Subjective Intent, Structural Deficiency, and the Imperative of Legislative Reform

Robert Nogacki

Managing Partner, Kancelaria Prawna Skarbiec, Warsaw

Commentary on Regional Administrative Court of Rzeszów, Judgment of May 22, 2025, Case No. I SA/Rz 172/25

Abstract

The Regional Administrative Court of Rzeszów vacated a binding tax ruling by the Director of the National Revenue Information Service, who had concluded that a family foundation acquiring residential properties for rental purposes had done so ‘exclusively for the purpose of subsequent disposal’ — thereby forfeiting its corporate income tax exemption and incurring a punitive twenty-five-percent rate. The court correctly identified the administrative authority’s semantic error: the conflation of ‘exclusively’ with ‘ultimately.’ The present commentary advances a more far-reaching thesis. The authority’s error is not incidental but structural. Confronting a statutory standard whose governing criterion is subjectively defined and therefore inherently unverifiable, the fiscal authority commands precisely two enforcement instruments: expansive statutory construction and the General Anti-Avoidance Rule. The first has failed; the second will, in all probability, fail as well. Expansive construction distorts unambiguous statutory text and penalizes foundations for candor before administrative bodies. The General Anti-Avoidance Rule cannot reach transactions grounded in genuine economic substance. Within this enforcement vacuum, a series of costly disputes has accumulated — disputes that the fiscal authority consistently loses and will continue to lose until the legislature replaces the current subjective test with an objective one.

I.  The Fiscal Authority’s Legitimate Concern and the Inadequacy of Available Instruments

2.1  The Enforcement Gap Created by the Legislature

Before characterizing the authority’s conduct as error, one must acknowledge: its apprehension concerning potential abuse of this provision rests on rational foundations. Article 5(1)(1) F.F.A. has created a genuine functional gap in the tax system. A taxpayer could, at least in theory, establish a family foundation, contribute residential units, enter into a handful of nominal leases at symbolic rents, and dispose of the assets within months — while maintaining throughout that the properties were acquired ‘for rental purposes’ rather than ‘exclusively for disposal.’ The purpose of acquisition is a historical psychological fact, recorded solely in the minds of the relevant decision-makers. No document confirms it; no document refutes it.

The fiscal authority perceives this gap and seeks instruments with which to close it. That response is rational and, at bottom, appropriate: enforcement gaps of this character corrode systemic integrity. The problem does not lie in the authority’s desire to combat abuse. It lies in its resort to instruments ill-suited to that purpose — instruments that, in the process, imperil every investor acting in good faith.

2.2  First Instrument: Expansive Construction of ‘Exclusively’ — and Why It Fails

The first instrument is expansive statutory construction: if a foundation ever disposes of a property, that fact is treated as retrospective proof that the property was acquired ‘for the purpose of disposal.’ In its extreme formulation — the logical terminus of this thesis — any disposal is taken as evidence of an exclusive intent to dispose. Every foundation holding any real property portfolio would subsist in perpetual uncertainty regarding its tax exemption status.

This construction founders on elementary principles of statutory interpretation. The Polish legislature’s choice of the adverb ‘exclusively’ — rather than, say, ‘primarily,’ ‘inter alia,’ or ‘among other things’ — was deliberate. Courts applying lex certa norms are not at liberty to substitute a relaxed standard for the demanding one the legislature enacted, even where the demanding standard creates awkward administrative consequences. The Regional Administrative Court of Rzeszów was correct to reject it.

2.3  Second Instrument: The General Anti-Avoidance Rule — and Why It Falls Short

The second available instrument is the general anti-avoidance clause under Article 119a of the Tax Code (Ordynacja podatkowa) (the ‘GAAR’). The authority could argue that, even if the purpose of acquisition was not ‘exclusively’ speculative, the totality of the arrangement constitutes an artificial construct concealing a genuine tax purpose. For reasons both formal and substantive, that argument fails. It bears noting that the Regional Administrative Court of Rzeszów made no reference to the GAAR; the following analysis therefore represents an independent assessment of the available enforcement landscape rather than an explication of the court’s reasoning.

2.4  Diagnosis: An Enforcement Vacuum

Both instruments fail — and not adventitiously. They fail structurally, because neither is designed for the situation the legislature created: a norm whose governing criterion is inherently unverifiable. Expansive construction transgresses the permissible limits of statutory interpretation and is consistently rejected by the courts. The GAAR requires an element of artificiality that genuine investment activity cannot supply. The result is an enforcement vacuum: the fiscal authority cannot reach the conduct it wishes to deter without simultaneously imperiling the conduct it has no legitimate interest in reaching.

