Last year, we wrote about a landmark judgment in which the Constitutional Tribunal ruled that Article 1a(1)(2) of the Local Taxes and Fees Act, which sets out the definition of a structure (Polish: ‘budowla’), was unconstitutional (judgment of 4 July 2023, Case No. SK 14/21).
At the time, the Tribunal decided that the regulation would remain in force for a further 18 months. Almost a year on from the judgment, the Ministry of Finance has drafted a new proposed definition of a structure for property tax purposes. We consider whether the changes could create new interpretation pitfalls for businesses.
What is a structure as defined by the Ministry of Finance?
In the new bill, the Ministry has proposed a new definition of a structure, according to which structures are the construction works listed in Annex 4 to the Act.
Structures will include, without limitation:
- Outdoor sports and recreation facilities
- Sewage treatment plants
- Water treatment plants
- Storage facilities, including but not limited to:
- Silos
- Grain elevators
- Storage facilities for fuels, gases and other chemical products
- Sheds and hangars
- Ports, harbours, docks, breakwaters, quays, piers, jetties, slipways
- Swimming pools, artificial islands,
- Flood control dikes
- Outdoor shooting ranges
- Power lines and traction
- Car parks which are buildings and are not part of buildings, parking areas, storage areas, garbage areas, driveways and canopies
- Industrial installations and technical equipment
Structures are also to include the following, if made using construction products:
- Construction parts of equipment which is not part of a structure
- Construction parts of wind power stations and nuclear power stations
- Foundations for technically separate machinery and equipment
- Connections to construction works
Advantages and disadvantages of the new definition of a structure
The new objects of taxation will be included in an annex to the Property Tax Act, which will contain an autonomous list of construction works considered to be structures. In this way, the definition of the term will no longer refer to provisions outside the tax system, which seems beneficial.
However, the proposed amendment also has its drawbacks.
The new provisions do not refer to construction law and are not linked to the Fixed Asset Classification, which makes it difficult to understand what the legislator had in mind when using certain terms, such as technical equipment, storage facilities or industrial installations, the definition of which may cause considerable problems for taxpayers.
What will a building be according to the Ministry of Finance?
The Ministry has also proposed a definition of a building, which is to be:
“a construction work, including installations that make it usable for its intended purpose, made using construction products, which is permanently connected to the ground, delineated from the surrounding area by building partitions and has foundations and a roof”.
The difference between the current definition and the proposed one is that the condition for construction works to be considered a building will be that they are used for their intended purpose and are constructed using construction products, as in the definition of a structure.
In addition, and this raises considerable doubts, under the new bill, construction works that are part of a structure may also be a building.
Controversy over the new definitions
This is only a draft law, so we will have to wait for the final version. However, the proposed definition of a structure is already causing a lot of controversy.
In fact, in view of the current wording of the bill, taxpayers will now have to check whether facilities on which they have never paid property tax will become structures under the new rules.
The new definitions are expected to come into force on 1 January 2025. We will keep you informed of any developments.
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