The Supreme Administrative Court (NSA) has issued a breakthrough judgment for the hotel industry – informed Elżbieta Ślusarczyk, tax advisor, manager at Grant Thornton. The Supreme Administrative Court ruled that the hotel service is not a service similar to rent or lease. This means – as Ślusarczyk explained – that in the light of the judgment, taxpayers providing hotel services are not subject to the tax on income from buildings.
Elżbieta Ślusarczyk pointed out that from the beginning of the tax on income from buildings, hotel owners argued with tax authorities and courts about the legitimacy of taxing their operations with this tax. The case settled last week by the Supreme Administrative Court concerned an entrepreneur who, as part of his hotel business, provides accommodation and catering services, as well as organizes training and conferences.
The hotel owner had doubts whether he should pay tax on income from buildings. In his opinion, the contracts he concludes do not qualify him as a taxpayer to be covered by the tax on income from buildings, the tax advisor indicated.
What was the case about?
According to the tax office, the provisions allow for the recognition of hotel service contracts as identical to rental or tenancy contracts. The result of such an assessment was to burden the hotel owners with another levy. “The tax base is income, understood as the sum of the initial values of real estate less PLN 10,000,000. The tax itself is 0.035 percent of this base,” we read.
Ślusarczyk reminded that the Director of the National Tax Information in the issued interpretation referred to the definition of a hotel service contained in the Act on hotel services and the services of tour leaders and tourist guides. The provision defines the hotel service as: “short-term, generally available rental of houses, flats, rooms, beds, as well as places for setting up tents or caravans, and the provision of related services within the facility”.
“In the opinion of the Director of KIS, the main benefit of this service is the use of the building and it has features similar to a lease agreement, so it should be taxed with tax on revenue from buildings” – added the tax adviser.
As she pointed out, a similar approach was presented in the judgment of the Voivodeship Administrative Court in Gdańsk (WSA) of August 26, 2020. The WSA dismissed the taxpayer’s complaint against the above interpretation. In the court’s opinion, the hotel contract and the lease contract have a similar purpose – the use of a thing, i.e. a specific property, for a fee.
Elżbieta Ślusarczyk stressed that the courts have often ruled in a similar scope to the detriment of taxpayers.
Judgment of the Supreme Administrative Court
In her opinion, the judgment of the Supreme Administrative Court of July 4 breaks the unfavorable interpretation line. “The judgment of the Supreme Administrative Court should be assessed positively. It is the first judgment in favor of the taxpayer in this key case – both for the hotel industry and for owners of other collective accommodation buildings – noted the tax advisor.
As she explained, in the opinion of the Supreme Administrative Court, contained in Art. 24b sec. 1 point 2 of the CIT Act and art. 30g mouth 1 point 3 of the Act PIT the term: “agreements of a similar nature” does not apply to hotel agreements. In the justification – quoted by Ślusarczyk – attention was drawn to their difference, manifesting itself, for example, in the manner of managing a given property – different for each of the benefits. Thus, the achievement of revenues from hotel services is not a reason to cover the hotel owner with the provisions on tax on revenues from buildings.
According to the adviser, “the change in the approach of the Supreme Administrative Court, which has ruled differently so far, allows us to hope for a positive jurisprudence for taxpayers.”
Main photo source: Shutterstock