Does the location of a transformer affect its real estate tax treatment?

The taxation of transformers for real estate tax purposes has for years been a highly contentious issue and a frequent source of disputes with the tax authorities. Unfortunately, despite taxpayers’ expectations, the amendments to the relevant regulations introduced in January 2025 did not significantly change the situation and, as a result, many questions and uncertainties remain. How should transformer owners settle their obligations with the tax authorities, and what should they verify to avoid penalties or disputes with the tax authorities? To better understand the issue, it is worth looking at specific examples of situations that the tax advisers at RSM Poland, who support both Polish and international clients, encounter on a daily basis.

As is well known, not all transformers are the same. Let us, therefore, review current case law and analyse the positions taken by the tax authorities under the regulations effective from 1 January 2025. The following case studies focus primarily on how the location of a transformer (whether inside or outside a building) affects real estate tax obligations.

Case I – taxation of a transformer located outside a building

About the company: In the first case discussed below, the client using our real estate tax compliance support is a manufacturing company operating an industrial plant specialising in the production of metal automotive components. The company currently employs more than 150 people and is planning to expand its production facility.

Facts: Due to growing demand for electricity, the company installed a container transformer substation on the plant premises (but outside the production building). The facility was delivered as a prefabricated unit comprising: 

• a housing/container, 
• power engineering equipment, 
• a transformer, 
• medium-voltage and low-voltage switchgear, 
• protection systems, 
• connection components. 

The purpose of the substation is to reduce the voltage of the electricity network to a level enabling the operation of machines and equipment located within the facility.

Analysis: The RSM tax advisory team analysed the facts presented by the client, reviewed the available technical documentation and conducted an inspection of the transformer. Subsequently, our experts analysed the applicable legal provisions and reviewed current individual tax rulings and case law (including, among others, WBMiP.III.3120.593.2025.ZT, WBMiP-III.3120.392.2025.JR and the judgment of the Voivodship Administrative Court in Białystok, case file I Sa/Bk 103/26).

As the final step, we applied the conclusions drawn from this analysis to the client’s specific circumstances in order to ensure a highly tailored approach and to determine the correct tax classification of the transformer in question.

Findings: In the practice of Polish tax authorities interpreting the emergence of a real estate tax obligation, there is a clear tendency to classify transformers as structures.

With this in mind, we presented to the client the authorities’ reasoning in this area, pointing out that since the facility is used to transform, distribute and deliver electricity with appropriate parameters to multiple facilities, officials may regard it as technical equipment directly associated with a power line and necessary for its intended use. We also highlighted that the authorities argue that, in such circumstances, the transformer has been erected as a result of construction works because construction works also include installation activities, and installation may encompass the placement, connection, anchoring, operational testing and integration of equipment into the power infrastructure.

Considering the above and the need to take further steps regarding the taxation of the transformer, and bearing in mind the client’s interests, the transformer located outside the building was classified and taxed as a structure.

Case II – taxation of a transformer located inside a production hall

About the company: In the second case, the company seeking our tax support is a global leader in the production of food ingredients, serving the food processing and catering industries in more than 90 countries. The company currently operates several dozen production facilities worldwide and employs almost 6,000 people.

Facts: Among the facilities located within one of its production halls, the company owns transformers functioning as electrical devices designed to change the voltage level of electric current. These transformers are located within the hall building and are installed on the building’s foundation while serving several buildings situated in the surrounding area.

Under the Polish real estate tax regulations, should transformers located in this manner also be taxed as structures?

Analysis: To determine the correct approach, the RSM team analysed the factual circumstances presented by the company, reviewed the available technical documentation and conducted an inspection of the transformer. Subsequently, our tax advisers analysed the applicable legislation and reviewed current individual tax rulings concerning transformers (including, among others, WF.II.3120.51.2025.AD and WBMiP.III.3120.593.2025.ZT) as well as relevant case law. In the next step, we applied the conclusions drawn from the analysis to the company’s specific circumstances to ensure a tailored approach and accurately determine the tax classification of the transformer concerned.

Findings: Based on the available individual tax rulings and the case law of the administrative courts, we informed the company that in its circumstances there is a risk that the transformers in question may be regarded as technical equipment and taxed as structures for real estate tax purposes.

Although in some rulings the Polish tax authorities have presented the view that a transformer located within a building and serving only that building does not constitute a structure, as it forms an element enabling the building to be used in accordance with its intended purpose, the analysis of the facts established that the transformers owned by the company serve several buildings. Consequently, they cannot be regarded as elements enabling the hall alone to be used in accordance with its intended purpose.

Taking the above into account and acting in consultation with the client, the transformer serving more than one building was classified and taxed as a structure for real estate tax purposes.

What should be considered when analysing the taxation of a transformer?

As the examples above demonstrate, the Polish tax authorities adopt a pro-fiscal approach to the taxation of transformers, regardless of whether they are located inside or outside buildings. Nevertheless, each case should be analysed carefully because, in the context of real estate tax, even a minor difference in the factual circumstances may alter the final outcome and determine whether a particular facility is subject to taxation or not.

If you have any questions regarding transformers or other facilities in the context of real estate tax, please contact our experts. They will be happy to clarify any doubts and propose appropriate solutions designed to help avoid unnecessary tax burdens or disputes with the tax authorities.