real estate tax exemption

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Investment incentives in gminas (municipalities) - real estate tax exemption

One of the basic investment incentives which are available for entrepreneurs in gminas (municipalities) is the exemption from local taxes and charges. Pursuant to the Act of 12 January 1991 on local taxes and charges (hereinafter referred to as A.l.t.), municipalities have the right to fix tax rates and establish the above-mentioned exemptions from taxes and charges foreseen therein. What is of fundamental importance for entrepreneurs is the exemption from the real estate tax.

Items subject to the real estate tax

The following is subject to the real estate tax:
1. land,
2. buildings or parts thereof,
3. buildings or parts of buildings associated with conducting an economic activity.

Real estate tax payers
 Real estate tax payers are natural persons, legal persons, organizational entities, including companies without the status of a legal person, which are owners or autonomous possessors of real estate or civil structures, perpetual usufructuaries or owners of State-owned real estate or parts thereof or civil structures or parts of civil structures belonging to the State or a local authority, if ownership results from an agreement concluded with the owner, Agricultural Property Agency or under a different legal title, and also without a legal title.

The amount of the real estate tax is set by a resolution of the municipal council, however, annual rates cannot exceed the limits specified in the A.l.t.

Exemption from real property tax
 The municipal council (gmina council) may, by way of a resolution, establish exemption from real estate tax for entrepreneurs as one of the forms of state aid.

The aid provided in the form of exemption from real estate tax is equivalent to the value of the tax exemption. What is worth emphasizing is that the tax aid granted under resolutions of municipal councils constitutes the so-called “automatic aid”, which means that an entrepreneur is automatically entitled to exemption after fulfilling the conditions set out in the resolution of the municipal council. However, the intention to use aid always has to be notified in accordance with the model notification, which should be specified in the resolution of the municipal council. All investment expenditure incurred before the exemption cannot be regarded as eligible costs.

Exemptions from local taxes and charges may be introduced taking into account the conditions specified in:
 - Decree of the Council of Ministers adopted pursuant to Article 20d of the A.l.t. (the Decree of the Council of Ministers of 5 August 2008 on conditions for exemptions from the real estate tax and the tax on means of transport, constituting regional investment aid (Journal of Laws 2008, No. 146, item 927),
 - acts governing the award of de minimis aid,
 - acts governing the award of aid within the framework of group exemptions.

Most often, municipal councils (gmina councils) introduce exemptions under the Decree of the Council of Ministers laying down the national aid scheme and within the framework of de minimis aid.

The exemption from the real estate tax under the Decree of the Council of Ministers
The Decree of the Council of Ministers on the conditions for exemptions from the real estate tax and the tax on means of transport, constituting regional investment aid, lays down framework conditions that a taxpayer must fulfil to benefit from regional investment aid in the form of exemption from the real estate tax.

Aid calculation method

The amount of aid may be calculated in relation to:
1. costs of investment in fixed assets and tangible and legal assets which are connected with the completion of a new investment, or
2. the costs of creating jobs associated with the completion of the new investment.

Conditions for the provision of aid:

1. informing the relevant tax authority, before the investment begins, of the intention to use aid. The resolution of the municipal council should specify the manner and form in which a notification should be made. Only the costs incurred after the submission of a notification can be included in the costs covered by the aid,
2. ndertaking by the entrepreneur to cover at least 25 % of the costs qualifying for aid from his own funds or from external funding sources (other than public aid),
3. maintaining the investment in a given region for a period of at least 5 years, and in the case of SMEs for at least 3 years from the date of its completion,
4. in the case of aid calculated on the basis of the costs of creating new jobs, these jobs must be set up within 3 years of the completion of the investment, with the level of employment not lower that the average from the 12 months preceding the creation of jobs, and the newly-created jobs must be retained for at least 5 years, and in the case of SMEs for at least 3 years from the date on which they were set up.

De minimis aid in the form of exemption from real estate tax
The municipal council (gmina council) may introduce, by way of a resolution on an aid programme, tax exemptions in line with the solutions based on the Community legislation on de minimis aid, which releases the aid from the notification obligation, yet the content of the resolution must be communicated to the President of the Office for Competition and Consumer Protection.

The basic legal act governing the award of de minimis aid is the Commission Regulation (EC) No. 1998/2006 of 15 December 2006 on the application of Article 87 and 88 of the Treaty (Official Journal of the European Communities L.06.379.5), under which aid may also be granted in the road transport sector.

Ceilings for de minimis aid
The Regulation sets the ceiling for de minimis aid granted to any one undertaking, which cannot exceed EUR 200 000 and EUR 100 000 in the road transport sector over a period of three successive fiscal years. This aid is calculated by adding other aid received during the fiscal year concerned and the two previous fiscal years.

The scope of application
Resolutions on exemptions under the de minimis aid regulations may, in principle, relate to all local taxes and charges and they may be adopted irrespective of resolutions providing for different types of aid (regional aid, aid under group exemptions). In such a situation, however, separate rules for the application of exemptions should be used to avoid their duplication.

The obligation to issue de minimis aid certificates
The Act on the procedure in matters relating to public aid introduces the obligation to issue certificates stating that the awarded public aid is de minimis aid.

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