1. Is the tax base in the minimum income tax only the net tax value of a building?
According to the precedential judgment of the Voivodship Administrative Court, the basis for taxation with the minimum income tax on commercial real estate is not the initial value of the building (i.e. a gross value) but the net tax value (i.e. the value less depreciation write-offs already recognized).
In the case at hand, a taxpayer holding a commercial real estate being subject to minimum income tax argued that due to the fact that the provisions binding since 2018 determine as the taxable basis the value calculated each time on the first day of a given month (taking into account the relevant tax-free amount), it means that this change results from monthly depreciation write-offs.
The Voivodship Administrative Court in Warsaw (judgment of April 17, reference number III SA / Wa 1905/18) considered the taxpayer’s standpoint to be correct, indicating the imprecise wording of the provisions and the need to resolve doubts in favor of the taxpayer. The approach approved by the court has significant effects for taxpayers because in the case of older buildings it significantly reduces the basis for taxation with the minimum tax.
2. Delivery of built-up land if the infrastructure already belong to the buyer is a delivery of the plot itself without delivery of infrastructure
Based on the judgment of the Supreme Administrative Court of 31 January 2019, reference number I FSK 1771/16 file, the contribution of the plot along with the infrastructure to the company, which owns the infrastructure, is the supply of the plot itself.
In accordance with the factual state, the voivodship acquired real estate for the purpose of railway investment (the transaction was exempt or excluded from VAT – in the case of purchase from the State Treasury and taxed at 23% VAT rate – in the case of purchase from the city). The voivodship has entrusted the construction and operation of real estate to the company, of which it is the sole shareholder. The construction of the railway infrastructure together with new buildings and structures was carried out on properties that are owned by the voivodship and which are to be transferred to the company in order to increase its share capital.
The voivodship argued that the contribution of land property built-up to the railway infrastructure would be exempt from VAT taxation because in the case of deliveries of buildings or structures permanently attached to the tax base, the value of the land is not distinguished. The tax authority disagreed with the standpoint of the taxpayer claiming that the transaction will in fact concern only the plots – all assets are already the company’s property.
The position of the tax authorities was confirmed by the Provincial Administrative Court and the Supreme Administrative Court, indicating that the subject of delivery will be only land as the buildings and structures of the railway infrastructure were built from the company’s own resources without the owner of the land, and thus the company has economic control over them from the moment of construction completion. Therefore, the subject of delivery will be only land and the entire transaction should be taxed at 23% VAT rate.
3. VAT on renovation services provided by a foreign entity
According to the tax ruling of the Director of the National Tax Information dated 29 January 2019, reference number 0115-KDIT1-2.4012.889.2018.1.AW renting a plot by a foreign entity to store equipment there and signing long-term contracts with subcontractors forms a permanent place of business in the light of VAT provisions.
According to the factual state, a taxpayer carrying out cargo reloading activities at seaports purchased machine repair services from a foreign entity. The taxpayer received a VAT invoice for the service provided, on which the Polish VAT number of the foreign entity was indicated – this entity is registered for VAT purposes in Poland. According to the taxpayer’s position, the foreign entity fulfills the conditions for the existence of a permanent place of business in Poland because it has technical resources, human resources and its activity in Poland is permanent and imperishable, and thus invoices were issued correctly and the buyer has the right to deduct the resulting input VAT.
The director of the National Tax Information agreed with the taxpayer’s position, recognizing that the right to deduct input VAT in this case will be applicable since the foreign entity has a permanent place of business in Poland and the place of providing repair services is Poland.
4. Taxation of real estate property owned by the entrepreneur
In accordance with the judgment of the Supreme Administrative Court of February 15, 2019, reference number II FSK 2428/18, only binding land, being a co-owner of an individual being entrepreneur, with its business activity determines taxation with the highest rate of real estate tax.
In this case, the entrepreneur bought in 2015 the joint property interest in the plot, while at the same time stating in the contract that he would use it for the needs of his business. In 2016, the spouses contributed to the company and purchased the remaining shares in the plot.
According to the position of the municipality and the self-government appeal board, since one of the co-owners in 2016 was an entrepreneur, it means that the property should be taxed according to the highest real estate tax rate. The taxpayer disagreed with the position, arguing that it is important in the case that the real estate activity is carried out on the real estate, and not the fact that the owner of the land is an entrepreneur. The Voivodship Administrative Court agreed with the tax authorities by underlining the entries made in the real estate purchase agreement and the possibility of using it on its own account for resale.
However, the Supreme Administrative Court agreed with the taxpayer stating that the contractual arrangements itself is not sufficient and paying attention to the judgment of the Constitutional Tribunal of December 12, 2017 (reference number SK 13/15), according to which the entrepreneur’s own possession is not sufficient to state that the property is related to business activity and a link with this activity is necessary – direct or indirect.