The interpretation of the MF and the amendments to the provisions of the RES Act on the taxation of wind turbines will allow for the recovery of overpayments from the property tax.
On 22 June 2018 Undersecretary of State at the Ministry of Finance Paweł Gruza replied to the parliamentary interpelling No.
22571 on the qualification of construction works for property tax purposes after the Constitutional Court judgment (‘TK’) dated 13 December 2017 (SK file signature 48/15), which declared an unconstitutional position that an object meeting the definition of a building could be a building within the meaning of the provisions of the Act on Local Taxes and Fees (Journal of Laws of 2017, item 1785, as amended).
In practice, this means that, for example, if we assume that a transformer station, often masonry, is a building (and in this case essentially meets the definition of a building, because it is constantly connected to the ground, it has a foundation, is separated by walls from space and has a roof), then property tax should be determined as for a building, that is, on the basis of the surface (e.g.
10m2) times the applicable rate (e.g. 10 m2 x 23 PLN = 230 PLN), not on the basis of the value of structures, i.e. not on the basis of the value of devices located, for example, in such a station.
Therefore, if the construction structure meets the definition of the building, then it should be taxed on property as a building rather than as a building.
Act dated 7 June 2018 the amendment of the Renewable Energy Sources Act and some other laws was announced in the Official Journal of the Laws under item 1276 on 29 June 2018 Its rules on the taxation of wind turbines came into force on 30 June 2018, with effect from 1 January 2018 So taxpayers who declared property tax for 2018 from the entire wind power plant, and not just from the building part, they will be able to claim a refund of the overpaid tax.
Qualification of construction works
Members' Question by Paweł Effectivecki dated 24 May 2018 was directed at the request of the Convention of Mayors of Kujawsko-Pomorskie Province, which requested urgent action to organise the legal status of the qualifying of construction sites, including wind power plants for property tax purposes.
The case is not trivial because it concerns the possibility for entrepreneurs to recover multi-million-dollar overpayments in the property tax while effectively reducing current and future municipal budgets due to interest tax reimbursement obligations. Therefore, the position of the Ministry of Finance in this case is important and certainly worth knowing.
Analyzing the response of the MF and referring to the following part of the judgment of the Constitutional Tribunal at the beginning:
the finding of non-constitutionality of tax regulations in the above-mentioned scope does not automatically result in the obligation of different classifications, for the purposes of determining the property tax, of construction works, including telecommunications containers (...), to which the ruling of administrative courts was adopted uniformly in the case-laws, as regards the possibility of recognising as buildings corresponding to the definition of the building. The determination of the nature of these facilities on the basis of the relevant legal provisions, without, however, leaving aside the contested passage of normative content, and following the required evidence is the competence of the tax authorities and the administrative courts controlling their activities.
and that: the finding that the meaning of the definition of a structure, which has been established in the single case-law of the administrative courts, is not absolute, and that the tax authorities, in the case of each facility, must assess its legal status, preferably guided by the expert’s opinion, is de facto passed on to the municipalities and administrative courts to decide what is a building and what is not, while the assessment may take into account the relevant legal provisions and the outcome of the evidence procedure.
The law itself, when defining a building, is not too complicated because according to Article 3(2) Building rights should be understood as such a building which is permanently linked to the ground, separated from the space by building partitions and having foundations and roofs. At the same time, the provision Article 46(1) k.c.
indicates permanent binding to the ground as a characteristic of the building. In order to assess whether in a given case we are actually dealing with a building, or with a structure, it will be necessary to analyse a particular case, supported by arguments relating to each of the features distinguishing the building, e.g.
whether we are dealing with foundations under the device, and the shields of such a device from the effects of atmospheric factors, or perhaps it will be construction divisions. Such an assessment will be extremely important in the resumption proceedings, as well as in current cases, to determine the appropriate amount of property tax.
It is likely that the assessment of the facts of each case will create opportunities for the taxpayer and the tax authority to pursue their claims before the court, which will, as always, be held responsible for the judgment in this respect, but not to take into account, as has often been the case so far, the out-of-the-art characteristics of the building, including the functions to be performed by the construction.
Controversy at taxing wind turbines
The Convention of the Mayors of the Kujawsko-Pomorskie Voivodeship also asked about the taxation of wind power plants. The MF pointed out that from 2017 the whole wind power plant is the subject of taxation, i.e. its construction and non-constructional (technical) parts.
Thus, according to the Ministry, it is not legitimate to claim, inter alia, that some tax authorities were subject to property tax 2017 only parts of wind turbine construction.
It should be noted that in the area of wind power plants, which would in principle be difficult to qualify as a building rather than a building, the judgment of the Constitutional Tribunal relating to the qualification of an object as a building in most cases does not really change much.
However, the Ministry pointed out that in the area of property tax on wind turbines, legislation is much more important Act dated 7 June 2018 to amend the Renewable Energy Sources Act and some other laws which, by amending, among others, the provision Article 3(3) Construction law changes the rules on taxation of wind power plants.
Name under Article 3(3) Construction law has changed the definition of structures in such a way that only part of technical equipment (coils, industrial furnaces, nuclear power plants, wind turbines and other equipment) and the foundations for machinery and equipment will be considered to be technically distinct parts of objects consisting of a useful whole.
This will allow to tax with property tax only foundations and masts (i.e. building parts) windmills. Property taxing will not apply to a device whose significant value has so far affected a high property tax.
Act dated 7 June 2018 the amendment of the Renewable Energy Sources Act and some other laws was announced in the Official Journal of the Laws under item 1276 on 29 June 2018 Its rules on the taxation of wind turbines came into force on 30 June 2018, with effect from 1 January 2018 So taxpayers who declared property tax for 2018 from the entire wind power plant, and not just from the building part, they will be able to claim a refund of the overpaid tax.
Author:
Aleksandra Księżyk
Director of the Legal Department in Warsaw. Legal advisor, from 2013 associated with Russell Bedford. He runs the Legal Department at the Chancellery Russell Bedford.