On 17 April 2019 Sławomir Łuczak (partner) and Stanisław Gordziałkowski (senior associate) from the SK&S Tax Team obtained a precedential administrative court judgment for one of the largest commercial malls in Warsaw, which confirmed that the basis for taxation with tax on income from fixed assets is exclusively the non-depreciated initial value of that fixed asset (and not the entire initial value).
The case concerned income tax (applicable since 2018) on commercial real estate and the interpretation of art. 24b sec. 3 of the CIT Act. In the oral reasoning of the judgment (case ref. III SA/Wa 1905/18) the Voivodship Administrative Court in Warsaw pointed out that when introducing this tax in 2018 the legislator made use of a ‘legal fiction’, in accordance with which tax income arises as a result of the possession itself (deed of ownership) of the fixed asset. In view of the exceptional nature of this tax the legislator should define in detail the rules for calculating it, including the way of determining the taxation basis. In the view of the Court, since the tax provision for the purposes of calculation refers to the initial value of the fixed asset established each month, then this value is variable. Therefore it cannot (as suggested by the tax authority) be subject to change only to the disadvantage of the taxpayer (e.g. as a result of an improvement of the fixed asset). For this reason, the Court cited a system-related interpretation and accepted that pursuant to the construction of income tax fixed assets are subject to depreciation, while the initial value is essentially an undepreciated initial value. Hence, there are no grounds for understanding differently the initial value of a fixed asset determined for the purposes of calculating the new tax.
The Court pointed out that a literal interpretation of this provision may give rise to doubts and hence it is legitimate to invoke art. 2a of the Tax Ordinance which orders that doubts which cannot be removed should be resolved in favor of the taxpayer (in accordance with the in dubio pro tributario principle).
The judgment is not legally final.