The case concerned an owner who rented an apartment as part of his business activity and chose lump-sum taxation. However, experts admit that the judgment can also be applied to private rental of apartments. The difference is that business rental can be taxed in three ways (lump sum, PIT scale and linear PIT), while private rental can only be taxed as a lump sum on recorded income. Therefore, business owners can choose the form of taxation, while private owners have no choice. In the case of a lump sum, the problem for both is the same: what is the revenue when they re-invoice the utilities, i.e. the cost of electricity, gas or heat they pass on to the tenant. And that's exactly what the NSA decided.
We explain how much tax to pay and what provisions should be included in the lease agreement.
Read also in BUSINESS INSIDER
What was the case decided by the Supreme Administrative Court about?
The dispute concerned a woman who runs a business and rents a warehouse and a warehouse and office building as part of her business. In addition to rent, tenants must cover the costs of utilities: electricity, water, sewage, gas, and waste disposal. Utility suppliers issue invoices to the property owner, who re-invoices them to the tenants, according to consumption (submeter readings), without any margin. The woman taxes her rental income at a lump sum (rates of 8.5% and 12% above PLN 100,000 apply).
The woman submitted an application for an individual interpretation and asked whether it should pay tax on income from rent or also on utility costs.
The taxpayer believed that she should not include in her income the costs of utilities that would be reimbursed by her tenants. The Director of the National Tax Information did not agree with this.
What is the position of the tax office on utility costs?
The Director of the National Tax Information did not agree with the taxpayer. It found that both when utility expenses are included in the rent amount and when they are re-invoiced separately from the rent, the income obtained must be included in rental income as part of a business activity. In such a case, utility fees constitute business income and the woman should also pay tax on them (lump sum on recorded revenues).
Can you pay tax only on the rent – court decision
Provincial Administrative Court in Kraków in the judgment of October 11, 2022 (reference number I SA/Kr 757/22) he did not agree with the authority. He explained that revenue cannot be said to have arisen if the amount due is not a final gain. The essence of tax revenue is the real, lasting and final nature of the property gain, i.e. one in which the taxpayer's assets are ultimately increased. If the complaining woman passes on the utility costs to the tenants, there can be no such benefit.
The Provincial Administrative Court in Kraków also noted that the interpretation presented by the authority “unjustifiably differentiates the legal situation of taxpayers who generate income from lease related to business activity, depending on the form of taxation chosen. To put it simply, according to the court, it cannot be the case that a taxpayer settling PIT on general principles does not include the reimbursed expenses (utility costs) in income, while a taxpayer settling a lump sum tax must include them. According to the court, in both cases, rental income does not include rental costs that are reimbursed to the landlord by the tenants.
The Supreme Administrative Court also agreed with this in its judgment of January 27, 2026. (reference number II FSK 559/23).
The NSA confirmed that the income must be finalso we can talk about it when we are dealing with an increase in the assets of the person who receives it. If the landlord is only an intermediary of costs, and therefore passes them on to the tenants, it cannot be said that these costs constitute any benefit to the landlord.. Therefore, utility costs should not be included in lump-sum taxable income. The woman must therefore pay tax only on the rent paid by her tenants.
As experts say, The Supreme Administrative Court's judgment also applies to people who rent apartments privately.
How to do it in practice, i.e. write it down in the lease agreement
Let us also remind you how to write in the lease agreement that the tenant pays for utilities.
— In the lease agreement the rent should be specified and a provision should be included that the tenant is also obliged to pay the following fees… (and here it is necessary to mention what the tenant pays additionally) – advised Grzegorz Grabowski, an expert from the WMP accounting and consulting firm. You can also add a provision in the lease agreement that the tenant pays these fees “through the landlord”.
Mariusz Makowski, tax advisor, proposes the following provision in the contract: “In addition to the rent, the Tenant will cover an advance payment for utilities in the amount of … (in words ….) payable to the Landlord's account within the period specified in point 1 of this paragraph. The amount of the advance payment may be changed, of which the Landlord will immediately inform the Tenant in writing. The above amount will include advance payments for the consumption of electricity, cold water, heating, cable TV, and the Internet.”
Who should pay for utilities
Experts also point out that there is no need to be afraid of losing control over your bills.
— The tenant can pay utility fees to the landlord's account, it is not necessary to “assign” utility contracts to the tenant. – says Mariusz Makowski.
Grzegorz Grabowski also agrees with this. — The provision that the tenant pays utilities “through the landlord” means that the tenant transfers money to the landlord, and the landlord pays liabilities to suppliers. This is being introduced so that the landlord has greater control over these payments to suppliers – emphasizes Grabowski.
There is no obstacle to agreeing with the tenant to transfer two amounts to the landlord: one for rent and the other for utility consumption.
Judgment of the Supreme Administrative Court of January 27, 2026, ref. no. act II FSK 559/23
Author: Łukasz Zalewski, journalist of Business Insider Polska, Law section
