Not every company must tax its structures

With many taxpayers, the attitude persists that all structures owned by an entrepreneur are subject to property tax (PON). This may be the result of their experience with the tax authorities.

Most often, tax authorities do not check whether a given structure is actually related to the entrepreneur’s business, which is the wrong approach. This is because, even assuming that an object is a structure (which is often not necessarily an obvious conclusion), only structures that are related to the conduct of business are subject to PON taxation.

Liquidation of a company and taxation of PON

A dilemma of how to tax owned structures and land and buildings faced a taxpayer in the manufacturing industry who decided to dissolve the company and cease business operations. As of a certain point in time, the company had effectively ceased its operational business activities. However, it was not immediately deleted from the National Court Register, but continued to carry out liquidation activities involving collection of debts, fulfillment of liabilities and liquidation of assets.

Significantly – the taxpayer’s questionable assets formally remained its fixed assets. At the same time, the company ceased to make depreciation deductions on these fixed assets for tax purposes after it ceased operations. Despite this, the tax authorities considered that the company’s ongoing liquidation process did not result in the recognition for PON purposes that the taxable assets in the entrepreneur’s possession were not related to the conduct of business activities. Thus, according to the authorities, the company, despite the cessation of its actual business activities, would pay PON at the highest tax rates until it was removed from the court register.

What is the position of the courts?

The courts, however, took a different view. First the Administrative Court in Gliwice[1] and then the Supreme Administrative Court [2] held that such circumstances did not necessarily mean that the structures owned were related to the conduct of business. It was emphasized that while it is true that a company in liquidation carries out economic activities related to its operation and liquidation, the entrepreneur’s failure to carry out its previous production activities by ceasing them altogether and not being able to carry out this or any other economic activity makes the properties owned by the company lose a key feature from the point of view of the PON. According to the courts, such properties also cannot be considered suitable for even partial or possible use for other economic activities. This means that in the case at hand, the taxpayer can apply the preferential tax rate for land and buildings. In the case of structures, on the other hand, the company is entitled not to tax them, which supports the thesis that not all structures owned by the entrepreneur should be taxed at the PON.

Taxpayers who, for various reasons, suspect that their real estate is not related to the conduct of business, should carefully verify the facts and prepare a precise argument for the tax authorities.

MDDP experts support entrepreneurs from various industries in PON settlements. We are at your disposal in case you need to conduct a tax review, reclassify your settlements, prepare overpayment claims or need assistance in ongoing proceedings.

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[1] judgment of the administrative court in Gliwice of February 07, 2022, ref. I SA/Gl 1384/21

[2] judgment of the Supreme Administrative Court of May 17, 2024, ref. no. III FSK 825/22