Exemption from property tax

One of the basic investment incentives available to entrepreneurs in municipalities is exemption from local taxes and fees. The Act of the 12th January 1991 on local taxes and fees (hereinafter referred to as the U.p.o.l) grants municipalities the authority to determine tax rates and establish exemptions from the taxes and fees provided for in the Act. The exemption from property tax is of fundamental importance for entrepreneurs.

Subject of property tax

Property tax is levied on:

1. land,
2. buildings or their parts,
3. structures or their parts associated with conducting business activities.

Taxpayers of property tax

Taxpayers of property tax include individuals, legal entities, organizational units, including non-legal entities, who are owners or self-owners of properties or buildings, perpetual lessees of land, or possessors of properties or their parts or buildings or their parts owned by the State Treasury or a local Government unit, if possession arises from an agreement with the owner, the Agricultural Property Agency, or any other legal title, as well as possession without legal basis.

The amount of property tax is determined by the municipal council by resolution, provided that the annual rates do not exceed the limits specified in the U.p.o.l.

Exemption from property tax

The municipal council may establish an exemption from property tax for entrepreneurs as a form of public aid by resolution.

The aid resulting from the exemption from property tax corresponds to the value of the tax exemption. It is worth emphasizing that tax aid based on municipal council resolutions is considered "automatic aid", which means that the exemption is granted by virtue of the law itself, after the entrepreneur meets the conditions established in the municipal council resolution. However, a requirement is always to submit a notice of intention to make use of the aid, in accordance with the template provided in the municipal council resolution. Any investment costs incurred before the exemption is granted cannot be considered as qualifying costs.

Exemptions from local taxes and fees can be introduced according to the conditions specified in:

• the Council of Ministers regulation issued on the basis of Article 20d (1) of the U.p.o.l (currently in force is the Council of Ministers regulation of the 9th January 2015 regarding the conditions for granting exemptions from property tax and tax on means of transport, which constitute regional investment aid, aid for culture and preservation of cultural heritage, aid for sports infrastructure and multifunctional recreational infrastructure, aid for local infrastructure, aid for regional airports, and aid for ports (Journal of Laws from 2022, item 1387),
• acts governing the provision of de minimis aid,
• acts governing the provision of aid under block exemptions.

Municipalities commonly introduce exemptions based on the Council of Ministers regulation, which constitutes a nationwide aid program, as well as within the framework of de minimis aid.

Exemption from property tax based on the Council of Ministers regulation

The Council of Ministers regulation regarding the conditions for granting exemptions from property tax and tax on means of transport, which constitute regional investment aid, establishes the general conditions that must be met for a taxpayer to benefit from an exemption from property tax as regional investment aid.

Calculation of aid

The granted aid can be calculated based on:

1. investment costs in fixed assets and intangible assets associated with the implementation of a new investment, or
2. costs of creating jobs related to the implementation of a new investment.

Conditions for granting aid

1. submission of a notice of intention to use the aid to the competent tax authority before starting the implementation of the investment. The municipal council resolution should specify the procedure and form of submitting such a notice. Only costs incurred after the notice has been submitted can be included in the aid,
2. the entrepreneur's commitment to cover at least 25% of the qualifying costs with their own funds or external sources of financing (not derived from public aid),
3. maintaining the investment in the region for at least 5 years, and in the case of SMEs, at least 3 years, from the completion of its implementation,
4. in the case of aid calculated based on the costs of creating new jobs, the condition is to create them no later than 3 years from the completion of the investment and maintain employment at a level no lower than the average for the 12 months preceding the creation of jobs, as well as maintaining the newly created jobs for at least 5 years, and in the case of SMEs, at least 3 years, from their creation.

Exemption from property tax as de minimis aid

The municipal council can introduce tax exemptions in the form of a resolution constituting a aid program, while complying with solutions based on the EU rules on de minimis aid, which exempts the aid from the obligation of notification, but the draft resolution must be submitted to the President of the Office of Competition and Consumer Protection.

The basic legal act regulating the provision of de minimis aid is Commission Regulation (EU) 2023/2831 of the 13th December 2023 on the application of Articles 107 and 108 of the Treaty on the Functioning of the European Union to de minimis aid, which allows for the provision of aid also in the road transport sector.

De minimis aid thresholds

The Commission Regulation sets the de minimis aid threshold at EUR 300,000 over three consecutive years. This aid is calculated by summing up the aid received in the past three years, with the total aid not exceeding EUR 300,000.

Based on the current Commission Regulation (EU) No. 1407/2013 of the 18th December 2013 on the application of Articles 107 and 108 of the Treaty on the Functioning of the European Union to de minimis aid (EU Official Journal L. 352, 2013), the limit is EUR 200,000, or EUR 100,000 in the case of the road transport sector. This aid is calculated by summing up the aid received in the current year and the two preceding years. Depending on the wording of the municipal council resolution, de minimis aid can be provided in accordance with Regulation No. 1407/2013 until the 30th June 2024.

Scope of application

Resolutions regarding exemptions under de minimis aid can apply to basically all local taxes and fees and can be adopted regardless of resolutions providing for other types of aid (regional, under block exemptions). In such a situation, however, the principles of applying exemptions should be distinguished to avoid duplication.

Obligation to issue de minimis aid certificates

The Act on Proceedings in Cases concerning Public Aid introduces the obligation to issue certificates confirming that de minimis aid has been granted.