Amendments to the real estate tax legislation: significant changes for businesses planned as from 2025

September 9, 2024

On September 3, 2024, the Ministry of Finance published a new draft law amending the real estate tax (RET) regulations.

This is yet another version of the draft law that takes into consideration the numerous criticisms and some of the comments on the previous draft law made during the public consultations held over the summer.

The most important changes compared to the first draft law amending the RET regulations published on June 14 concern:

1) the definition of a structure, in particular by:

• indicating explicitly in the definition of a structure that only building parts of, inter alia, PV farms, energy storage facilities, technical facilities and free-standing industrial facilities will be considered as structures liable to 2% RET;
• indicating that every structure liable to RET must be "erected as a result of construction works" (formerly the law used the ambiguous term: "made using construction products"). The concept of "construction works" is to be understood in accordance with its definition placed in the construction law meaning: construction as well as works involving the reconstruction, installation, renovation or demolition of a construction object (with the exception that RET regulations exclude demolition works from this definition);
• including "building facilities" (Polish: urządzenie budowlane) in the definition of a structure, which is to be understood as: connectors and installation facilities, including those for the treatment or collection of sewage, and other technical facilities, connected with a building or structure, directly ensuring the use of a building or a structure for its intended purpose (this definition is in fact similar to the one in effect under the existing regulations);
• removing the widely criticized "technical-functional entirety" concept from the definition of a structure;
• removing the "free-standing technical facilities permanently attached to the ground" from the structures liable to RET listed in the annex to the draft regulation;
• amending the definition of "permanent attachment to the ground" (which is necessary for certain categories of objects to be considered RETable structures), as such a connection of a construction object to the ground that ensures the object's stability and ability to withstand external factors independent of human action that could destroy it, cause it to move or shift to another location.

2)the definition of a building by:

• indicating that an object in which bulk materials are or can be accumulated, occurring in pieces or materials in liquid or gaseous form, the basic technical parameter of which determining its function is its capacity cannot be considered as a building for RET purposes;
• clarifying that a building must be erected as a result of construction works.

3) the definition of a construction object by indicating that mine workings as well as small objects (classified as small architectural objects under the construction law) being objects of religious worship, garden architecture and utilitarian objects for daily recreation and housekeeping cannot be deemed as construction objects.

4)the deadline for filing RET return for 2025, which is to be extended to March 31, 2025 to allow taxpayers to analyze the new regulations and new scope of RET taxation.

The proposed changes, compared to the first draft law, are positive and (unlike the previous version of the draft law) aim at maintaining the fiscal status quo (particularly for entities from the energy sector, including RES).

In particular, the Ministry of Finance's incorporation of some of the demands formulated by entities from various industries and tax advisors at the stage of public consultations, such as the deletion of the concept of "technical-functional entirety" or the clarification that only the construction parts of PV farms or energy storage facilities are subject to RET, engenders optimism. Also of note is the removal of the "free-standing technical facilities permanently attached to the ground" from the list of structures subject to RET, and the lack of an indication of transformers (as subject to RET) in the justification for the latest version of the draft law.

Nevertheless, the definition of a structure includes building facilities, which are to directly ensure that a building or structure can be used for its intended purpose. It is difficult to assess at this stage how much this change will affect the scope of RET taxation. Moreover, the definition of permanent attachment to the ground is still broad and may raise doubts - the legislator has not considered the requests to use the definition developed in the case law.

In summary, the direction of the changes in the draft law should be evaluated positively, but to some extent the proposed regulations may still raise questions.

The amended regulations are scheduled to take effect on January 1, 2025 - we will therefore continuously monitor the progress of works on the project.

Currently, the draft has been sent for brief public consultations, which will last through September 9, 2024. After that, we expect the draft law to be presented to and approved by the government and then it will be passed to the parliament to proceed further (we note that at those stages the regulations may still be subject to adjustments). Given the short time remaining for the legislative process, the final shape of the legislation should be known around October this year.

We suggest already at this stage to estimate the impact of the planned changes on RET settlements for 2025, and to review the tax rulings obtained in order to assess whether these interpretations will continue to protect applicants after the amended regulations come into force.

Should you have any questions or concerns, our Tax Team remains at your disposal.