Inheritance and Gift Tax – When Is It Not Payable?

Inheritance and gift tax applies to individuals who acquire assets or property rights through inheritance or donation. However, in many cases, it is possible to benefit from a tax exemption, provided that specific statutory and formal requirements are met. Below we outline the most important exemptions worth considering when receiving an inheritance or a gift.

Exemption for Immediate Family Members

The most commonly applied exemption concerns members of the immediate family (the so-called “zero tax group”).

To benefit from this exemption, the taxpayer must:

• report the acquisition of assets or property rights to the competent tax office,

• submit the notification within 6 months from the date the tax obligation arises or from the date the court decision confirming inheritance becomes final.

If the acquisition involves cash, it must be properly documented, for example by:

• a bank transfer to the recipient’s bank or credit union (SKOK) account,

• a postal money order.

Other Inheritance and Gift Tax Exemptions

The lack of eligibility for the immediate family exemption does not automatically result in a tax liability. The law provides for several additional exemptions that may apply in specific circumstances.

Agricultural Land

The acquisition of agricultural land (together with trees and plants) is exempt from tax provided that:

• the acquisition results in the creation or expansion of a farm,

• the total farm area ranges between 11 and 300 hectares,

• the farm is operated by the acquirer for at least 5 years from the date of acquisition.

Gifts for Housing Purposes

Tax exemption applies to monetary gifts:

• received by individuals belonging to the first tax group,

• up to PLN 2,000 per month from one or multiple donors,

• transferred to a savings account held at a bank and designated for housing purposes.

Savings and Loan Accounts

The exemption also applies to the acquisition, by way of donation, of rights to a savings and loan account held with a housing fund, provided that:

• the recipient remains in a de facto marital relationship with the account holder,

• the funds are used for housing purposes.

Co-ownership and Adverse Possession

The exemption covers, among others:

• the acquisition of physically separated parts of real estate through adverse possession by co-owners, up to the value of their ownership share,

• the acquisition of assets or property rights through the gratuitous dissolution of co-ownership by individuals belonging to the first tax group.

Agricultural Machinery and Vehicles

Tax exemption applies to the acquisition by a farmer of:

• agricultural machinery, agricultural vehicles, and spare parts,

• provided that they are not sold or donated to third parties within 3 years of acquisition.

Works of Art and Cultural Heritage Objects

Tax exemption may apply to the acquisition, by inheritance or vindicatory legacy, of:

• works of art,

• manuscripts,

• movable monuments and collections entered in the register of historic monuments,
  subject to meeting statutory conditions (e.g. related to the artistic, literary, or scientific activity of the deceased).

Foster Care

The exemption applies to money or assets acquired by individuals:

• forming a foster family,

• running a family children’s home,
  provided that the assets are used within 12 months for purposes directly related to foster care.

Inheritance of a Sole Trader’s Business

Tax exemption applies to the acquisition, by inheritance or vindicatory legacy, of:

• a sole trader’s business or a share therein,
  provided that:

• the acquisition is reported to the tax office within 6 months,

• the business is operated by the acquirer for at least 2 years from the date of acquisition.

The Inheritance and Gift Tax Act provides for numerous exemptions that may significantly reduce or entirely eliminate tax liability. Each case should be assessed individually, as even less obvious circumstances may allow the application of a tax exemption. In case of doubt, consulting a tax advisor is recommended.

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