Changes in property tax (PON) 2025: Issues important to developers

1. How will transformer stations be treated in the draft regulatory changes? Will they have to be taxed with property tax starting in 2025?

In the draft amendments to the Law on Local Taxes and Fees presented by the Ministry of Finance, there is no direct mention of transformer stations. However, this does not mean that such facilities will be outside the scope of taxation. Indeed, a freestanding transformer station understood as an object consisting of a building component (transformer building/container enclosure) and a technical component (transformer) can be treated as a component of a power grid, which is listed as an example of a structure in Appendix 4 to the Tax Law. This is indicated by the new definition of the term “technical and utility whole” and the content of the explanatory memorandum to the draft in question. It is worth noting that due to the imprecision of the proposed amendments to the regulations, it is not impossible that the brick building of the transformer stations will also have to be taxed on its value.

2. What building can be part of the structure “pedestrian crossing: above and below ground and pedestrian walkway”? I am referring to the provision in the definition of a building regarding the new Appendix 4 to the Law on Local Taxes and Fees.

The draft of the new definition of a building includes a proviso referring to buildings that are part of heterogeneous or complex facilities such as sewage treatment plants or sports facilities. Significantly – in the Finance Ministry’s proposal, however, such a proviso applies only to structures listed in items 1 through 6 of Appendix 4 to the Tax Law. Among this group of structures, the following are listed in item 5: a pedestrian crossing: above and below ground, and a pedestrian walkway. According to the explanatory memorandum to the draft amendments, in the event that a complex or heterogeneous facility includes parts that meet the prerequisites for qualification as buildings, they will constitute buildings and will be taxed on the usable area. In this context, it is questionable to include pedestrian crossings and walkways in the group of complex or heterogeneous objects. Indeed, it is difficult to point to an example of a building that could be part of the structures listed in item 5. of Appendix 4 to the Law on Local Taxes and Fees.

On the other hand, in further items of the said appendix one can find examples of other complex objects, which may also include buildings (e.g., port – item 13) , and even examples of objects that are entirely buildings (e.g., hangar – item 9 or railroad signal tower). In light of the announced draft amendments, the listed objects are to be treated as structures or parts thereof and taxed on their value despite meeting the prerequisites in the new definition of a building. Hopefully, these inaccuracies will be corrected during further legislative work.

3. What will be the tax treatment of a temporary yard for construction purposes, which may exist for the duration of the project and is removed on completion of the construction work?

In terms of how hardened parking yards are taxed, the draft new tax legislation changes little. Such yards are both hitherto and are to be classified for tax purposes as structures after the changes. However, it is worth recalling that newly created structures are taxable only from the beginning of the following year. Therefore, if the temporary yard mentioned in the question is demolished before the end of the year in which it was built, it will not need to be reported for taxation.

4. Does the concept of a small architectural object disappear?

Yes – the Law on Local Taxes and Fees will no longer mention that small architecture objects are not structures. This could potentially lead to a change in practice by some tax authorities. Taxpayers should no longer invoke this argument. Omitting direct mention of objects of minor architecture (OMA) as excluded from property tax could lead to additional disputes. Until now, the practice has been to omit small objects from taxation, such as benches, bicycle shelters and trash cans. It cannot be ruled out that tax authorities will use the lack of OMAs in the regulations to increase the burden, but also as a pretext for additional fiscal controls.