In considering what tributes should be paid to PV farms, particular attention should be paid to property tax. This tax is charged to land, buildings and buildings.
Land tax (real estate)
The land belonging to PV farms may theoretically be taxed on the basis of two set:
- • Local Taxes and Charges Act (i.e. Journal of Laws of 2019, item 1170) or
- • Agricultural Tax Act (i.e. Journal of Laws of 2020, item 333).
Agricultural tax rates are much lower, so entrepreneurs try to look for arguments to recognise that PV farms are planted on agricultural land.
The problem in this matter is also whether it is possible to divide such agricultural parcels into parts occupied by photovoltaic panels (or other facilities within the farm), i.e. economic activities, and agricultural activities, which would seem to be a reasonable solution (if of course such a division could be made). In that order In the first the accident would be taxed on the basis of property tax, whereas In the second – on the basis of agricultural tax.
In this regard, the view adopted by the administrative courts prevails that in such a situation it is not possible to conduct proper, full and rational agricultural activities. Consequently, the whole area leased to a photovoltaic farm should be considered to be engaged in economic activities other than agricultural activities and will therefore be subject to property tax (see e.g. NSA judgment dated 7 July 2017 reference no. II FSK 1540/15).
Property tax chargeable to buildings or structures
Further consideration should be given to the tax on the property of the PV installation itself. As has already been mentioned, the aforementioned tax imposes on the land, buildings and buildings. The land was mentioned just now. At this point, should it be analysed whether a given photovoltaic installation is a building or a building?
This is important because In the first the case, the tax is charged on the building's usable area and is more favourable to the taxpayer. In the case of buildings, it is charged on a market value, which involves a higher tax (according to Article 4(1)(7) Act on local taxes and charges).
The legal definitions of the building and buildings are contained in the glossary of the abovementioned Act (Article 1a). According to him, in order for an object to be considered a building, it must meet together three requirements:
- • be permanently associated with the ground,
- • be separated from space by building partitions,
- • must have foundations and roofs.
As you can see, the photovoltaic installation does not meet this definition. Thus, the concept of structures should be addressed. According to the above-mentioned dictionary, it is a building (within the meaning of the regulations of the building law) which is not a building or a small architectural object, as well as a construction equipment (also within the meaning of the regulations of the building law) related to a building which ensures the possibility of using the building as intended.
In the definition of a structure Article 3(3) Construction Law Act (i.e. Journal of Laws of 2021, item 2351) The legislator lists an example directory of objects entering this concept. However, photovoltaic installations are missing.
Since these definitions give rise to interpretation doubts, they have repeatedly been discussed by the administrative courts. For example, NSA in judgment dated 12 December 2018 reference no.
II FSK 1275/18 He concluded: "The correct author of the cassation complaint points out that the legislator distinguishes as building parts of technical equipment, and consequently - and contrario - does not recognise as building other parts of these devices" and further "(...) the applicant's position is to be accepted that the construction of the device under consideration: panels which are elements of silicon semiconductor panels fixed to the ground by means of a special system of anchors, smoking, or concrete panels, and the function which they fulfil - the conversion of solar energy to electricity, make it necessary to consider only their construction parts.
Consequently, they are subject to real estate tax in this respect.’
This view is the dominant approach. Consequently, it must be concluded that the line of caselaw has led to the conclusion that property tax, as constructions, should only be subject to the structural parts of the installation, but not to the panels themselves, since they do not fully reflect the character of the structure.
Excise duty in the context of electricity trading
When examining excise duty, it is appropriate to have First, Whereas the subject matter of taxation is the trade in electricity. However, it should be stressed that this is a single-phase tax in which taxation is applied at the last stage of the turnover.
According to Article 9(1)(2) Excise duty laws (i.e. Journal of Laws of 2020, item 722) The subject of excise duty shall be the sale of electricity to the final customer in the territory of the country, including by an entity not licensed to produce, store, transfer, distribution or trade in electricity which produced that energy.
Consequently, where the PV farm does not provide electricity to the end-user and for the energy undertaking which supplies that energy, further to the last user, there is no excise duty on tax.
It is also important to consider whether the PV farm produces electricity for its own needs or for external needs and at what capacity. The key is here Article 5(1) Regulations of the Minister of Finance dated 28 December 2018 on excise duty exemptions (i.e. Journal of Laws of 2021, item 1178). Under this provision, the consumption of electricity produced from generators of a total power not exceeding the total power shall be exempt from excise duty. 1 MW by the entity that uses this energy.
Moreover, the government's anti-inflationary action in this respect must be mentioned. Based on Act dated 9 December 2021 amending the Excise Tax Act and certain other laws (Journal of Laws of 2021, item 2349) The government has decided to make temporary changes.
