Real Estate Tax – Recent Case Law in Favour of Taxpayer

The Supreme Administrative Court (“SAC") has recently established important precedents in real estate taxation, particularly focusing on building valuations, the real estate tax base and real estate tax rates. These precedents provide welcome guidance on the fundamental principles governing valuation practices, the scope of assets subject to real estate tax and the determination of intended use.
 
We cover the following cases in this Alert:

In precedent 2026:12, the SAC provided clarifying guidance on when a facility constitutes a building or structure subject to real estate tax. The case concerned an energy company planning to construct a large-scale underground heat storage facility consisting of three bare-rock caverns with no internal structures or surface materials installed within them. The SAC held that the caverns forming the storage facility did not qualify as buildings or structures for real estate tax purposes.
 
Since the assets evaluated did not bear any resemblance to a recognised building category and lacked the internal structures characteristic of buildings, as well as space suitable for human occupation or movement, they could not be considered buildings for real estate tax purposes. As regards classification as a structure, the SAC reiterated, consistent with its earlier case law, that permanence alone is not sufficient, but that the manner of construction, structural design and intended use are equally decisive criteria. On that basis, the caverns were not regarded as structures either, and they therefore fell outside the real estate tax base entirely.
 
In addition to establishing that the asset type in question falls outside the real estate tax base, this precedent provides long-awaited further insight into the criteria for determining whether facilities are subject to real estate tax. Companies holding facilities whose classification for real estate tax purposes remains unresolved should review their current real estate tax position in light of this decision.

The SAC has also recently issued precedent 2026:10, in which it held that a parking garage co-owned by housing companies and located on a separate plot from the residential buildings was equivalent to a separate garage building, and that the residential building real estate tax rate was therefore to be applied to it instead of the higher general rate. The residential and parking plots were considered to form a single whole in real estate law terms, since the town-planning framework and the contractual arrangements between the housing companies were sufficient to secure the legal conditions for the parking garage to serve residential use.
 
The decision extends the earlier precedent SAC 2017:45, in which the residential rate had been confirmed for a parking garage co-owned by housing companies and located on the same plot as the residential building. The Court accepted that SAC 2009:26 – where a separate intermediary real estate company owned the car park – was distinguishable, as in the present case there was no intermediary vehicle and the housing companies were direct co-owners of the car park.
 
This precedent is significant for housing companies and developers involved in multi-plot residential developments with parking garages on parking facility-designated land. Housing companies currently taxed at the general rate in respect of satellite parking garages should review open tax years and assess whether a claim based on SAC 2026:10 is available. Where parking structures are held through an intermediary vehicle, the merits of restructuring to direct co-ownership should also be considered.

The above cases continue a trend of the SAC issuing taxpayer-favourable decisions in real estate taxation. Last year, the SAC delivered several such precedents on building valuations.
 
In precedent 2025:6, the SAC provided specific guidance on the valuation of buildings and their distinct sections. It determined that a spa section of a hotel, which is physically separate from the main hotel facilities and serves a broader clientele, can be valued independently where it represents a significant portion of the entire building. Such significance can be assessed not only by reference to surface areas but also by reference to the volumes of the different parts of the building.
 
This precedent may broaden the circumstances in which buildings within a building complex or distinct sections of a building are valued under separate rules. For instance, the spa section may qualify for a higher age-based deduction than the rest of the hotel, affecting the overall tax liability. In many cases, valuing buildings or sections of a building separately will result in a more favourable outcome for the taxpayer.
 
In precedent 2025:38, the SAC confirmed that sub-buildings used primarily by a hospital are more closely analogous to retail, warehouse, factory, workshop and utility buildings than to residential and office buildings. Therefore, a higher age-based deduction rate was to be observed when determining these buildings’ real estate tax base. This precedent continues a line of previously published case law in which the SAC has already held that, for example, a metro station (SAC 2021:79) and a fire station (SAC 2023:94) were in the scope of a higher age-based deduction rate. Although the precedent does not therefore introduce any materially new principle, it consolidates the legal guidance expressed in earlier decisions. The precedent confirms that a building’s wear and tear, technical requirements and need for renovation are relevant factors when evaluating to which age discount group a building is more comparable, having regard to its main purpose and technical characteristics.
 
In decision 2025:58, the SAC evaluated whether the real estate tax base of a building can be determined separately from that of the land where the same party owns both. As a main rule, an imputed taxable value determined under schematic rules constitutes the real estate tax base, but if the fair value of the asset is lower than the imputed value, the fair value is used instead. The SAC confirmed that a building’s fair market value lower than the imputed taxable value can be used as the tax base, even if the combined fair market value of the building and the land exceeds their combined imputed taxable value, i.e. the fair market value of the building could be assessed separately from that of the land. This may be of considerable significance for the amount of real estate tax payable where the calculated taxable value of real estate is distributed between its taxable components in a different proportion than their respective fair market values.
 
Lastly, in case 2025:60, the SAC held that a plot zoned as a commercial premises area but in fact used for industrial and warehouse buildings should be valued in accordance with the principles applicable to industrial use. In practice, the precedent established that developed land can be valued based on its actual use notwithstanding the zoning designation under the city plan, where this results in a significantly lower value than the schematic valuation derived from the city plan.

Overall, the common thread running through recent case law is the distinctly taxpayer-friendly approach of the SAC in real estate tax matters. In several of these cases, the SAC has looked beyond the wording of the law in order to give effect to its underlying purpose. The SAC has demonstrated a clear willingness to employ purposive and systematic methods of interpretation, attributing decisive weight to the object-tax nature of real estate tax and to the economic substance of the arrangements under review, rather than confining itself to a formalistic or purely textual analysis.
 
Taken together, these precedents open significant avenues for taxpayers to reassess their real estate tax position – both as regards the applicable tax rate and the taxable valuation of their real estate – with a view to identifying potential grounds for reduction.
 
Given that several of these precedents resolve previously open questions of interpretation, taxpayers are well advised to act without delay in reviewing open tax years and, where the conditions are met, to file claims for adjustment or applications for advance rulings in order to secure the benefit of the now-clarified legal position before the relevant limitation periods expire.

If you have any questions concerning this Legal Alert, please contact the undersigned or other members of our Tax team.