The Constitutional Tribunal in its judgment of February 24, 2021 (file no. SK 39/19) ruled that with regard to real estate tax, the higher tax rate for real estate owned by an entrepreneur but not related to the economic activity is inconsistent with the Constitution.

The problem related to the automatic classification of real estate owned by a natural person conducting economic activity to the category of land, buildings or structures related to the conduct of this activity. Natural persons conducting such activity act in two ways under the tax law – as entrepreneurs and as private persons (in terms of their personal property). The Constitutional Tribunal found that it is unconstitutional to classify land owned by such persons as land related to running a business and, consequently, to be subject to a higher tax rate, regardless of whether they are actually related to conducting such business.

In the opinion of the Tribunal, entrepreneurs cannot be charged with a higher tax rate solely because they own real estate which is not used for their business activities. Taxation of land or buildings with a higher rate of real estate tax – unused and that cannot potentially be used for business activities – solely due to their possession by an entrepreneur or other entity conducting business activity, the Tribunal found inconsistent with Art. 64 sec. 1 of the Constitution. Art. 1a sec. 1 point 3 of the Act on Local Taxes and Fees is an instrument serving purposes other than fiscal, being a disproportionate tax burden consisting in not distinguishing the tax situation of taxpayers who own real estate, but do not use it and cannot use it to conduct business, and taxpayers using their real estate for business.

Due to the above, in accordance with the operative part of the judgment, Art. 1a paragraph 1 point 3 of the Act of 12 January 1991 on Local Taxes and Fees (Journal of Laws of 2019, item 1170), understood in the way that only the possession of the land determines whether the land, building or structure is bound to business activity , building or structure by an entrepreneur or other entity conducting business activity, is inconsistent with art. 64 sec. 1 in connection with Art. 31 sec. 3 and art. 84 of the Constitution of the Republic of Poland.

The judgment of the Constitutional Tribunal is of great importance for entrepreneurs who owned real estate other than residential real estate, which are not actually related to running a business – they can apply for a refund of wrongly overpaid tax.