In particular, this is about the addition to the Excise Tax Act Article 163d(1) according to which period from 1 January 2022 up to day 31 May 2022 The sale of electricity to the final customer of electricity in a household within the meaning of Article 3(13b) Act dated 10 April 1997 - Energy law.
Under section 2 that Article clarifies that for the purposes of applying the exemption in question Under section 1, a household is not considered to be a property entirely used for the purpose of the business.
In addition, for non-domestic electricity consumers, it was decided to temporarily reduce the rate of excise duty, also in the period from the date of 1 January 2022 up to day 31 May 2022 – to 5 PLN to 4.6 PLN for a megawatt hour (watered Article 164a(3) to the Excise Tax Act).
Tax on goods and services
In this respect, in principle, general VAT rules will apply. For electricity, the reduced rates included do not apply. Under Article 41, neither the exemption in question under Article 43 VAT Act (i.e. Journal of Laws of 2021, item 685).
On the other hand, there is a possibility of an individual exemption, specified under Article 113 the abovementioned Act. We are talking about selling below the amount 200,000 PLN net in the previous tax year.
In this context, attention should be paid to section 13 point 1 point (b) the article in question, according to which the above entity exemption does not apply to taxable persons supplying goods with excise duty, but the exception is, inter alia, electricity (tiret) first, CN 2716 00 00.
This means that taxable persons selling electricity up to that limit may benefit from the entity exemption in VAT.
In addition, it is worth noting that, as in the excise duty, the government also decided in the framework of the anti-inflation shield to reduce the VAT rate 23% to 5% for supply, intra-Community acquisition and import of electricity (CN) 2716 00 00. However, the reduced rate will only apply by 3 months – i.e. until 31 March 2022
This provision was introduced by the Regulation of the Minister of Finance dated 17 December 2021 amending the Regulation on goods and services for which the rate of duty on goods and services is reduced and the conditions for applying reduced rates (a new chapter has been added 5b).
Income tax
There are also general accounting rules for PV farms for income taxes. However, attention should be paid to the issue of receiving grants, as often RES projects are financed either by public funds or by private investors.
Grants received to cover costs either as reimbursement of expenses related to the purchase or production of fixed assets or intangible assets are tax revenues, as is apparent from Article 12(1)(1) CIT Act (i.e. Journal of Laws of 2021, item 1800). However, this income is exempt on the basis of Article 17(1)(21) This bill.
As provided for in the provision under Article 17(1)(21) CIT, income tax free are subsidies, subsidies, subsidies and other unpaid benefits, subject to point 14a, received to cover costs either as reimbursement of expenses related to the receipt, purchase or production of fixed assets or intangible assets from which depreciation is made in accordance with Article 16a-16m.
The restriction in question Under point 14a, relates to grants from the State budget received for the financing of projects implemented under the Special Pre-accession Programme for Agriculture and Rural Development (SAPARD).
It must be concluded that the Article 17(1)(21) The CIT Act only applies to State aid subsidies. This position was expressed by the Director of National Tax Information in the tax interpretation dated 2 June 2017 reference no.
0114-KDIP2-2.4010.22.2017.1.JG: „It should be made clear that only some grants from public entities' budgets are not subject to any exemption. The view expressed in the caselaw leaves no doubt as to the scope of the exemption under Article 17(1)(21) Act.
The exemption does not therefore cover taxpayers' income received from other sources and thus not from public funds." The tax authority in the argument also referred to the judgment of the WSA in Kraków dated 12 February 2008 reference no.
I SA/Kr 912/07, which indicated that ‘the addition to the provision of the term ‘other unpaid benefits’ does not alter the nature or purpose of that provision. This is only a complement to the category of State aid which is involved in this standard.
Not every grant, subsidy, or surcharge will have a specific name in the Act, although its nature may be identical or similar to those types of aid.’
In conclusion, according to the above analysis, the taxation of PV farms requires a few taxes to be considered at the angles. The least obvious situation for the taxpayer appears to be presented in property tax due to the municipality. Also in excise duties, as in VAT, the recent amendments relating to government anti-inflationary activities should be taken into account. Given the complexity of this subject, it would therefore be reasonable to analyse each case individually.
About the author
Mateusz Krawczyński. Junior tax consultant At Russell Bedford Poland. Graduated from bachelor's degree in Logistics and Master's degree in Finance and Accounting. He is currently studying law at the Łazarski University. Previous professional experience in tax matters In one of Big Four companies. He specializes in tax on goods and services, in particular with regard to VAT settlements in local government units.