BI: Business wants property tax reform. Not just new definitions

Michal Nielepkowicz, tax adviser and partner at Thedy & Partners was asked to comment on this issue. He pointed out that it is very good that the Ministry of Finance has been working on these changes for a long time. Admittedly, we do not yet know their shape, neither the draft nor the assumptions have been published, but hopefully this will happen in the coming weeks, in line with the Ministry’s announcement that they want to publish the draft of the new regulations early enough for it to be subject to broad public consultation while it is still in the works at the MF.

Expectations in this regard are extremely high. The provisions challenged by the Court have been in force for more than 20 years and, to tell the truth, everyone, i.e. taxpayers, tax authorities and administrative courts, have had enough of them and have repeatedly demanded their amendment. Significantly, the Court only challenged the definition of a structure and, incidentally, a building, i.e. the most important provisions determining the scope of property taxation.

Flaws in the system

What is noteworthy, and to its credit, is that the Ministry is aware of the numerous other flaws in the property tax system, and if this year – which is very likely – it does not manage to develop a comprehensive property tax revolution and only improves the legislation to the extent challenged by the Court, it should continue this work in future years. And this is what taxpayers expect. Of course, the definitions determining the scope of taxation are to be changed first. Certainly, in this respect, the reference to the provisions of the Construction Law should be abandoned, which, by the way, was the basis for the judgment of the Constitutional Tribunal; however, taxpayers also expect that the catalogue of structures will be constructed in a precise manner and at the same time not extending the existing scope of taxation. At the same time, the absurdities of the existing definitions, which are the source of numerous disputes between taxpayers and tax authorities, will be eliminated. For example, taxpayers expect that the taxation of technical equipment with structural parts or foundations only in the scope of these foundations will be regulated once and for all, as well as the issue of non-taxation of the so-called structures in buildings will be resolved in the same way.

Indeed, no taxpayer today understands the demands of the tax authorities regarding the taxation as constructions of objects in buildings, which are sometimes reported by the tax authorities, or the taxation of technical equipment with property tax, in particular those that arrive ready-made from the manufacturer’s factory and are only assembled on a foundation erected as part of the construction process.

In the same way, the “competition” between a building and a structure should be unambiguously resolved in the new legislation. Under the current rules, objects which fulfil the definition of a building, such as silos, are classified as structures by the tax authorities, which raises justified objections on the part of taxpayers, as it contradicts the definition of a building.

Too many absurdities

In addition to the only examples outlined above of the need for precise definitions of a building and a structure, the real estate tax regulations are full of numerous other absurdities that urgently need to be eliminated. These absurdities relate in particular to the catalogue of taxpayers, the tax base for buildings and structures, including the requirement to calculate tax on structures according to the initial value of the fixed asset not reduced by depreciation write-offs, the fiction of equality for the purposes of taxation of a modern factory and a derelict building within which there is a risk of damage to health, procedural issues, decentralisation of tax authorities whose number equals the number of municipalities (approx. 2,500) is a nightmare, especially for network entrepreneurs or, finally, the interpretations issued by these tax authorities, who are the beneficiaries of property tax revenues. All these issues need to be regulated anew, of course, drawing on 30 years of experience of the functioning of the existing legislation, and this is what taxpayers, as well as the tax authorities, not to mention the administrative courts, who have to settle disputes on a daily basis on the basis of massively written regulations, expect.

Let us really hope that the Ministry of Finance, will be willing to deal comprehensively with these issues as well and not just stop at rewriting the definition of a building and a structure.

The entire article can be read at this link: Podatek od nieruchomości do zmiany. Takie są oczekiwania biznesu (businessinsider.com.pl)