In today's article from the series "Tuesday Mornings for the Construction Industry," we will focus on tax issues, namely the next version of the proposed changes to property tax. Following criticism of the initial June 2024 draft amendment to the Act on Local Taxes and Fees related to property tax, the Ministry of Finance has published a new version.
As in the original draft (which you can read about in the "Tax This and That" ), the act introduces a definition of buildings and structures. This is intended to eliminate the problem of tax law referring to definitions contained in the Construction Law.
The list of structures will be regulated both in the body of the act and its annex. A structure will include, among others, a photovoltaic or wind farm, which was controversial in the original draft. However, it was clarified that only the structural portion of such a facility will be considered a structure, not the entire facility. In the case of complex or multifunctional facilities, such as sewage treatment plants, water intakes, or stadiums, the individual elements of such a complex economic structure, listed in the annex to the act, will be subject to taxation as structures. These include the pitch, the players' tunnel, and the stands—all of which are part of the stadium—as well as the sand trap, degreaser, and sedimentation tank—all of which are part of the sewage treatment plant.
However, structures meeting the criteria for such classification will not be considered buildings if they contain or can store bulk materials, materials in lump form, or materials in liquid or gaseous form, the primary technical parameter of which defining their function is capacity. This solution is intended to eliminate doubts related to the tax classification of structures that meet the statutory criteria for a building and are currently classified as structures under the Building Law, such as tanks, silos, or elevators.
In the case of a petrol station, for the purposes of property tax, the petrol station building will be classified as a building, and the remaining elements of the petrol station will be taxed as structures indicated in the individual items of the annex, e.g. fuel tanks or roofing.
Listening to critical voices, the Ministry has explicitly stated in the new draft that the following items will not be subject to taxation: shrines, roadside crosses, garden statues and figurines, brick barbecues, sandboxes, swings, climbing frames, garbage cans, and shelters for prams and bicycles.
However, a definition of "permanent connection to the ground" has been introduced. It will be defined as "a connection of a building structure to the ground that provides it with stability and the ability to counteract external factors beyond human control that could destroy it, cause it to displace, or shift to another location." Objects permanently connected to the ground do not include any objects whose mass or construction prevents them from shifting due to atmospheric factors, including, for example, mobile containers that are not connected to the ground in any way. A technical connection is a factor that allows for the recognition of a structure as being connected to the ground; without it, the structure will not constitute a building or structure.
A significant change is the definition that for a structure to be classified as a building or structure, it must be constructed as a result of construction works. The definition of "construction works" will be the same as in the Construction Law (construction, reconstruction, and assembly).
The bill also aims to standardize the tax treatment of owners of garages located in residential buildings. Previously, owners of parking spaces in parking lots that were part of a common property were privileged, where the method of determining the use of individual spaces was based on a quoad usum division. These spaces are treated as residential units, which means they are subject to a lower tax rate. Meanwhile, separate commercial premises are not treated as residential units (even though the right to use these spaces is often granted as a quad usum division) and are taxed at a higher tax rate. The proposed changes assume that, regardless of whether garages are separate premises or not, they will be taxed at the lower tax rate applicable to the residential parts of the building .
The current draft law was published after taking into account some of the comments submitted during public consultations. It should be submitted to the Sejm (lower house of parliament) soon. It will take effect after being passed by the Sejm and Senate and signed by the President.
The proposed changes are to enter into force on 1 January 2025.
This article is for informational purposes only and does not constitute legal advice.
Legal status as of September 9, 2024
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