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A new definition of a civil structure and its consequences for real property tax

2015-08-19

On 28 June 2015, an amendment to the Act – Construction Law came into force under which, among others, Art. 3 of the Act – Construction Law of 7 July 1994 (Journal of Laws of 1994, No. 89, item 414, as amended; “C.L.”) was amended. Due to a direct reference in the Local Tax and Fee Act to the provisions of the Construction Law, a new version of the definition of a civil structure may bring about a change in the principles of taxation with real property tax.

Pursuant to the previous version of Art. 3 of the C.L., a civil structure was regarded as a building with systems and technical equipment, a structure constituting technical and functional entirety with systems and equipment and landscape structure. As a result, real property tax was determined on the basis of the area of the real property, whereas systems and devices located inside the building or structure did not constitute a separate object of taxation with real property tax.

The new definition of a civil structure is to be understood as a building, structure or landscape structure, with systems allowing to use civil structure in line with its intended use, erected using construction products. Therefore, the premise of “technical and functional entirety” was abandoned and substituted with “allowing to the use civil structure in line with its intended use”. It can be concluded that the new scope of the definition of a civil structure is narrower through:

  1. exclusion of technical equipment from the definition of a civil structure,
  2. exclusion of systems which are not systems allowing to use a civil structure in line with its intended use from the definition of a civil structure.

It is important that the premise of “allowing to use the civil structure in line with its intended use” is discretionary. It is possible that after the amendment comes into force, tax authorities will subjectively decide that specific devices and systems do not allow to use the civil structure in line with its intended use. Consequently, they will be taxed separately from the civil structure with real property tax in the amount of 2% of their value.

Presently, experts’ views on tax consequences of amendment at issue are divided. It is not known what the practice of tax authorities will be in this matter. Nevertheless, due to the risk of an increase in tax burdens, it is worth collecting arguments confirming the function of systems in building outlined in the law.