The Supreme Administrative Court has disagreed on the possibility of continuing the depreciation of apartments and apartment buildings, which has been blocked since January 1, 2023. The Supreme Administrative Court’s ruling is a huge disappointment for taxpayers.
What the ban on depreciation of residential units is based on
As of January 1, 2023, no taxpayer is allowed to include depreciation deductions on residential buildings and premises as tax expenses. This right was taken away from both PIT and CIT taxpayers under the Polish Deal. Only until the end of 2022 could depreciation deductions still be made on buildings and dwellings acquired or manufactured before January 1, 2022, and counted as tax deductible expenses. Despite this, the unconstitutionality of the introduced rules on depreciation of residential premises was raised, raising the hopes of taxpayers. The WSA in Lodz, in a June 27, 2023 ruling (I SA/Łd 258/23), stated that by introducing a ban on depreciation of apartments and residential buildings, the legislature violated the principle of protection of acquired rights. The verdict is not yet final.
NSA on the side of the fiscal
Meanwhile, the Supreme Administrative Court recently ruled unfavorably on the right to depreciation (judgment in case number II FSK 119/23). Referring to the charge of unconstitutionality of the amendment, the director of the NAC in the case defended the position that it is within the competence of the Constitutional Court to rule on compliance or non-compliance with the Polish Constitution. The fiscal’s position was subsequently accepted by the courts of both instances. The WSA in Łódź confirmed that in an individual interpretation, the director of the KIS could not declare the incompatibility of a provision of substantive law (i.e., Article 71(2) of the Polish Order) with the principle of protection of acquired rights. The taxpayer derived this principle from Article 2 of the Polish Constitution, which states that “the Republic of Poland is a democratic state governed by the rule of law, realizing the principles of social justice.” Meanwhile, the Supreme Administrative Court concluded that this principle had not been violated.