Changes in property tax 2025: definition of structure and building and other key issues

1. Should it be inferred from the draft that the concept of a structure takes precedence over the definition of a building?

The intention of the drafters was to resolve disputes in the “structure or building” area. It is relatively clear to indicate that the precedence of the definition of a building applies to complex structures (items 1-6 of the new annex). What, however, in other cases? Was the intention to introduce the precedence of the definition of a building in this area? If so, this leads to absurd situations. For example, railroad signal devices are generally located in typical buildings, such as station buildings. This would mean that station buildings would have to be taxed like structures. Therefore, it seems that, however, there can be no precedence of structures and each case should be considered separately. Only that such a conclusion is not in line with the assumptions and gives rise to numerous disputes.

2. Do you have to reassess all facilities and classify them after the change in the regulations, or will this only apply to new developments?

The final content of the tax legislation, which is expected to take effect from 2025, will apply to all properties and facilities. That is why it is so important for each taxpayer to review all of their assets against the new definitions. For if the regulations in the version proposed by the Ministry of Finance are enacted, it may turn out that some of the existing buildings will have to be taxed on their value as structures or parts thereof. It is also likely that objects that are outside the scope of taxation under current regulations will be taxed as structures.

3. Can the inclusion in the scope of taxation of new objects hitherto untaxed create a risk for past years, especially in view of the case law, which is not uniform on many issues?

The new regulations, including the definitions of a building and a structure, will not take effect until the beginning of 2025 at the earliest. Therefore, the planned changes will not create additional risks with regard to the liability for 2024 or earlier years. On the other hand, the amendment to the tax regulations under discussion obviously does not mean that possible questionable issues will disappear with respect to periods prior to 2025, for which, after all, the existing regulations will apply. Thus, until the statute of limitations for the tax liability for a given year, any tax risks that have existed to date will remain. It is worth recalling that at the end of December 31, 2024, the statute of limitations on property tax liability for 2019 expires.

4. Can you give any example to the concept of “construction parts of equipment that do not constitute parts of structures referred to in letter a” listed in the draft definition of structures?

Such an example could be a steel support structure for technical equipment that is not permanently attached to the ground, with the proviso that such technical equipment is not explicitly listed as an example of a structure in the new Appendix 4 to the Local Taxes and Fees Act and that it does not constitute a technical-utility wholeness along with the structures in the said Appendix.

5. Does the concept of a temporary structure disappear?

The concept of temporary construction facility does not disappear, as it is defined in the provisions of the Building Act, which is not affected by the proposed amendments. The existing wording of the provisions of the Local Taxes and Fees Act does not use such a term. Therefore, the question of whether one is dealing with a temporary building is irrelevant in determining what is a taxable building or structure. Incidentally, as indicated in the explanatory notes of the Ministry of Finance to the draft amendments under discussion, temporary construction facilities may be buildings, structures or small architectural objects on tax grounds – depending on their nature and construction.

6. The changes are to apply to property tax, not income tax. What relevance can fixed asset records have for property taxation? What relevance will the definitions of a building and a structure from the fixed asset records have?

The subject of the changes is, of course, to be regulated by the Local Taxes and Fees Act. The records of assets are of practical importance for determining the scope of property taxation. In the first place, the gross initial values of fixed assets are precisely the basis for PON taxation. In addition, fixed asset records are a regular feature of property tax controls. Thus, possible irregularities or simplifications in the tax records of assets can impinge on the scope of taxation and the tax base itself. Sometimes the names of fixed assets are imprecise, and this can create risks associated with misclassification of objects for taxation. For example, a fixed asset that has “tank” in its name may be considered taxable to property tax. And let’s recall that tanks are among the sensitive types of objects and they directly fall under the definition of a structure. In practice, however, it may turn out that the object is not a tank at all, because, for example, technologically it serves completely different, and only its external character is similar to a tank. The definitions of buildings and structures from the fixed asset records do not affect property tax taxation. Hardly, they should not even be relevant for determining fixed assets for income tax purposes, because there is no reference to the fixed asset records for these definitions. Instead, it is good practice to take the definitions into account for tax purposes when accounting for new fixed assets, in order to exclude inaccuracies and related risks for the future.

7. Is there anything known about another proposed provision that also directly relates to amendments to the Local Taxes and Fees Law, namely the “draft on reducing bureaucracy and legal barriers…”?

The latest draft of the amendments has no links to this act. This requires a supplement to the justification by the proposers (Print No. SH-020-65/24). It should be borne in mind that this is a parliamentary act brought by a group of MPs from the Law and Justice club. It cannot be ruled out that it will be processed by Parliament for a long time to come. One of the assumptions of this project is the possibility of a declaration by the owner and the lessee to “transfer” the tax obligation from the owner to the lessee, which in certain circumstances may be more favorable to both parties.