The inheritance and gift tax should be paid by individuals who acquire assets, among others, through donation or inheritance, when its value exceeds the specified threshold. It is worth mentioning that this topic is highly relevant, as in July 2023, the regulations in this area were amended, introducing, among others, a new, higher tax-free allowance.
What does inheritance and gift tax cover?
The described tax is regulated by the provisions of the Act of 28 July 1983 on inheritance and gift tax (hereinafter referred to as the “Act”). Pursuant to Article 1(1) of the Act, the tax (…) applies to the acquisition by natural persons of ownership of property located in the territory of the Republic of Poland or property rights exercised in the territory of the Republic of Poland by:
- inheritance, ordinary bequest, further bequest, testamentary bequest;
- donations, donor’s instructions;
- adverse possession;
- free elimination of co-ownership;
- statutory portion, if the entitled person did not obtain it in the form of a donation, inheritance, or bequest;
- free annuity, usufruct, and easement.
Moreover – according to Article 1 (2) of the Act – the tax also applies to the acquisition of rights to a savings deposit, investment funds, and specialized investment funds based on the participant’s instructions, in the event of their death.
As a result, it should be acknowledged that the commonly accepted name of this tax is somewhat of a simplification. It encompasses a much broader range of events in which the acquisition of property rights is not associated with a purchase-sale transaction. It is also worth noting that the reference to the territory of Poland mentioned in Article 1 (1) of the Act has been extended in Article 2 to include property acquired outside the country’s borders.
In the scope of this tax, a number of exclusions and exemptions have also been provided for, as specified, for example, in Article 3 and Article 4 of the Act. As a result, it does not apply, among others:
- acquisition of copyright and related rights, rights to inventive projects, trademarks, or ornamental designs;
- acquisition by inheritance of funds from an employee pension program;
- acquisition of funds accumulated in the account of a deceased member of an open pension fund.
Exempt from tax are, among others:
- Acquisition of ownership of land constituting a farm, provided that as a result, a farm with an area between 11 and 300 hectares will be established or enlarged, which will then be operated by the buyer for a period of at least 5 years;
- Acquisition by a farmer of vehicles and agricultural machinery, if they are not sold or transferred by way of donation to third parties within three years;
- Acquisition by a person classified in Group I for tax purposes of money by way of donation, in an amount not exceeding 9637 PLN from one donor or 19,274 PLN from multiple donors, if within a period of 5 years the recipient allocates these funds for purposes related to the construction of a house, purchase of an apartment, or repayment of a mortgage loan;
- Acquisition by inheritance;
- By individuals from Groups I and II for tax purposes, items of home furnishings, clothing, bedding, tools, etc.;
- Artworks and manuscripts of the deceased’s creative work, as well as library materials if the deceased engaged in scientific, artistic, educational, literary, or journalistic activities;
- By individuals from Groups I and II for tax purposes, immovable monuments entered in the register of monuments, if the acquirer secures and conserves them in accordance with applicable regulations.
The full list of exemptions and exclusions can be found in the provisions of the mentioned act
The issue of prescription in the scope of inheritance and gift tax
An important aspect also arises when the tax liability becomes time-barred. In this regard, regulations found in the Tax Ordinance of August 29, 1997, apply, where based on Article 69 §1-2, it is determined that:
- The obligation does not arise if the tax decision has been served after 3 years have elapsed, calculated from the end of the calendar year in which the tax liability arose;
- The tax obligation also does not arise if the taxpayer did not submit the declaration on time or did not disclose all the necessary data to determine the amount of the tax liability in the submitted declaration, and the decision establishing the amount of this taxation has been served after 5 years have elapsed, calculated from the end of the calendar year in which the tax liability arose.
The moment of the tax liability arises has been determined in Article 6(1)(1) of the Inheritance and Gift Tax Act. For example, in the case of inheritance, it is its acceptance, while in the case of acquisition by the donor’s instruction, it is the execution of that instruction
Tax groups – starting point for determining tax rates and tax-free amount
One of the characteristic elements of the inheritance and gift tax is the operation of several tax groups, to which the membership determines, among other things, the tax rate and tax-free amounts. According to Article 14 (3) of the Act, the individual tax groups include:
- Group I – spouse, descendants, ascendants, stepchild, son-in-law, daughter-in-law, siblings, stepfather, stepmother, and parents-in-law;
- Group II – descendants of siblings, siblings of parents, descendants and spouses of stepchildren, spouses of siblings and siblings of spouses, spouses of siblings of spouses, spouses of other descendants;
- Group III – other acquirers.
It is worth emphasizing that under civil law, descendants are considered to be the descendants in the direct line, originating from a common ancestor. This concept includes children, grandchildren, or great-grandchildren. Ascendants, on the other hand, are individuals from whom the descendants originate, such as parents, grandparents, or great-grandparents.
Inheritance and gift tax rates
Turning to the fundamental issue, namely the rates of inheritance and gift tax, it is necessary to mention the tax scales specified in the regulation of the Minister of Finance of June 28, 2023.
Table 1. Rates of inheritance and gift tax
| Excess amounts in PLN | The tax in 2023 amounts to | |
| over | to | |
| 1) from buyers classified in tax group | ||
| 11 833 | 3% | |
| 11 833 | 23 655 | 355 PLN and 5% of the surplus over 11,833 PLN |
| 23 655 | 946.60 PLN and 7% of the surplus over 23,655 PLN | |
| 2) from buyers classified in tax group II | ||
| 11 833 | 7% | |
| 11 833 | 23 655 | 828.40 PLN and 9% of the surplus over 11,833 PLN |
| 23 655 | 1,893.30 PLN and 12% of the surplus over 23,655 PLN | |
| 3) from buyers classified in tax group III | ||
| 11 833 | 12% | |
| 11 833 | 23 655 | 1,420 zł and 16% on the surplus over 11,833 zł |
| 23 655 | 3,313 zł 20 gr and 20% on the surplus over 23,655 zł | |
When calculating the tax, you also need to take into account the limit of the tax-free amount specified in art. 9 sec. 1 of the Act, amounting to:
- 36,120 PLN for Group I taxpayers;
- 27,090 PLN for Group II taxpayers;
- 5,733 PLN for Group III taxpayers.
It should be remembered that the limit of the tax-free amount includes all donations received from the same person or after the same person, within the 5-year period preceding the current year.
The inheritance and gift tax is therefore a rather complex form of taxation, where not only the tax base itself matters, but also the relationship with the donor and the nature of the acquired property. Its scope – despite often being limited to the titular types of events – is also quite broad, and it is full of exemptions and exclusions. Therefore, when trying to determine it, it is worth consulting with a specialist.