Property tax Poland: Amendments to the according tax regulations

The Ministry of Finance has published a draft law amending the Law on Local Taxes and Fees which will, among others, also affect the regulations on property tax. The law is expected to come into force on 1 January 2025. The Ecovis experts are familiar with the changes and explain the potentially far-reaching consequences.

Background

The purpose of the amendments is to clarify and eliminate interpretative doubts concerning the current regulations and ensure their correct application. This is a consequence of a ruling by the Constitutional Tribunal of 4 July 2023 (SK 14/21), in which the Tribunal ordered the introduction of a definition of a non-building structure to the Law on Local Taxes and Fees (of which property tax regulations are a part) which does not refer to the provisions of any other laws, including construction law.

Scope of the changes

The changes in the regulation proposed by the Ministry of Finance are now much more extensive than those resulting from the ruling by the Constitutional Tribunal.

As a result, taxation may cover, among others, photovoltaic farms, tanks and silos, installations and equipment of various types, or transformer stations, i.e. elements that have so far remained outside the “interest” of property tax regulations.

Additional changes of concern are:

1. The introduction of an annex that lists objects defined as a non-building structure
2. A return to the principle of taxing non-building structures together with installations and equipment, if they constitute a technical and functional whole
3. The introduction of a definition of “permanent connection to the land,” the concept of which was based on a line of jurisprudence abandoned some time ago by the Supreme Administrative Court.

We can help you in determining whether the announced changes may affect your company.

Hubert Kaczyński, Tax Advisor, ECOVIS Poland, Warsaw, Poland

Practical issues

The seemingly straightforward amendments to the regulations have given rise to a number of interpretative doubts. They may also violate the neutrality of these changes for taxpayers, contrary to the assurances of the Ministry of Finance that the amendments are not intended to increase the tax burden.

The proposed amendments are important because the basis for taxation of a non-building structure and parts thereof used to conduct economic activity, is its overall value used as the basis for calculating depreciation, not reduced by depreciation. The tax rate is 2% per year. Thus, if the definition of a non-building structure is extended, then the tax burden is greater.

In connection with such far-reaching changes, it seems that the scope for interpretation by the tax authorities and administrative court judgements issued on the basis of the existing regulations may also be severely restricted.

These concerns have also been highlighted by other ministries, industry and business organisations and other entities in comments on the proposed changes as part of inter-ministerial consultations.

As the draft law is still in the consultation phase, its final shape is still unknown. However, the number and scope of the comments submitted allow us to assume that the proposed changes to the regulations will be significant.

For further information please contact:

Hubert Kaczyński, Tax Advisor, ECOVIS Poland, Warsaw, Poland
Email: hubert.kaczynski@ecovis.pl