Constitutional Court challenged one from the provisions of the Renewable Energy Sources Act and some other laws on the taxation of wind power plants.
On 22 July 2020 The Constitutional Court ruled (reference no.
K 4/19), that Article 17(2) Act dated 7 June 2018 amending the Renewable Energy Resources Act and certain other laws (hereinafter ‘the Amending Act’) is incompatible with those of Article 2 The Constitution of the Republic of Poland principle of non-retroactivity of the law, in so far as it implemented retroactively (i.e.
date 1 January 2018) Article 2(1)(6) and Article 3(1) that law, which included, inter alia, the new wording of the definitions of ‘building’ and ‘wind plant’.
The introduction of the provisions of the Amending Act retroactively and during the tax year was important for municipalities as local government units, as it affected the income generated by the municipalities from the property tax
Income decrease and one million to be returned
Implementation of the provisions of the Amending Act with retroactive effect and during the tax year (since 1 January 2018) was of significant importance to municipalities as local government units as it affected the income generated by the municipalities from the property tax.
The property tax constitutes a local tax and according to Article 2(1) point Act dated 12 January 1991 on local taxes and charges, this tax shall be subject to real estate or construction works, such as buildings or parts thereof relating to the pursuit of economic activity, and any change in the definition of buildings in construction law shall result in a change in the taxation of buildings with real estate tax, which constitutes the exclusive income of the municipality.
Consequently, the municipalities were deprived of part of their income and, furthermore, by retroactive application Article 17(2) The amending law, there was a risk that they would have to reimburse the already collected property tax on wind turbines planted on their land.
The law should not go backwards
On 20 August 2018 and 31 May 2019 The Constitutional Court received requests from the Council of the Światie Municipality Council on Wasp and the Kobielnica Municipality Council to examine the constitutionality of the regulations providing for retroactive entry into force of the provisions giving new wording to the definitions of "building" and "wind plant".
In the assessment of the applicants, the contested provision introduces retroactive amendments, contrary to the principle of lex retro non agit, and in addition directly alters the rules on the taxation of wind power plants during the tax year, and there is no justification for the draft law amending the constitutional value justifying the infringement of the principle of lex retro non agit.
Although exceptions to this principle are allowed, it is absolutely unacceptable to provide retroactively for stricter law – lex Severior retro non agit. This principle, known primarily as criminal law, also includes tax law.
What about compensation and reimbursement?
The contested provisions will cease to apply only after 18 months from the date of delivery of the judgment in the Official Journal of the Laws, and thus remain in force and in force until then.
The Court justified such a ruling by the fact that the loss of power of the contested provisions at the time the Constitutional Court delivered its ruling in the Official Journal of the Republic of Poland would mean that the municipalities would not only lose the right to charge property taxes for wind power plants located in their territory, but would also be obliged to reimburse taxes collected for such buildings after the rightholders have opened appropriate proceedings.
The Court also stressed that, at the time of the postponement of the deadline for the expiry of the current contested regulation, the legislator is required to bring about a constitutional condition which will require the establishment of appropriate legal arrangements and compensation to municipalities for losses incurred as a result of the retroactive introduction of a regulation affecting the reduction of their income from wind-up tax.
Author: Michał Skwarek - Council applicant in the legal department Russell Bedford Poland. Graduated from the Faculty of Law and Administration of the University of Warsaw.