Gift and temporary stay – does this combination pose a tax risk? We explain when personal income tax (PIT) may apply and how to avoid mistakes when declaring foreign gifts.
Gift and Temporary Stay – Taxation in Practice
A gift received from close family members is usually exempt from inheritance and gift tax. We’ve also discussed taxation of foreign gifts here:
But what if the recipient is staying in Poland solely based on a temporary residence permit?
According to Article 2 of the Polish Inheritance and Gift Tax Act, the key factor is having a permanent place of residence in Poland. The tax authorities interpret this as fulfilling formal legal residency requirements, not actual physical presence or tax residency.
This interpretation is supported by numerous tax rulings. For example, in a ruling dated November 6, 2019 (ref. 0111-KDIB4.4015.109.2019.1.MD), we read:
According to the application, the Applicant, at the time of signing the donation agreement, was neither a Polish citizen nor had a permanent residence in Poland – he held only a temporary residence card. Therefore, the acquisition of money under the gift agreement is not subject to inheritance and gift tax under Article 2 of the Inheritance and Gift Tax Act.
Gift and Temporary Stay – What About PIT?
The lack of taxation under the Inheritance and Gift Tax Act does not mean the benefit is tax-free. If you are considered a Polish tax resident and have only a temporary stay, the gift may be classified as income from other sources and taxed under PIT.
Under normal circumstances, Article 2(1)(3) of the PIT Act excludes from taxation any income that falls under the Inheritance and Gift Tax Act.
However, if your situation does not qualify under that Act, PIT may apply. This is confirmed by, among others, the tax ruling of July 26, 2022 (ref. 0114-KDIP3-1.4011.476.2022.1.AK), which states:
Given the decision issued to you in regard to inheritance and gift tax — namely, that receiving money from your stepfather under a gift agreement was not subject to inheritance and gift tax — the exclusion stated in Article 2(1)(3) of the PIT Act does not apply. Therefore, the gift received in 2021 is subject to personal income tax as income from other sources under Article 10(1)(9) of the PIT Act, taxed according to the general tax scale provided in Article 27(1).
Summary
Gift and temporary stay – if you only hold a temporary residence card, your gift may not be subject to inheritance and gift tax. However, you should verify whether PIT applies.
Do you have questions about gifts and temporary residence? Contact us via the form at www.outsourced.pl. We’ll help you safely and lawfully declare your gift.
