Donation tax exemption - when does it apply?

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The Polish legal system is fully exempt from tax on gifts and inheritance. Using it means that you do not have to pay any tax, regardless of the amount received. However, only persons close to the donor (testator) may use the exemption, provided that they meet certain conditions. In practice, the exemption from the tax on cash donations raises doubts.

Who is the donation tax exemption for?

The exemption from taxes on donations may be used by the donor's relatives indicated in the act (the so-called "zero group"), i.e. his or her:

  • spouse,
  • descendants (e.g. child, grandson),
  • ascendants (e.g. parents),
  • stepson,
  • siblings,
  • stepfather and stepmother.

Tax regulations should be interpreted strictly, which means that this exemption cannot be used by persons other than those indicated above.

Example 1:

The foster parent made a donation to the child. The full tax exemption on donation does not apply as the foster parent is not the child's ascendant.

Notification of the tax office - SD-Z2

The first condition that a taxpayer must meet in order to benefit from the exemption from donation tax is timely notification of the competent tax office about the receipt of the donation. It must do so within six months of the tax obligation. In the case of a donation agreement, the tax obligation arises when the donor submits a declaration in the form of a notarial deed. In most situations, the parties do not conclude a donation agreement in this form, often such an agreement is oral. In such a situation, the tax obligation arises when the money is transferred. The notification must be made on the official form with the symbol SD-Z2. You will not be exempt from donation tax without submitting this form.

The obligation to report a donation in the immediate family does not apply to cases where the value of property acquired jointly from the same person or by the same person over the period of 5 years preceding the year in which the last acquisition took place, added to the value of recently acquired property and property rights (i.e. in this case, as a result of money donation), does not exceed the amount of PLN 9,637.

Donation in the form of a notarial deed

The taxpayer also does not have to submit a donation declaration if the acquisition takes place on the basis of an agreement concluded in the form of a notarial deed or a declaration of intent of one of the parties has been submitted in this form. After all, it cannot be ruled out that, for various reasons, the parties to the donation agreement will want to formally formalize it (excluding cases where the obligation to maintain the form of a notarial deed results from regulations, e.g. in the case of real estate donation). In such a situation, the obligation to notify the tax office about the donation rests with the notary. The exemption from donation tax does not require additional reporting of the donation by the recipient to the tax office.

Documenting receipt of money

The second condition that the taxpayer must remember in order to be exempt from the tax on donations - in the case of donation of funds - is documenting their receipt with a proof of transfer:

  • to the buyer's payment account,
  • on his account, other than a payment one, in a bank or a cooperative savings and credit union,
  • by postal order.

However, it is not necessary for the payment to be made to the account held by the gifted person or even from the bank account held by the donor. It is enough for the taxpayer to document the fact and amount of the donation with a proof of payment to the bank account and it will not matter whether the payment at the bank's cash desk was made by the donor or by the recipient who, e.g. a week ago received money from the donor in cash. In both cases, it will be possible to exempt from donation tax.

Often money is donated in such a way that, for example, the parent transfers the funds to the account of another entity (e.g. to the account of the developer with whom the child concluded the contract). Nevertheless, the child is still a recipient and may benefit from the exemption if he attaches to the SD-Z2 notification a proof of payment by his parents to the developer's account.

Court judgments favorable to taxpayers

Originally, the tax authorities were very rigorous in documenting the donation of money - for example, they required the money to be transferred from the donor's account to the recipient's account or to be paid in person by the donor at the bank's cash desk to the recipient's account. An exemption from the donation tax was also excluded when the money was given to the recipient in cash and then deposited into the account. Under the influence of court judgments, the interpretation of the provisions has changed significantly in favor of taxpayers. In their justifications, the courts indicated (and currently indicate) that the purpose of the provisions governing the exemption of a donation from tax is not to force relatives to open bank accounts, but only to lead to a situation where the amount of the donation is known (documented) between the parties to the contract.

 "Since at the basis of the regulation [imposing on the taxpayer the obligation to document a financial donation - ed. ed.] was the protection of the property interests of members of the closest family, consisting in the exemption from tax on the acquisition of property or property rights by them, then such a regulation objective cannot be eliminated only by such technicalities as documenting a donation, when there is no doubt about its transfer. "(judgment of the Supreme Administrative Court in Warsaw of August 24, 2017, file reference number II FSK 2104/15)

“It cannot be assumed that the proof of payment or postal order should show that the donor should be the person making the donation. The results of the teleological interpretation do not lead to the conclusion that the condition for the exemption from taxation is the personal payment of the donation amount by the donor to the recipient's bank account. "(judgment of the Provincial Administrative Court in Szczecin of November 16, 2017, file reference number I SA / Sz 792/17).

Loan repayment and exemption from donation tax

A taxpayer wishing to apply the tax exemption on donations must meet the conditions described above also when he does not receive any money from the donor, but when the donor reduces his debt to another entity (e.g. to a bank). The inheritance and donation tax applies to the acquisition by natural persons of the ownership of things located on the territory of Poland or property rights exercised on the territory of Poland, by virtue of, inter alia, donation.The concept of "acquisition of property rights", mentioned above, should not be interpreted solely as the acquisition of assets (which results in an increase in the property mass). It should be assumed that it is a benefit in any form obtained by this property, and therefore also in the form of a reduction in liabilities (resulting in a reduction in debt).

Example 2:

The parent repays the loan installments taken by his child to the bank. The parent will be treated as a donor under the inheritance and donation tax act. The child, as the recipient, must in this situation remember that if he does not meet the requirements for exempting the donation from tax, he will have to pay the appropriate amount by way of donation tax to the account of the tax authority.

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Failure to meet the conditions for tax exemption

In the event of failure to meet the conditions described above (submission of the notification on time and proof of receipt of the donation), the acquisition of the donation is subject to taxation on general principles. There is then no total exemption from donation tax. Therefore, people from the zero group will pay the tax like people from the first tax group. Therefore, if there were to be a donation in the amount of PLN 20 thousand, The taxpayer would have to pay the tax in the amount of PLN 312.55 (the tax base, PLN 20 thousand, is reduced by the tax-free amount, which for tax group I amounts to PLN 9,637, and the tax is calculated on this amount according to the scale).

Tax in the penalty amount of 20%

What if the taxpayer has not benefited from the tax exemption from the donation, nor has the donation reported for taxation under general rules and has not paid the tax due? Can he plead the statute of limitations? Contrary to appearances, it does not have to mean that the tax will never be paid and you can cover yourself with the statute of limitations. Often, the fact of a donation, also between close relatives, is mentioned by taxpayers many years after receiving it (e.g. during an inspection in connection with the settlement of income tax). In this way, they most often try to prove that their property is of legal origin. However, in such a situation, they must take into account the obligation to pay a donation tax in the amount of 20%. In a situation where the acquisition has not been reported for taxation, the tax obligation arises when the taxpayer invokes the acquisition by the tax authority or the tax inspection authority.