The right to deduct donations in the annual tax return

Service-Tax

Taxpayers earning income on the territory of Poland are required to submit an annual tax return by the end of April of the following year, accounting for the income earned in the previous calendar year. On the occasion of the annual settlement, the taxpayer has the right to deduct donations made for public benefit purposes.

What is a donation?

Pursuant to Art. 888 § 1 of the Civil Code, by a donation agreement, the donor undertakes to provide a free benefit to the recipient at the expense of his property.

The following free benefits do not constitute a donation:

  1. when the obligation to provide free benefits results from an agreement regulated by other provisions of the code,

  2. when a person renounces a right which he has not yet acquired or which he has acquired in such a way that, in the event of his renunciation, the right is deemed not to have been acquired.

The donor's declaration should be submitted in the form of a notarial deed. However, the donation agreement concluded without this form becomes valid if the promised performance has been met.

The donation is taxable

In the light of the Income Tax Act, donations have been excluded from tax deductible costs and are also not subject to income tax. However, it should be remembered that the recipient will be obliged to pay inheritance and donation tax at the rate appropriate for a given item.

Pursuant to Art. 1 (1) of the Act on inheritance and donation tax, this tax is subject to the acquisition by natural persons of:

  1. things located on the territory of Poland,

  2. property rights that will be exercised on the territory of Poland.

The obligation to tax the donation received will take place at the time of the act of acquiring the item by way of donation, i.e. on the day the donor submits a declaration in the form of a notarial deed, and in the event of concluding the contract without maintaining the prescribed form, the tax obligation of the donation received will arise at the moment of the promised benefit ( such a situation may occur when, due to the subject of the donation, regulations require a special form for the declarations of both parties).

Another moment of taxation of a donation is the situation of acquiring a donation at the request of the donor. The obligation to tax this donation will arise when the order is carried out.

When is the right to deduct donations?

Pursuant to Art. 26 (1) (9) of the Personal Income Tax Act, it is possible to deduct from the income in the tax year the value of donations up to 6% of the amount of income.

For which entities is the donation deductible?

Pursuant to Art. 26 sec. 1 point 9 of the Personal Income Tax Act and pursuant to Art. 3 sec. 2 and 3 of the Act on Public Benefit and Volunteer Work, donations made to non-governmental organizations may be deducted from income in the amount not exceeding 6% of its amount, including:

  1. non-entities of the public finance sector, research institutes, banks and commercial law companies that are state or local government legal persons,

  2. non-operating in order to make a profit,

  3. legal persons or organizational units without legal personality that are granted legal capacity by a separate act, including foundations and associations,

  4. legal persons and organizational units operating on the basis of the provisions on the relationship of the State to the Catholic Church in the Republic of Poland, on the relationship of the State to other churches and religious associations and on guarantees of freedom of conscience and religion, if their statutory goals include conducting public benefit activities,

  5. associations of local government units,

  6. social cooperatives,

  7. joint-stock companies and limited liability companies and sports clubs that do not operate with the purpose of making a profit and allocate all income to the implementation of statutory objectives and do not allocate the profit to be distributed among their shareholders, shareholders and employees.

Donations made for certain purposes only allow the taxpayer to deduct them from income

Donations transferred to:

  1. for the purposes of religious worship,

  2. blood donation carried out by honorary blood donors on the basis of the Act on public blood service, in the amount of the product of the amount of compensation specified in the regulations issued on the basis of art. 11 sec. 2 of this Act and liters of donated blood or an equivalent amount of its components calculated in accordance with Art. 8 of this act,

  3. for public benefit purposes, including:

  • social welfare, supporting the family and foster care system,

  • providing free legal assistance,

  • activities for the professional and social integration and reintegration of people at risk of social exclusion,

  • charity work,

  • maintaining and disseminating the national tradition,

  • activities for national and ethnic minorities and a regional language,

  • activities for the integration of foreigners,

  • health protection and promotion, including medical activities,

  • activities for the disabled,

  • promotion of employment and professional activation of people who are unemployed and threatened with dismissal,

  • activities for the equal rights of women and men,

  • activities for people of retirement age,

  • activities supporting economic development, including the development of entrepreneurship,

  • activities supporting the development of technology, inventiveness and innovation,

  • activities supporting the development of communities and local communities,

  • science, higher education, education, education and upbringing,

  • activities for children and adolescents, including leisure for children and adolescents,

  • culture, art, protection of cultural goods and national heritage,

  • supporting and disseminating physical culture,

  • ecology and protection of animals and protection of natural heritage,

  • tourism and sightseeing,

  • public order and safety,

  • state defense and the activities of the Armed Forces of the Republic of Poland,

  • promotion and protection of human rights and freedoms and civil liberties, as well as activities supporting the development of democracy,

  • providing free civic counseling,

  • rescue and civil protection,

  • assistance to victims of catastrophes, natural disasters, armed conflicts and wars at home and abroad,

  • disseminating and protecting consumer rights,

  • activities for European integration and developing contacts and cooperation between societies,

  • promotion and organization of volunteering,

  • help the Polish diaspora and Poles abroad,

  • activities for the benefit of veterans and repressed people,

  • activities for the benefit of veterans and injured veterans,

  • promotion of the Republic of Poland abroad,

  • activities for the family, motherhood, parenthood, promotion and protection of children's rights,

  • counteracting addictions and social pathologies,

  • revitalization.

Donations to church charity and care activities are deducted in 100% from the income

The taxpayer may deduct from the income donations made to church charity and care activities, which may be deducted in full, even up to 100% of the income earned.

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Necessary documentation confirming the donation

The necessary documentation requirement enabling the deduction of the donation made is:

  1. having a proof of payment to the recipient's payment account in the case of transfer of funds,

  2. having a receipt for the receipt of a donation issued by the recipient,

  3. having a proof of incurring expenses for the purchase of the donation object

  4. having, in the case of blood donors, a certificate of the organizational unit carrying out blood collection tasks

  5. receiving a report on the allocation of the donation for church charity and care activities, which the recipient must transfer to the donor within two years of receiving the donation.

Deduction of donations in the annual tax return

Deduction of donations should be made in PIT-37 and PIT-36 statements by adding the PIT-O appendix to include all deductions and reliefs due to the taxpayer. On the other hand, taxpayers who benefit from flat taxation of their income can only deduct 100% of their income from donations made for charity and care.