Today we learned about the draft changes to the real estate tax (“PoN”), which were published on the website of the Government Legislation Center. Deloitte Polska experts prepared a preliminary analysis of the published project. Will we see a revolution in real estate tax changes from January 2025?
As previously announced by the Ministry of Finance, the new definitions of structures and buildings under the Local Taxes and Fees Act (UPOL) are autonomous and do not contain any reference to the Construction Law (or other non-tax acts).
At the same time, the definitions proposed in the draft may mean serious changes in real estate taxation for taxpayers.
Below, Deloitte Polska experts have prepared a preliminary analysis of the published draft changes to real estate tax.
New wording of the definition of structures and buildings
When creating a new definition of a building, the Ministry of Finance used the content and concepts from the provisions of the Construction Law, although it does not refer to them directly – experts emphasize
The proposed change therefore, in principle, consists in creating an annex to the UPOL containing a list of objects treated as buildings.
It includes the following items:
- outdoor: sports facility and recreation facility;
- water treatment station;
- sewage treatment plant;
- defensive facility (fortification) and protective facility;
- pedestrian crossing: aboveground and underground as well as a pedestrian route;
- hydrotechnical facility;
- tank in the form of a siloan elevator, a bunker for storing fuels and gases and other chemical products, as well as another tank intended for collecting loose materials, in pieces or in liquid or gaseous form, whose basic technical parameter determining economic functions is capacity;
- container facility permanently attached to the ground;
- shelter and hangar;
- tent cover and pneumatic cover
- water pipeline, gas pipeline, heat pipeline and pipeline
- network: electricity, telecommunications, gas, heating, water supply, sewage and other land infrastructure network, transmission pipeline;
- port, marina, artificial island, swimming pool, dock, breakwater, quay, pier, pier, jetty, slipway;
- outdoor shooting range;
- runway, taxiway, apron, parking area, maneuvering area, landing field – located on airport premises;
- road, entrance, exit and exit from the road and parking bay;
- railway road, i.e. railway tracks, including turnouts and track crossings, the rails they consist of, groove rails, steering wheels, fenders, guides, switches, crossings and other turnout elements, railway sleepers and fastenings, small elements of the railway surface, ballast in including crushed stone and sand, along with the elements listed in points 2-11 of Annex No. 1 to the Act of March 28, 2023 on railway transport;
- power line and traction;
- bridge, viaduct, overpass, tunnel, culvert and passage;
- retaining structure;
- earth facility;
- landfill;
- embankment;
- fence;
- a parking lot that is not a building or part of a building, a parking lot, a storage yard, a garbage bin yard, a driveway and a roof;
- free-standing, permanently attached to the ground: antenna mast, advertising board and advertising device, outdoor lighting, industrial installation and technical device;
- cable line placed directly in the ground or above ground, excluding telecommunications cables suspended to an existing above-ground cable line;
- cable duct and technological duct, excluding cables installed in them, and another duct whose characteristic parameter is length.
Importantly, according to the new definition, structures listed in the annex constituting, together with installations and devices, a technical and functional unit are treated as a structure.
The technical and operational whole is defined as a set of elements that are necessary to achieve a specific economic goal, interconnected in such a way that none of them can achieve this goal alone, and the lack of any of these elements makes its implementation impossible.
At the same time, the project provides that in the case of objects listed in items 1-6 Annex (including sports facilities, sewage treatment plants, hydrotechnical facilities) if part of them meets the definition of a building, it should be taxed as a building even though the remaining part of the facility will constitute a structure. For example, this allows for taxation as a building, on the usable area, the building part of a stadium or the building of a pumping station in a sewage treatment plant – emphasize Deloitte Polska experts.
The project stipulates that the structure and building must be constructed using construction products. In this way, the previous condition that a building must meet, relating to the construction (and not construction) using construction products, has been changed.
So what do the new definitions of structures and buildings mean?
It should be emphasized that the change proposed in the project may mean a significant extension of the scope of taxation of structures.
The concept of a technical and utilitarian entity already existed in real estate tax until the definition of a building was changed in 2015 and raised numerous doubts. This is an imprecise concept and may raise concerns that it will be used to uncontrolled extend the definition of a building to include various types of technical devices related to buildings. The justification to the draft act directly refers to transformers, distribution devices and battery banks, which may constitute a technical and utility unit together with the power grid. Such cases of extending the scope of real estate tax to technical devices based on the so-called However, in practice the “technical and operational whole” may be much more – emphasize Deloitte Polska experts.
A revolutionary change is the introduction to the Act of the definition of a permanent connection with land, which is based on a very broad concept presented in some judgments, referring to resisting external factors.
This means that a taxable structure permanently attached to the land may include, for example, container facilities or technical devices whose structure or mass means that external factors such as wind cannot move them to another place. This raises the risk of a significant expansion of the scope of taxation on construction, emphasize Deloitte Polska experts.
No need to construct structures and buildings in the construction process and replacing it with the premise of “construction using construction products” may mean extending the scope of real estate tax to fully prefabricated devices, the creation of which was not associated with the construction process at any stage.
The concept of “construction products” has not been defined and can be interpreted very broadly (currently, it is assumed in the case law that a construction product can be basically any material).
Our preliminary analyzes already indicate that the new wording of the regulations may lead to numerous doubts in practice. The proposed definition may potentially result in an extension of the scope of taxation in relation to devices that are currently not subject to taxation – emphasize Deloitte Polska experts.
Other important changes in the definition of building and structure affecting taxpayers
The project also provides for several other changes that may apply to taxpayers with specific categories of property.
They will be taxed at a lower residential rate from January 1, 2025 multi-car garages in residential buildings (treated as part of a residential building) – emphasize Deloitte Polska experts. – The scope of tax exemption for airports is to be narrowed. The project envisages the restoration of the rules in force before 2022, i.e. exemption from buildings and structures in the air parts of public use airports, and in the case of land only the part of them that is occupied by these buildings and structures.
The scope of the exemption for railway infrastructure is also to be narrowed. Land, buildings and structures constituting cargo terminals are to be excluded from the scope of the exemption.
The exemption for research institutes is also to be changed in such a way that the exemption covers institutes only in the part actually devoted to research activities.
What next with the project of changes to real estate tax?
Once the draft amendment to the Act is made available on the RCL website, the draft will be subject to public consultations and consultations. The draft bill will then be considered by the relevant committees, the legal committee and the Council of Ministers, and then parliamentary work will be carried out (which should be completed by early autumn at the latest).
The regulations should be adopted with an appropriate vacatio legis, so that they can apply from January 1, 2025, and taxpayers have time to prepare for their entry into force. We will keep you informed about the next steps – summarize Deloitte Polska experts.
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