Real Property Taxation of Wind Power Installations
Published: January 12, 2022 | Updated: January 2026
The legislative amendments to the taxation of wind power installations that entered into force on January 1, 2017, precipitated a substantial body of litigation between renewable energy enterprises and municipal tax authorities. The central controversy concerned not the legitimacy of taxation per se, but rather the proper methodology for determining the tax base. A seminal case adjudicated by the Supreme Administrative Court of Poland illuminates the critical distinction between fixed assets as defined under income tax legislation and structures as contemplated by the Local Taxes and Fees Act—a distinction bearing significant implications for taxpayers across the renewable energy sector.
The 2017 Legislative Redefinition of the Taxable Object
Prior to January 1, 2017, only the construction elements of wind turbines—namely, the foundation and tower—constituted taxable structures for real property tax purposes. The Act on Wind Power Investments fundamentally altered this definitional framework. Under the amended regime, a wind turbine in its entirety qualifies as a taxable structure, encompassing both construction components (foundation and tower) and technical elements: the rotor assembly with blade system, drive transmission unit, electrical generator, control systems, and nacelle assembly including mounting apparatus and yaw mechanism.
This statutory redefinition presented enterprises with a novel and consequential question: how ought the tax base for this newly defined taxable object be properly determined?
Factual Background: Wind Installations Not Recorded as Discrete Fixed Assets
The taxpayer in question—a limited liability company engaged in wind energy development—operated wind power installations within a Polish municipality. Critically, the company’s fixed asset register did not contain entries for “wind turbines” as discrete, separately identifiable fixed assets. Rather, the company had recorded separate initial values for foundations, towers, and wind generation equipment.
Of particular significance, the initial value attributed to wind generation equipment included capitalized expenditures extending beyond the technical elements enumerated in the statute. These additional capitalized costs comprised: control software, hoisting equipment with rigging, warning illumination systems, lightning protection apparatus, cooling and ventilation units, wind direction and velocity measurement instruments, emergency shutdown mechanisms, and intellectual property including proprietary technical knowledge.
These elements, while capitalized within the fixed asset values, do not constitute structures within the meaning of the Local Taxes and Fees Act and therefore, arguably, should not be subject to real property taxation.
The Request for an Individual Tax Ruling
The company submitted an application for an individual tax ruling, inquiring inter alia as to the proper methodology for determining the tax base applicable to wind power installations from January 1, 2017.
Article 4(1)(3) of the Local Taxes and Fees Act provides that the tax base for structures shall be the value as determined under income tax legislation, established as of January 1 of the tax year, constituting the basis for depreciation calculations. However, Article 4(5) of the same Act establishes a material exception: where depreciation deductions are not made from structures or their components, the tax base shall be their market value as determined by the taxpayer on the date the tax obligation arises.
The company contended that since wind turbines as integrated units did not appear in its fixed asset register and were not subject to depreciation as such, Article 4(5) should govern, permitting the adoption of market value as the appropriate tax base.
The Tax Authority’s Position: Fiscal Considerations Over Legal Principle?
The municipal executive (Wójt) rejected the company’s position as incorrect. In the authority’s view, since individual components of the wind installation were recorded in the fixed asset register and subject to depreciation, no grounds existed for applying market valuation. The authority further maintained that determining the tax base for specific taxpayer assets or resolving practical computational difficulties fell outside its competence.
In its response to the subsequent administrative court proceedings, the tax authority advanced an argument that the Voivodeship Administrative Court in Gdańsk explicitly criticized: the authority invoked the deterioration of the municipality’s financial position resulting from reduced real property tax revenues. The Court unequivocally held that such reasoning “cannot justify maintaining a position inconsistent with binding judgments of administrative courts” (Judgment of the VAC in Gdańsk of November 16, 2021, Case No. I SA/Gd 766/21).
Procedural History: From the Voivodeship Court to the Supreme Administrative Court and Back
The matter traversed the full spectrum of tax proceedings and administrative court review. Following the initial complaint to the Voivodeship Administrative Court in October 2017, the court annulled the authority’s ruling, identifying an impermissible oversimplification of the factual circumstances. The authority had failed to address the difficulties articulated by the company regarding determination of the initial value of technical elements statutorily classified as structures.
Upon remand, the authority issued another unfavorable ruling. The company again sought judicial review, but on this occasion the VAC dismissed the complaint. The taxpayer subsequently filed a cassation appeal to the Supreme Administrative Court.
The Watershed SAC Judgment: Fixed Asset Records Do Not Determine the Tax Base
In its judgment of November 26, 2019 (Case No. II FSK 1498/19), the Supreme Administrative Court vacated the VAC decision and remanded for further proceedings. The SAC articulated several propositions of considerable importance to all enterprises operating wind power installations:
First, fixed asset records do not, in themselves, determine the tax base for real property tax purposes. The object of taxation under this levy is not fixed assets but rather structures or their components as defined in the Local Taxes and Fees Act.
