Amendments to property tax: what the new definitions of non-building structures and buildings mean for taxpayers?

This article will answer the following questions:

• What is the new definition of the terms building and non-building structure?
• What changes in taxation are provided for in the draft Act on Local Taxes and Charges?
• How will the new regulations governing property taxation affect Polish taxpayers? 

The Ministry of Finance has announced a draft Act amending the Act on Local Taxes and Charges being a result of a ruling of the Polish Constitutional Tribunal of 4 July 2023 (ref. SK 14/21), in which the judges ruled that the currently binding definition of a non-building structure in unconstitutional. The new interpretation of the key terms is just a part of the modifications set forth by the national legislative. Let’s find out how the proposed amendments to the Act governing property taxation may impact Polish taxpayers.

New definitions of buildings and non-building structures 

In accordance with the announcements publicised by the Ministry of Finance, the new definitions of buildings and non-building structures that have been presented in the draft Act published by the national legislative, do not contain any references to other legal acts (including to the Building Law) and are entirely autonomic. 

This does not mean, however, that the Building Law has nothing to do with the new definitions whatsoever. The Ministry of Finance has taken advantage of the Building Law and decided to clarify all doubts as to the proper definition of non-building structures by supplementing the Act with Annex 4 listing categories of non-building structures. The list comprises 28 items.

Additionally, it is worth noting that the regulations will treat not only the abovementioned constructions specified in the Annex as non-building structures but also the equipment and engineering systems pertaining to them that, from the technical and functional perspective, form with them a separate entity.

This may translate to a greater burden for taxpayers, as – in the instance of the taxation of solar panels – the tax office will be free to tax not only the supporting structure but also the panels. Likewise, this will be applicable to the taxation of telecommunications equipment and power systems.

What else is subject to amendments under Polish property tax law?

The new draft Act covers other areas that will undergo a change. They include:

• Taxation of multi-car garages in residential buildings

Pursuant to the announced draft Act, multi-car garages in residential buildings will be taxed similarly to residential buildings. This will be effected with the aim of ensuring a uniform, lower tax rate.

• Exclusion of the right to claim tax exemption on railway infrastructure making up railway terminals 

This amendment covers land, buildings and non-building structures that make up freight terminals. Taxpayers will not be entitled to claim an exemption from the property tax.

• Limitation in exemptions for airports

Once the new regulations become effective, taxpayers will not be eligible for an exemption from the property tax on land where there are no buildings and non-building structures within the airside areas of public airports. This constitutes a reversion to the legislation that was in force prior to 1 January 2022.

• Limitation in exemptions for research institutes

Research institutes will not be allowed to claim an exemption from the property tax on properties and their parts that are not intended for conducting their core activity. 

What do the new regulations mean for taxpayers having property in Poland?

The draft legislation on property tax announced by the Ministry of Finance may substantially expand the scope of taxation through limiting exemptions, imposing tax on non-building structures that from the technical and functional perspective form entirely separate entities as well as introducing a broad definition of a permanent affixion to the ground. This may expose modular structures and other portable structures to the risk of them being recognised as permanently affixed to the ground due to their mass or construction that allow them to withstand external forces.

Additionally, the Minstry has ruled out the requirement that buildings and non-building structures must be erected in the course of a construction process and substituted it with the obligation to use building materials, which will pave the way for the taxation of prefabricated structures that at no point require any construction works.

The draft of the new regulations has been submitted for consultation The Act will become effective as of 1 January 2025 (with one exception). We will keep you in the loop as to any upcoming changes. 

Should you have any questions – or feel the need to discuss the topic – we strongly encourage you to contact our experts.