Should the owner of leased farmland pay agricultural tax or real estate tax? One of our clients has for a long time been sure that, given their business profile, they should pay the latter. There is a significant difference in terms of money so you may find it worthwhile to review the terms and purpose of your lease and, if applicable, try to reclaim overpaid tax.

This was exactly the kind of case where we were able to secure a favourable ruling for our client from the Local Appeals Board after a long dispute with Kostomłoty local authority. The case involved a claim for overpaid real estate tax. We appealed the unfavourable decision by Kostomłoty to deny the claim and the appellate body reversed the decision and determined there was overpaid real estate tax in the amount we claimed.

The facts were as follows: Our client is a business entity and owns real estate classified as farmland. The client leased the land out for agricultural purposes.

In our view, given it has actually been used for agricultural purposes, such land should be subject to agricultural tax, not real estate tax. As the client had been paying real estate tax on the land for many years, we proceeded on behalf of the client to reclaim overpaid tax.

Having heard our claim, the Kostomłoty local authority wrongly held that leasing out the land means the land was used in connection with client’s business and occupied for business purposes. As a result, the decision was that agricultural tax would be inapplicable and so our overpaid real estate tax claim should be denied.

We disagreed and filed an appeal to the Local Appeals Board.

The Board went along with our argument that, with the land being used by the lessee for agricultural purposes,  the client’s transaction does not mean that it is occupied for business. Consequently, the local authority was ordered to refund the real estate tax that had been overpaid by our client.

The case was managed jointly by Szymon Karpiński, tax advisor and Sendero partner, and Monika Bilska, tax advisor.

If you lease out your farmland, do not hesitate to contact us. Perhaps you might also have a chance to get your money back.