Property tax rate for residential property rental
January 7, 2025
As a rule, residential buildings, including those owned by entrepreneurs, are subject to property tax at the rate applicable to residential buildings or their parts (Article 5(1)(2)(a) of the Local Taxes and Fees Act, hereinafter: LTFA). An exception is provided in Article 5(1)(2)(b) LTFA, according to which a higher tax rate applies to residential buildings or their parts used for business purposes. Therefore, the determining factor for the applicable property tax rate is whether the premises are used for business purposes.
What determines the amount of property tax?
This concept has been the source of disputes between taxpayers and tax authorities, which often argue that if a given property is rented out by an entrepreneur, it is being used for business purposes. They reasoned that renting is, in essence, conducting business activity. The subject of the dispute is significant, as the rate for residential buildings is a maximum of PLN 1.15 per square meter, while for buildings used for business purposes, it can reach PLN 33.10 per square meter.
Inconsistent stance of the courts
Courts have repeatedly addressed this issue, but their opinions have been highly inconsistent. On one hand, the Supreme Administrative Court (NSA) held that parts of a residential building used for residential purposes—i.e., to permanently satisfy the basic housing needs of the occupants—cannot be considered as being used for business purposes, even if the taxpayer rents them to third parties as part of their business activity (NSA ruling of July 12, 2023, case no. III FSK 250/23).
The purpose of the premises matters
On the other hand, courts have also stated that the concept of “used for business purposes” cannot be interpreted to include situations where a taxpayer uses the property as their office but exclude cases where the taxpayer rents it out for a fee as part of their business activity (Gdańsk Regional Administrative Court ruling of June 5, 2024, case no. I SA/Gd 227/24).
Property tax: new resolution
On October 21, 2024, the NSA, sitting as a panel of seven judges, issued a resolution resolving the issue of property tax on residential buildings rented out as part of business activity (case no. III FPS 2/24). The NSA unequivocally stated that such a building, if rented for residential purposes, will be taxed at the rate applicable to residential buildings, i.e., the lower rate. The key factor is the satisfaction of housing needs and the purpose of the rental, while it should not matter whether the lessor is an entrepreneur or an individual.
