Settlements related to the unauthorized use of real estate may raise doubts as to their proper tax classification. Companies are often faced with the question of whether remuneration received for the use of such property should be treated as consideration for the supply of services or whether the amounts received constitute compensation for the unauthorized use of land. In a recent tax ruling, the Director of the National Revenue Information Service (KIS) indicated that even where a company openly objects to the use of its land and demands its return, such use may still be implicitly classified as a supply of services.
The case concerned a company holding a perpetual usufruct right to a property. In the course of its business activity, the company entered into an agreement with a contractor regarding the deposition of excavated material on the property. After the expiry of the agreement, no handover protocol was signed due to the contractor’s failure to fulfil certain obligations. Moreover, despite the contractual completion date having passed and despite obtaining the required permits, approvals, and authorisations, the contractor did not formally complete the construction and reclamation process, did not carry out the acceptance of works, and did not file a notice of completion of construction.
Subsequently, the company and the contractor entered into a second agreement concerning the deposition of excavated material on the property. Under that agreement, the contractor was obliged to return the property in an unimpaired condition upon its completion.
As the contractor failed to fulfil this obligation, the company sent a letter requesting the signing of a property handover protocol. One month later, the company issued another letter informing the contractor that, pursuant to the contractual provisions, it considered the contractor to be occupying the property without legal title and, consequently, began charging remuneration in accordance with the agreement. Despite objections raised by the contractor, the company maintained its position and invoiced the relevant amounts. This gave rise to doubts as to whether the situation should be treated as a supply of services subject to VAT.
The company argued that the invoices it issued were not related to the provision of services and therefore should not include VAT. It pointed out that after the expiry of the agreement, the contractor used the property in a manner different from that originally envisaged, while the company had objected to such use from the very first day following the agreement’s termination.
The company also referred to previous individual tax rulings in which the decisive factor for determining whether unauthorized use of real estate was being tolerated was the moment at which the owner expressed opposition to such unauthorized use. According to those rulings, prior to the owner’s objection, the situation could be regarded as the paid provision of access to real estate and therefore subject to VAT. However, the company argued that its circumstances were different because it had consistently demanded the return of the property from the date of the agreement’s expiry.
According to the company, no new contractual relationship had arisen, nor had the previous agreement been extended. The contractor continued to use the property without the company’s consent. Consequently, the company maintained that the amounts received constituted compensation for being deprived of the right to freely dispose of its property and therefore fell outside the scope of VAT.
The tax authority disagreed with this position. In its individual ruling of 17 February 2026 (reference no. 0111-KDIB3-1.4012.914.2025.2.IK), the Director of KIS noted that although the company claimed it had not consented to the contractor’s continued use of the property, it had nevertheless sent letters to the contractor and issued VAT invoices for such unauthorized use.
The authority further emphasized that the company had not initiated court proceedings but instead engaged in settlement negotiations, which ultimately resulted in the return of the property. In the authority’s view, these circumstances demonstrated that the company had, in practice, consented to the contractor’s continued use of the property. As a result, the arrangement should be treated as a supply of services within the meaning of Article 8(1) of the Polish VAT Act.
According to the tax authority, the payments received were directly linked to the service provided by the company and therefore constituted consideration for that service. Consequently, the service was subject to VAT.
The authority also addressed the tax rulings cited by the company. It pointed out that the ruling favourable to the taxpayer had been issued following a court judgment and therefore did not reflect the interpretation generally adopted by the tax authorities. The second ruling referenced by the company, on the other hand, was consistent with the position presented in the case at hand.