Tax-free amount for donation - how much is it?

Service-Tax

Receipt of a donation, i.e. free acquisition of property, in principle results in the obligation to be taxed with inheritance and donation tax. However, the recipient of a donation is not always obliged to pay this tax. This is necessary when the tax-free amount for the donation is exceeded. Read the article and find out when it is obligatory to tax a gratuitous benefit.

Donation - basic information

Donation is a free transfer of property rights to the recipient on the basis of a donation agreement. The recipient is obliged to pay tax on this account. Tax obligation in accordance with Art. 6 sec. 1 point 4 of the Act on inheritance and donation tax arises when the recipient presents a notarial deed. In terms of taxation, however, there are some exemptions, e.g. due to the amount of the donation or the tax group to which the donor belongs. Art. 6 sec. 1 point 4 of the Act on inheritance and donation tax
The tax obligation arises: (...)
4) in the case of acquisition by means of a donation - upon the submission by the donor of a declaration in the form of a notarial deed, and in the event of the conclusion of the contract without the prescribed form - upon the performance of the promised benefit; if, due to the subject of the donation, the provisions require a special form for the declarations of both parties, the tax obligation arises at the moment of submitting such declarations.

Tax groups and the tax-free amount in the case of donation

The tax-free amount in the case of donation depends on the group to which the person donating the property belongs to. We distinguish the following tax groups:

  • "Zero group" - includes spouse, descendants, ascendants, stepson, siblings, stepfather and stepmother;

  • Group I - includes spouse, daughter, son, grandchildren, great-grandchildren (descendants), mother, father, grandparents (ascendants), siblings, son-in-law, daughter-in-law, stepson, stepfather, stepmother, parents-in-law;

  • Group II - there are descendants of siblings, descendants and spouses of stepchildren, siblings of parents, spouses of siblings and siblings of spouses, spouses of siblings of spouses, spouses of other descendants.

  • Group III - includes other buyers.

In the first tax group, the tax-free amount in the case of a donation is PLN 9,637, for the second group this value is reduced and amounts to PLN 7,276, while in the third group the threshold is PLN 4,902. Exceeding the above-mentioned tax-free amounts results in the obligation to tax the property received free of charge.

The above procedure is confirmed by the position of the Director of the Tax Chamber in Warsaw in the individual interpretation of December 22, 2015, ref. No. IPPB2 / 4515-132 / 15-2 / MZ, from which it follows that:

(...) the acquisition by the Applicant of the inheritance from the deceased daughter of the grandmother's sister is subject to inheritance and donation tax on the terms set out in the provisions of the Act on inheritance and donation tax for persons classified in tax group III. (...) Art. 9 sec. 2 of the inheritance and donation tax act:
If the acquisition of property and property rights from the same person occurs more than once, the value of the property and property rights acquired recently from that person or from the same person during the 5 years preceding the year in which the last acquisition took place. From the tax calculated on the total value of purchased goods and property rights, tax is deducted from tax on previously acquired goods and property rights. (...)

Tax-free amount for donation from a zero tax bracket

It very often happens that the taxpayer receives things or property rights from the immediate family. Donation provided by people from the so-called the zero tax group, i.e. the husband, children, brother, sister, mother, father is exempt from taxation, if the tax-free amount in the case of a donation is exceeded, certain conditions must be met.

If the value of the donation received by the taxpayer from a person from the zero group within 5 years does not exceed the tax-free amount, the situation is simple. There is no need to complete any formalities - the donation is not subject to inheritance and donation tax.

It is also important that if the tax threshold for the zero group is not exceeded, there is no obligation to transfer the donation amount to the recipient's bank account, thanks to which the giver can do it in cash.

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Example 1.

Two years ago, Ms Magdalena received a laptop worth PLN 3,000 as a donation. The giver was her sister. This year, Mrs. Magdalena received a passenger car free of charge from her husband, the value of which was PLN 5,000. The total value of the donation received is PLN 8,000. Has the tax-free amount for donation been exceeded? Is Mrs. Magdalena obliged to report this fact to the office and pay inheritance and donation tax?

No, it is not obliged to report the receipt of a donation to the tax office and its taxation, because the value of the donation received from a given person within 5 years does not exceed the tax-free amount.

The situation becomes more complicated when the value of the donation exceeds the limit of PLN 9,637. Then, in order to avoid taxation, the taxpayer is obliged to report the donation to the tax office within 6 months. If he does not, he will have to pay tax on the assets he receives free of charge. This is due to Art. 4a paragraph. 1 point 1 of the inheritance and donation tax act.

Additionally, if the tax-free amount in the case of a donation is less than the value of the donation received, the donor is obliged to transfer the donated amount to the bank account. Therefore, it is not possible to make a donation with a value exceeding the tax threshold in the form of cash. Notifications for the received donation should be made on the SD-Z2 form.

Example 2.

In the current year, Mr. Igor received from his wife funds in the amount of PLN 15,000 in the form of a transfer to a bank account. He has not received any other donation in the last 5 years. Is he obliged to report the fact of receiving a donation to the tax office? Will he pay tax in connection with this?

Yes, Mr. Igor is obliged to notify the office about the donation received. The notification should be made on the SD-Z2 form. If the notification is made within 6 months of receiving the donation, he will not have to pay tax on this account. However, if the deadline for submitting the application has passed - it will be necessary to pay the inheritance and donation tax.

The above position is also confirmed by the interpretation of the Director of the National Tax Information of May 26, 2017, ref. 0111-KDIB4.4015.34.2017.1.MCZ, which states that: (...) the receipt by the Applicant as a donation from the parents of cash, as a rule, is subject to inheritance and donation tax in accordance with art. 1 clause 1 point 2 of the inheritance and donation tax act. However, this donation is exempt from inheritance and donation tax under Art. 4a of the same act, provided that the conditions specified in Art. 4a paragraph. 1 items 1 and 2 above the law.

The condition for applying the exemption is to submit a notification on the SD-Z2 form within 6 months from the date of the tax obligation and document the transfer of money in the manner specified in art. 4a paragraph. 1 point 2 of the inheritance and donation tax act. (...)