new legal definition of “building” for the purposes of determining the subject of real estate tax, without reference to acts outside tax law.
In the opinion of the Constitutional Tribunal, the legislator – by introducing a new definition of “building” in the Act, which would not refer to non-tax laws – should also change the current legal definition of “building”, referring to the Construction Law.
Also in the justification of the 2023 ruling on the unconstitutionality of taxation of garages in multi-apartment buildings, the Constitutional Tribunal confirmed that the definition system in the Upol has been criticized in the existing case law and literature on the subject, and the definitional problems have not been solved by the legislator.
According to the Constitutional Tribunal, it would be desirable for the legislator to make appropriate modifications to the Act by the date when the unconstitutional provisions lose their binding force, i.e. by the end of 2024.
The Commissioner for Human Rights emphasizes that the lack of a proper definition of the term “construction” in the Act on Local Taxes and Fees is a blatant example of inappropriate tax legislation. The defective and ambiguous definitions lead to unequal treatment and lack of predictability in the area of tax obligations. Therefore, it is necessary to urgently commence legislative work on changes in this area – emphasizes the Ombudsman.
Marcin Wiącek addresses min. Andrzej Domański for information on the state of legislative work and the schedule of work on adapting the Act to the guidelines of the Constitutional Tribunal. If possible, he also asks for the presentation of the ministry’s current concept as to the justification for introducing systemic changes in real estate taxation.
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