How not to turn a mole hill into a (tax) mountain
Did you buy, sell or acquire real property in 2018? Did you make changes to the real property or in the Real Estate Cadastre in 2018? Take care when filing your real property tax return, since even a small tax amount can get very expensive!
Real property tax returns must be submitted by 31 January 2019. This should not be underestimated, as the penalty for late filing (or the failure to file a tax return for a higher tax liability) is determined from the overall tax liability and not just from a year-on-year tax difference. The penalty amounts to 0.05% of the assessed tax for each day of default, but only up to 5% of the total tax. The penalty cannot be waived and, as a result, may result in an unexpected tax non-deductible expense.
On the other hand, a tax return need not always be submitted, e.g. when only the tax rate, coefficient or local jurisdiction change from the preceding taxable period. The tax authority usually sends payment assessments to companies’ data boxes but is not obliged to do so. Instead, it is the responsibility of each legal entity and individual to monitor the dates on which their real property tax is due. Standardly, the tax is payable in two equal instalments by 31 May and 30 November of each individual year.
A piece of positive news is that no significant legislative changes occurred in this area in 2018. However, a change in the financial administration’s approach to the taxation of real estate bears mentioning. Until recently, the tax authorities applied a clearly formalistic approach by relying on information recorded in the Real Estate Cadastre, referring to the principle of material publicity and the provisions of the Act on Real Estate Cadastre, according to which the Real Estate Cadastre is, inter alia, a source of information for tax purposes.
According to recent court decisions, the tax administrator must perform all acts to determine the tax correctly. Consequently, when assessing tax on buildings and land, the tax administrator must take into account the actual legal situation. If there is any doubt, the tax administrator should examine whether information recorded in the Real Estate Cadastre reflects reality, i.e. the actual use of real property (tax on buildings) or the existence of final and conclusive administrative decisions (tax on land). It is to be expected that the tax administrator will call on taxpayers to provide supporting documentation regarding actual situations, since the Real Estate Cadastre remains their primary source of information