Property tax becoming increasingly dire

Record high tax rate hikes

Considering the general economic situation this year, the running costs of offices, warehouses, retail and residential buildings can see record-high increases.

One of the fastest-growing costs items is property tax, which even before the increase represented a significant burden for business properties located in Poland.

Property tax is charged on the area of land and buildings and on the value of structures (e.g. car parks, squares, enclosures). The rates are fixed by each individual local authority, with the majority of Polish cities using the maximum threshold limit set by the Act on local taxes and levies.

It is the increase in the maximum rates that is the biggest contributor to the record high increase in property tax expense seen in 2023.

The rate hikes are the effect of the annual adjustments provided for in the act. The maximum tax amounts in a given fiscal year are annually adjusted for six-month inflation. Over the past few years, we have been seeing an upward trend — disadvantageous for the taxpayers — with the property tax rates in 2021 nearly doubling the 2020 rates (almost by 4%). In 2023, the rates of local taxes and levies will be set based on the year-on-year price growth in Q1 2022 (a time with steep price rises). Statistics Poland reports that the rate was 11.8% and this is how much the maximum property tax rates will go up in 2023.

In 2023, the maximum business land tax rate can be PLN 1.16 per square meter, up by PLN 13/100, and for business buildings — as much as PLN 28.78 per square meter, up by PLN 3.04.

Is there anything that can be done?

High property tax rates often result in higher services charges, which reduce the competitiveness of the site.

Moreover — in the absence of lower tax rates for vacant properties — higher property tax can become even more burdensome when the property is left without a tenant.

To successfully manage higher tax expense we should first of all avoid overpaying the tax. Poland’s property tax laws are excessively complicated and lead to multiple errors in taxpayer’s calculations. Usually, problems begin already with accounting for an investment project because the definitions of a building and structure under the property tax laws do not coincide with the classification of fixed assets used for the purposes of accounting and income tax. Therefore, to calculate property tax correctly one must often demonstrate technical and construction knowledge and be familiar with the latest tax rulings.