Exemption for railway sidings – tax relief, not state aid
Since 2017, Polish local tax regulations (Article 7(1)(1) of the Local Tax Act) have provided for a property tax exemption for railway infrastructure made available to carriers. According to the Act, “land, buildings and structures forming part of railway infrastructure” are exempt (a list of infrastructure elements – tracks, sidings, network equipment, etc. – is included in the appendix to the Railway Transport Act). The Ministry of Finance confirmed that from 2017, the exemption also covered private railway sidings together with the entire registered plots on which they are located. In other words, any owner of a siding connected to a railway line – who actually allows licensed railway carriers to use it – could benefit from this relief.
However, since 2022, the provision has been significantly narrowed – the exemption applies only to parts of the property actually used by the infrastructure manager or service infrastructure operator, and the preference is intended only for entities conducting railway activities. As a result, many private sidings have been excluded from the exemption, which has raised numerous questions of interpretation. The dispute to date has mainly concerned the years 2017-2021, when the law also allowed the entire plots with sidings to benefit from the relief, even if their owner was not a railway operator.
Property tax exemption for sidings – CJEU position
Provincial administrative courts were divided in their assessment of the right to exemption – some recognised it without reservation, while others suspended the relief, fearing that without notification to the European Commission it could constitute illegal state aid. The Supreme Administrative Court referred preliminary questions to the CJEU (ref. C453/23), which were key to assessing selectivity and impact on competition.
The Court of Justice of the European Union heard the case on 29 April 2025 and, following the earlier opinion of the Advocate General, ruled that the exemption for railway infrastructure did not constitute prohibited state aid. The CJEU emphasised that this is a relief under the normal tax system (local taxes are not harmonised at EU level) and that the provision itself is general and objective in nature. On the basis of Article 107(1) of the Treaty on the Functioning of the EU, it was concluded that “the exemption from property tax… does not confer a selective advantage on the beneficiaries”. In other words, all owners of sidings connecting to the railway network had formally equal access to the relief, and the Polish tax system treats this preference as one of the elements of general taxation of land and buildings. The CJEU also emphasised that the mere possibility of exemption does not distort competition – owners of properties without sidings and their owners do not compete with those who have railway sidings.
Experts point out that the CJEU ruling gives Member States broad autonomy in shaping non-harmonised tax reliefs. The ruling states that the relief applies to “various industries” (not only railways, but also, for example, mining and refining – all of which have sidings), and since it is not “manifestly discriminatory”, it cannot be considered state aid. In summary, the Court and the Advocate General confirmed that the property tax exemption for railway sidings is compatible with EU law.
Positions of tax authorities and practice
In practice, the tax authorities initially complied with the regulations and court rulings favourable to taxpayers. It was only after several years of favourable court rulings that the authorities began to raise the argument of state aid in their individual interpretations. Some municipalities considered that the relief had not been notified to the EC, so its application risked constituting “illegal aid”. This led to disputes and divergent rulings by the Provincial Administrative Courts. As uncertainty persisted, the Supreme Administrative Court sought the opinion of the CJEU.
How to take advantage of the property tax exemption for railway sidings?
To benefit from the exemption, the following conditions must be met:
- Belonging to railway infrastructure – the exemption applies to real estate (land, buildings, structures) containing elements from the list in the UTK annex (e.g. tracks, sidings, traction networks, station buildings, etc.). For this reason, a warehouse or storage wagon on a siding is not exempt, but the siding itself and the building, e.g. the siding management office, are.
- Connection with rail transport – the infrastructure must be made available to licensed carriers. The law treats this literally: it is sufficient to actually make the siding available. No formal UTK permit is required – what counts is the real possibility for carriers to use the siding. Safety of use is confirmed by an authorisation/safety certificate issued by the UTK – in the opinion of the authority, only an infrastructure manager with such a certificate can be a beneficiary of the exemption.
- Owner status – under the current legal framework (after 2021), the exemption is only available to entities engaged in railway activities (e.g. railway line managers or siding operators). In 2017–2021, there was no such restriction – the mere fact of making the siding available was what counted. Important: the entire registered plot with the siding may be exempt, as confirmed by the courts and the Ministry of Finance (the requirement for a “part of the land” from 2017 has been removed).
It follows from the above that a typical owner of a company siding (which connects to the railway network and is used by carriers) meets the conditions for relief, provided that the siding meets the formal requirements of the infrastructure manager and actually handles railway traffic.
Refund of overpaid tax for railway sidings – effects of the CJEU ruling on taxpayers and municipalities
The CJEU ruling means that siding owners who benefited from the exemption in 2017-2021 can claim a refund of overpaid tax. After the ruling is published, taxpayers have up to three months to request the reopening of closed court proceedings (if they previously lost in court) or one month to request the reopening of tax proceedings. Those who paid tax instead of applying the exemption can correct their tax returns for years that are not time-barred (e.g. 2020–2021) and recover the overpayment.
For municipal budgets, this means that taxpayers’ cases must be reconsidered and, in many cases, funds must be refunded. Local governments can no longer refuse to apply the relief. In practice, the tax authorities are reopening proceedings and, if the beneficiary has met the requirements, should formally confirm the overpayment or cancel the previously disputed liability. It is advisable for siding owners to prepare documentation confirming the availability of tracks and (if required) their status as managers.
In summary: the property tax exemption for railway sidings does not constitute illegal state aid. The CJEU has confirmed that the relief is part of the normal tax system and does not give beneficiaries a selective advantage. This means tax security for railway companies and smaller businesses with sidings.
Sale of a railway siding and property tax
The development of Polish railway infrastructure also has a number of legal and tax implications, including in the area of taxation of real estate related to rail transport. The sale of real estate containing a railway siding results in a change of ownership – and therefore also of the property tax payer, in accordance with Article 3(1)(1) of the Act on Local Taxes and Fees (UPOL). As a rule, property tax is levied on the owner of the land, building or structure, and the tax liability rests with the new purchaser from the first day of the month following the month in which the sale took place.
However, the status of railway infrastructure and the possibility of benefiting from the tax exemption referred to in Article 7(1)(1) of the UPOL are of key importance. If the subject of the transaction is a railway siding that meets the criteria for railway infrastructure (in accordance with the Railway Transport Act and the UTK annex), and the new owner actually makes the infrastructure available to licensed carriers, they may, after acquiring legal title, benefit from the tax preference.
In practice, this means that:
- The seller loses the right to exemption upon the sale of the property – in a given tax year, they may be required to pay tax proportionally for the period until the end of the month of sale.
- The buyer may benefit from the exemption from the month following the conclusion of the contract, provided that the statutory requirements are met – including having the status of infrastructure manager or making the siding available to railway carriers.
It should be remembered that the mere acquisition of a siding does not guarantee automatic exemption – both a technical analysis of the facility (whether it meets the infrastructure criteria) and a formal analysis (whether it is actually made available to carriers) are necessary.
It is recommended to conduct tax and infrastructure due diligence before acquiring a siding, as well as to prepare the appropriate documentation to take advantage of the preferences.
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