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The case concerned the interpretation of the provisions on the exemption from VAT on the sale of undeveloped land, whose main purpose in the local zoning plan has been defined as green areas and waters, however, it is possible to build on these areas specific construction facilities serving the basic purpose. The tax authority decided that the possibility of building on the site indicated in the local zoning plan for construction works indicates the allocation of land for development, so the sale of these areas is not subject to exemption from VAT.

The Provincial Administrative Court in Krakow disagreed with the position of the tax authority, admitting in full the arguments presented by the SPCG Law Firm, namely that the possibility of constructing any building in a given area does not prejudge the qualification of the area as an area designated for development. On the character of the land as construction site within the meaning of art. 2 point 33 and art. 43 par. 1 point 9 of the VAT Act can only be said in a situation where the possibility of development has a dominant role for the site. Therefore, from the point of view of exemption from VAT tax, the basic purpose of a given land indicated in the local zoning plan, indicating the construction or non-building nature of a given area, is decisive. However, there is no significant possibility to build such a site if it is complementary to its basic purpose.

The above-mentioned position of the SPCG Law Firm was also shared by the Supreme Administrative Court, which, by a judgment of October 19th, 2018, reference number I FSK 1992/16, dismissed the cassation appeal of the tax authority.

The proceedings were conducted by advocate Agnieszka Soja, SPCG’s partner.

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