Tax on donations in Poland. New tax thresholds and tax-exempt amounts
Pursuant to Art. 888 § 1 of the Polish Civil Code, donation constitutes an agreement in which the benefactor obligates to provide a free-of-charge service in favor of the beneficiary at the expense of the benefactor’s assets. In practice, there is often a situation in which parents give something to their child, for example a car, an apartment or money. Are such donations subject to tax? In 2022, new tax thresholds, including the tax on donations, and new tax-exempt amounts were introduced.
Any information regarding rules and principles governing tax on donations can be found in the act on inheritance and donations. The said legal act specifies, among others: tax-exempt and non-taxable amounts as well as scales that allow calculating the amount of tax. On 13 October 2022, a new ordinance of the Minister of Finance was introduced to index the said rates. Pursuant to Art. 17 of the act on inheritance and donations: “Value amounts of items and property rights exempted from tax and non-taxable, as well as the ranges of excess of the value amounts of items and property rights subject to taxation shall be increased in the case of an increase of the price of non-food goods of permanent use by over 6%, at a rate reflecting the increase of the said prices”.
Tax-exempt amounts in Poland – update on 13 October 2022
The amount of tax on donation is determined based on the tax group that the acquiring person is classified in. Classification to a tax group takes place according to the personal relation of the acquiring person to the person from or after whom items and property rights were acquired.
Individual tax groups include:
- in case of group I – spouse, descendant, ascendant, stepchild, son-in-law, daughter-in-law, siblings, step father, step mother and in-laws,
- in case of group II – descendants of the siblings, siblings of parents, descendants and spouses of stepchildren, spouses of siblings and siblings of spouses, spouses of siblings’ spouses, spouses of other descendants,
- in case of group III – other acquiring parties.
Let us then have a look at the tax-exempt amounts after the changes introduced on 13 October 2022:
| Was | Now | ||
|---|---|---|---|
| 1. | if the acquiring person is classified in group I: | PLN 9,637 | PLN 10,434 |
| 2. | if the acquiring person is classified in group II: | PLN 7,276 | PLN 7,878 |
| 3. | if the acquiring person is classified in group III: | PLN 4,902 | PLN 5,308 |
It should be noted that the amount in question comprises of all donations from the same person within the period of 5 years preceding the year in which the last donation was made.
A donation from immediate family
The act on inheritance and donations distinguishes 3 tax groups that influence the taxation method and which have been mentioned above. There is, however, an exception in form of the so-called group zero. The said group includes members of the immediate family, namely: the spouse, descendants (e.g. a child), ascendants (e.g. a parent), stepchildren, siblings, stepfather and stepmother. When the benefactor and the beneficiary belong to the same group and meet specific criteria, it is possible to use a full tax-exempt that has been specified in Art. 4a of the act on inheritance and donations.
In a situation when the donation, as part of group zero, does not exceed the tax-exempt amount (that starting from 13 October 2022 amounts PLN 10,434) there is no need to report the receipt of such a donation to the Tax Office and to pay the tax.
A donation that exceeds the above-mentioned threshold can also be fully exempt from taxation – however, subject to the following conditions:
- The Tax Office must be notified within 6 months from the receipt of the donation – using the SD-Z2 form.
- What is more, in case of a cash donation – it must be properly documented i.e., cash should be paid to an account at a bank or a credit and savings union, or sent by means of a money order.
If the beneficiary fails to fulfill the said obligations, they will need to pay the tax on donation according to the rate specified for group I.
What are the rates of tax on donation?
The tax on donation is calculated based on the excess of the tax basis over the tax-exempt amount. On 13 October 2022, the tax scales were changed and are as follows:
| Excess amount in PLN | Tax is | |
| over | to | |
| 1) on acquiring persons classified in the 1st tax group | ||
| 11.128 | 3% | |
| 11.128 | 22.256 | PLN 333 90/100 and 5% on the excess over PLN 11,128 |
| 22.256 | PLN 890 30/100 and 7% on the excess over PLN 22,256 | |
| 2) on acquiring persons classified in the 2nd tax group | ||
| 11.128 | 7% | |
| 11.128 | 22.256 | PLN 779 and 9% on the excess over PLN 11,128 |
| 22.256 | PLN 1,780 60/100 and 12% on the excess over PLN 22,256 | |
| 3) on acquiring persons classified in the 3rd tax group | ||
| 11.128 | 12% | |
| 11.128 | 22.256 | PLN 1,335 40/100 and 16% on the excess over PLN 11,128 |
| 22.256 | PLN 3,115 90/100 and 20% on the excess over PLN 22,256 |
Example:
Person X gives their uncle an amount of PLN 16,000. The uncle – as sibling of the parents – belongs to the 2nd tax group. Thus, the amount of tax will be as follows:
PLN 779 + 9% (PLN 16,000 – PLN 11,128) i.e., PLN 1,217.48
Donation for housing purposes in Poland
The changes made on 13 October 2022 also included tax-exempt amounts regarding donations for housing purposes. Art. 4 section 1 point 5 of the act on tax on inheritance and donations states that the following are subject to tax exemption: purchase by way of donation of money or other items by a person classified in the 1st tax group, in an amount not exceeding PLN 10,434 (used to be PLN 9,637) from one benefactor and a total of PLN 20,868 (used to be PLN 19,274) from many benefactors within the period of 5 years from the date of the first donation, if such money or items are used by the beneficiary, within 12 months from receipt, for the purposes of a building or residential contribution to a housing co-operative, construction of a single-family house, purchase of residential premises constituting a separate real property, or repayment of a credit secured by a real property mortgage, including interest.
Author: Elżbieta Pazdrowska, Senior Accountant at MDDP Outsourcing.
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