Christmas is a time when most Poles give gifts to their loved ones. Choosing a gift can often be challenging – we all want our loved ones to be completely satisfied. Many of us opt for expensive gifts, forgetting that, legally speaking, a Christmas gift is nothing more than a simple donation, on which tax must be paid. While this issue typically doesn't apply to gifts for loved ones, the situation is different when the recipient is a mother-in-law, cousin, or friend.
The rules for tax-exempt donations are becoming more stringent each year, and the tax authorities are increasingly vigilant in ensuring compliance. To avoid legal problems, it's worth familiarizing yourself with the legal regulations regarding donations before giving a gift to your loved ones, as discussed below.
Tax law divides gift recipients into three tax groups. Group I includes spouses, ascendants, and descendants, i.e., children, parents, grandparents, and great-grandparents, as well as siblings (including half-siblings), step-relatives, i.e., stepson, stepfather, and stepmother, and parents-in-law, sons-in-law, and daughters-in-law.
Group II consists of our aunts and uncles, spouses of our descendants, siblings and stepchildren, as well as descendants of the latter two and the family of our other half – her brothers and sisters and their spouses.
Group III includes all other buyers, i.e. not only every stranger, but even extended family, even cousins – even first-degree cousins, i.e. first cousins.
The tax-free allowance for this year's Christmas gifts will be as follows: Group I – PLN 10,434, Group II – PLN 7,878, Group III – PLN 5,308. These thresholds are calculated for donations from each donor individually, adding up to a maximum of PLN 20,868 for donations from multiple donors. If this amount is exceeded, the recipient is required to report the excess on an SD-Z2 form.
The taxation scheme is as follows – up to PLN 11,128 above the tax-free amount it is 3, 7 and 12%, between PLN 11,128 and PLN 22,256 – 5, 9 and 16%, and above this amount – 7, 12 and 20% for each of the individual groups.
Considering that during Christmas, we think first and foremost about our immediate family, and only then about our friends, there's a significant upside – in many cases, we won't have to pay tax on donations at all, as the regulations also provide for a group 0. This group includes all members of group 1 except for parents-in-law, daughter-in-law, and son-in-law. However, to avoid taxation, the gift must be reported to the Tax Office within six months of receipt. Additionally, proof of purchase must be included, which is particularly important for monetary donations.
In the past, administrative courts ruled that a transfer made by a parent to the account of the seller of real estate in order to purchase an apartment as a gift to a child meets the condition for exemption from gift tax under group 0. However, the current position of the Ministry of Finance is that the money should be transferred to the child's bank account, and otherwise the child should pay gift tax.
Therefore, if our gift isn't a symbolic surprise but something that might require intermediary transactions, such as an apartment or a car, it's worth making a cash donation as early as possible in the payment process. We shouldn't try to avoid reporting the gift, because if the recipient's name is revealed during an audit, the "penalty" tax rate is 20%.
As we can see, in most cases, we don't have to worry about tax on Christmas gifts. However, if we have exceptionally generous relatives, it's worth considering the regulations that apply to us as recipients. Fortunately, we don't have to worry about this during Christmas, and we can postpone a visit to the tax office until at least the first few months of the following year.
This alert is for informational purposes only and does not constitute legal advice.