Second, the Local Taxes and Fees Act incorporates by reference income tax provisions solely for purposes of establishing initial value. The manner in which fixed assets are identified and recorded for income tax purposes bears no relevance to real property taxation.
Third, where the initial value of a wind installation established for depreciation purposes includes not only expenditures on statutorily enumerated elements but also other components and ancillary infrastructure that, not being structures, cannot be subject to real property taxation, such initial value cannot serve as the tax base. This is so because the figure represents not the initial value of the wind turbine qua taxable object, but rather the initial value of a fixed asset—a categorically distinct concept.
The SAC further observed that the taxpayer’s inability to establish the initial value of particular installation components statutorily classified as structures does not constitute a mere computational or practical difficulty. To the contrary, it implicates the fundamental rules governing determination of the tax base.
Resolution: Statutory Redefinition Cannot Compel Impossible Recordkeeping Modifications
In September 2020, the VAC in Gdańsk annulled the individual tax ruling, and in its judgment of November 16, 2021 (Case No. I SA/Gd 766/21), reaffirmed this jurisprudential approach while articulating an additional proposition of considerable significance:
The redefinition of the taxable object effective January 1, 2017, cannot simultaneously impose upon taxpayers the necessity of far-reaching, often impossible modifications to existing entries in tax records. Enterprises that had previously operated wind installations and treated only construction components as taxable objects cannot be compelled to retroactively restructure their accounting records.
The Court confirmed that where fixed asset records contain initial values encompassing construction components of wind installations, electricity generation equipment, and additionally other elements and ancillary infrastructure that, not being structures, cannot be subject to real property taxation and that have not been separately valued, the prerequisites for applying Article 4(5) of the Local Taxes and Fees Act are satisfied, permitting determination of the tax base according to the market value of the structure.
Doctrinal Significance and Practical Implications
The case under examination illustrates several persistent challenges confronting enterprises engaged in tax litigation:
Regulatory Complexity. The interrelation of the Local Taxes and Fees Act with income tax legislation, compounded by cross-references to construction law and the Act on Wind Power Investments, creates an intricate regulatory matrix. The consequences of legislative ambiguity fall disproportionately upon taxpayers.
Fiscal Overreach. The tax authority’s explicit invocation of municipal budgetary concerns demonstrates that, in practice, tax authorities may prioritize fiscal interests over proper statutory interpretation. Administrative courts have resolutely rejected such reasoning.
The Imperative of Perseverance. The litigation extended over several years and required exhaustion of all available procedural remedies. A taxpayer who abandoned the contest at an earlier stage would have borne inflated tax liabilities in perpetuity.
Guidance for Practitioners and Enterprises
Enterprises operating wind power installations should carefully examine how such assets are recorded in their fixed asset registers and what elements have been capitalized in initial values. Where such values incorporate components that do not constitute structures under real estate law and tax legislation, grounds may exist for adopting market value as the tax base.
Upon receipt of an unfavorable tax decision or individual ruling, consideration should be given to pursuing available appellate remedies. As the case examined herein demonstrates, even protracted disputes with tax authorities may ultimately vindicate the taxpayer’s position where that position finds support in applicable law.
Effective defense against excessive taxation requires not merely familiarity with tax law but also persistence in asserting one’s rights before administrative bodies and courts. Professional tax advisory services and legal counsel may prove indispensable for the proper conduct of proceedings through all instances.
Legal Framework:
- Act of January 12, 1991 on Local Taxes and Fees (Article 4(1)(3), Article 4(5))
- Act of May 20, 2016 on Wind Power Investments (Article 2)
- Judgment of the Supreme Administrative Court of November 26, 2019, Case No. II FSK 1498/19
- Judgment of the Voivodeship Administrative Court in Gdańsk of November 16, 2021, Case No. I SA/Gd 766/21
Founder and Managing Partner of Skarbiec Law Firm, recognized by Dziennik Gazeta Prawna as one of the best tax advisory firms in Poland (2023, 2024). Legal advisor with 19 years of experience, serving Forbes-listed entrepreneurs and innovative start-ups. One of the most frequently quoted experts on commercial and tax law in the Polish media, regularly publishing in Rzeczpospolita, Gazeta Wyborcza, and Dziennik Gazeta Prawna. Author of the publication “AI Decoding Satoshi Nakamoto. Artificial Intelligence on the Trail of Bitcoin’s Creator” and co-author of the award-winning book “Bezpieczeństwo współczesnej firmy” (Security of a Modern Company). LinkedIn profile: 18 500 followers, 4 million views per year. Awards: 4-time winner of the European Medal, Golden Statuette of the Polish Business Leader, title of “International Tax Planning Law Firm of the Year in Poland.” He specializes in strategic legal consulting, tax planning, and crisis management for business.