III.  The Structural Deficiency: Subjective Purpose as a Tax Criterion

3.1  Bilateral Unverifiability and the Inverted Burden of Proof

Article 5(1)(1) F.F.A. conditions its tax consequence upon the mental state of the foundation’s decision-makers at the time of acquisition — a historical psychological fact etched solely in human memory, leaving no documentary trace. This unverifiability operates symmetrically. The administrative authority cannot prove that the purpose was ‘exclusively’ speculative, just as the taxpayer cannot prove that it was not. In that symmetry, however, the burden of persuasion falls upon the weaker party: the taxpayer must convince the authority that it intended to rent rather than to speculate. The authority need prove nothing; it need only remain unpersuaded. This inversion of the presumption expressed by the principle

IV.  De Lege Ferenda: The Case for Objectivizing the Criterion

The judgment under review is correct but does not cure the underlying pathology — it relieves a symptom. The pathology is legislative: a norm premised on a subjective, unverifiable criterion that distributes the burden of proof asymmetrically will inevitably generate persistent legal uncertainty, costly litigation, and the temptation of aggressive administrative construction. Until Article 5(1)(1) F.F.A. is replaced by an objective criterion, successive judgments will merely palliate successive manifestations of the same underlying defect.

Legislative objectivization of the criterion does not entail abandonment of the provision’s purpose. It means pursuing that purpose with more precise instruments. Three models warrant consideration:

• A temporal safe harbor: disposal after the expiration of a specified holding period — for example, five years from the date of acquisition — qualifies for the exemption without inquiry into subjective purpose. This model finds support in numerous European systems, including the Swiss Grundstückgewinnsteuer and the Belgian règle de cinq ans.
• A rental-use test: property that generated rental income during a specified minimum proportion of the holding period is not deemed to have been acquired exclusively for disposal. Income records, lease agreements, and tax declarations supply the requisite objective verification.
• A negative definition: the punitive consequence applies exclusively to trading activity — that is, to properties acquired and disposed of within twelve months, or encumbered by a sale agreement concluded prior to acquisition. This approach is consistent with the conceptual framework developed by the Head of the National Revenue Administration in opinion DKP2.8082.2.2024.

Each of these alternatives is verifiable from documents, records, and registers — and each eliminates the enforcement vacuum without exposing bona fide investors to the risk that presently attends candor.

V.  Conclusions

The judgment of the Regional Administrative Court of Rzeszów of May 22, 2025, is correct. The court properly rejected the substitution of ‘ultimately’ for ‘exclusively’ and restored the plain statutory meaning of the provision. The decision is also of direct practical utility: a family foundation that acquires property with the intention of multi-year rental — even if it contemplates a potential future disposal — does not forfeit its corporate income tax exemption.

The judgment does not, however, resolve the systemic problem. That problem presents itself at three distinct levels:

• The legislative level: a norm grounded in an unverifiable subjective criterion generates an enforcement gap and inevitable legal uncertainty;
• The instrumental level: confronting that gap, the fiscal authority reaches for instruments that are fundamentally unsuited to the purpose — and fails for fundamental rather than merely procedural reasons;
• The systemic level: the resulting costs are borne not only by the speculative actors at whom the provision was aimed, but by all family foundations operating in the affected space.

Robert Nogacki

Founder and Managing Partner of Skarbiec Law Firm, recognized by Dziennik Gazeta Prawna as one of the best tax advisory firms in Poland (2023, 2024). Legal advisor with 19 years of experience, serving Forbes-listed entrepreneurs and innovative start-ups. One of the most frequently quoted experts on commercial and tax law in the Polish media, regularly publishing in Rzeczpospolita, Gazeta Wyborcza, and Dziennik Gazeta Prawna. Author of the publication “AI Decoding Satoshi Nakamoto. Artificial Intelligence on the Trail of Bitcoin’s Creator” and co-author of the award-winning book “Bezpieczeństwo współczesnej firmy” (Security of a Modern Company). LinkedIn profile: 18 500 followers, 4 million views per year. Awards: 4-time winner of the European Medal, Golden Statuette of the Polish Business Leader, title of “International Tax Planning Law Firm of the Year in Poland.” He specializes in strategic legal consulting, tax planning, and crisis management for business.