The Council of Ministers decides to consider changes to property taxation

On Monday 7 October 2024, a draft law amending the Agricultural Tax Act, the Local Taxes and Fees Act and the Stamp Duty Act was submitted to the Council of Ministers for deliberation. It is a proposal for new legislation on several tax laws, developed during extensive public consultations, but which will most profoundly affect property taxpayers. The upcoming changes to the definition of a building and a structure are a consequence of a Constitutional Court ruling in July 2023, in which the current definition of a structure was found to be incompatible with the Basic Law.

How the definition of a building for tax purposes will change?

The future definition of a building for property tax purposes will be significantly expanded compared to the current legislation. However, the added provisions largely replicate regulations from the Construction Law (an object erected as a result of construction works, together with installations ensuring that it can be used for its intended purpose…). What is new is the stipulation, that buildings will not be such facilities in which the following are or may be collected:

• loose materials,
• materials occurring in pieces, or
• materials in liquid or gaseous form

and whose primary technical parameter determining their purpose is their capacity.

What will be a taxable structure from the beginning of 2025?

A much more profound change awaits the definition of a structure that is contained in the Local Taxes and Fees Act. First of all, it will be detached from the provisions of the Construction Law. In addition, the draft under discussion introduces an appendix to the Tax Act covering 28 types of structures grouped by function. Among them, we will find both examples of structures appearing in the Construction Law, structures not listed in the Construction Law and listed elements of complex structures (e.g. those forming part of a telecommunication network: pole foundation for a cable line, telecommunication cabinet, telecommunication pole and others).

RES entrepreneurs should be happy to know that only the building parts of wind and photovoltaic power plants, as well as agricultural biogas plants and energy storage facilities are to be recognised as structures.

Will there still be a risk regarding the recognition of technical facilities as structures?

The original draft of the amendment omitted so-called construction devices, i.e. technical devices ensuring the possibility of using a building object in accordance with its intended purpose, which are currently recognised as structures for tax purposes. However, the version of the draft that was submitted to the Council of Ministers contains an autonomous definition of construction devices, which is to be one of the types of taxable structures from the new year. Unfortunately, this heralds further disputes with the tax authorities over which technical devices will be taxable on its value.

Will additional fixed assets have to be taxed from next year onwards?

The new wording of the definitions of building and structure, as well as the introduction of completely new definitions of construction device, building object or permanent connection to land into the Tax Act, create a great deal of uncertainty among entrepreneurs as to the scope of objects that will be taxable from the beginning of 2025. It is highly likely that more fixed assets will be subject to property tax from 2025 than is the case today. However, there are some industries that may benefit from the changes described.

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The degree of complexity of the new regulations and the fact that today entrepreneurs still do not know the final version of the regulations to be in force from the beginning of 2025 makes it difficult to speak of predictability and stability of the tax law.

If you are wondering how the property tax changes will affect your tax returns in 2025, please contact MDDP.