Małgorzata Dankowska Partner, Tax Advisor

Tax & Legal Highlights for Real Estate – May 2021

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CIT implications of transforming a limited partnership into a general partnership

In the tax ruling of 16 April 2021 (ref. no. 0112 KDIL1 2.4012.644.2020.2.PG), the Director of the National Fiscal Information confirmed that the general partnership, which will be established in 2021 as a result of the transformation of a limited partnership, will not become a CIT taxpayer. In a situation where the partners of the general partnership are not only natural persons, the transformed company (i.e. a limited partnership) is obliged to submit information about the partners to the tax office. This information should be filed to the tax office before the date of entry of the transformation into the National Court Register. The above position is also confirmed by the tax rulings of 15 March 2021 (ref. no. 0111-KDIB1-1.4010.9.2021.2.ŚS), of 5 March 2021 (ref. no. 0111-KDIB1-3.4010.9.2021.1.JKU), and of 26 February 2021 (ref. no. 0111-KDIB2-1.4010.538.202.1.AR).

The 20% sanction in VAT is incompatible with EU law

In its judgment of 15 April 2021 (ref. no. C-935/19), the Court of Justice of the European Union ruled that Polish provisions on the possibility of imposing 20% ​​VAT sanction by tax authorities for incorrect assessment of transactions do not comply with the VAT Directive. The current wording of the provisions violates the principle of proportionality as the VAT sanction is imposed without considering the nature and gravity of the infringement. Therefore, it is possible to impose VAT sanction also on taxpayers who have overestimated the VAT refund as a result of incorrect classification of a VAT-exempt transaction as a VAT-taxed transaction, and not as a result of fraud or an attempt to reduce revenues to the state treasury. According to the CJEU, sanctions imposed by the Member States must not go beyond what is necessary to achieve the objectives of ensuring the correct collection of tax and preventing tax fraud. Thus, it should be concluded that the Polish provisions of the VAT Act are inconsistent with EU law. The CJEU judgment constitutes the basis for the resumption of tax or court-administrative proceedings.

Impact of depreciation of structures on the basis of their taxation

The Supreme Administrative Court (NSA) in its judgment of 3 March 2021 (ref. no. III FSK 999/21), ruled that after the completion of depreciation write-offs, the basis for taxing a structure with real estate tax is the same as during depreciation of this item as a fixed asset. It is the value understood as the basis for calculating the depreciation as of 1 January of the year in which the last depreciation write-off was made. This means that the full amortization of the fixed asset does not reduce the fiscal burden of the real estate tax, and therefore companies are not entitled to reduce the tax on fully depreciated structures. In the opinion of the NSA, the distinction introduced into the Act on Local Taxes and Fees, between structures subject to depreciation and structures fully depreciated, was related only to the clear indication in both cases of the date of determining the tax base. The legislator’s goal was not to enable taxpayers to reduce the tax base of fully depreciated structures, as this could lead to a situation where (in extreme cases) the tax would amount to PLN 0. The judgement of the NSA confirms the established line of jurisprudence developed in this respect by voivodship administrative courts (WSA) (e.g. judgments: WSA in Olsztyn of 25 June 2020, I SA / Ol 85/20, WSA in Łódź of 24 September 2020, I SA / Łd 171/20, WSA in Poznań of 17 July 2020, I SA / Po 42/20, WSA in Lublin of 6 March 2020, I SA / Lu 746/19, WSA in Gliwice with on 7 July 2020, I SA / Gl 100/20, WSA in Rzeszów of 21 February 2019, I SA / Rz 1222/18, WSA in Opole of 4 November 2020, I SA / Op 237 / 20, WSA in Białystok of 29 January 2020, I SA / Bk 709/19).

Not every shelter is a building

According to the Supreme Administrative Court (NSA) judgment of 30 July 2020 (ref. no. II FSK 2872/18), the lack of specifically marked walls does not exclude an object from the definition of a building. To characterize an object as a building, it is believed that it is enough for the object to have building partitions. The building partitions should also be understood building structure elements, such as pillars, columns, or columns, which structurally separate the building or part of it from the space. In the present case, the issue was the classification of the packaging shelter, which had only one brick wall, two corrugated metal partitions and mesh panels. In the opinion of the NSA, the boundaries of the facility have not been clearly delimited, and therefore it is not possible to precisely define its boundaries and separate it from the three-dimensional space. The court explicitly emphasized that if a partition is not a wall, it should be able to play the role of a wall structurally. Elements such as corrugated metal partitions and mesh panels do not fulfil this role and may constitute a fence of the facility. With this in mind, the NSA found that the shelter did not meet the requirements for it to be considered a building.

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