The provisions of the Personal Income Tax Act allow for the deduction from the tax base of donations made for public benefit purposes (Article 26, paragraph 1, item 9, letter a). Public benefit activities include, among others, rescue and protection of the population and assistance to victims of catastrophes, natural disasters, armed conflicts and wars in the country and abroad (Article 4, paragraph 1, items 23 and 24 of the Act on Public Benefic Activities and Volunteering). Consequently, donations made for flood relief purposes may also be eligible for the deduction if certain conditions are met.
What form of taxation allows for the deduction?
The deduction can be applied by taxpayers taxing their income according to the tax scale and also, in the case of entrepreneurs, a lump sum on revenues. The deduction is not available to entrepreneurs settling their income tax using the flat tax rate.
What can be donated?
A donation may take the form of:
- cash, when a transfer is made to the donated organization;
- non-cash (in kind), when the donated goods include e.g.:
- cleaning products,
- food,
- clothing,
- equipment to help combat the effects of flooding.
A deductible donation can be made to:
- Non-governmental organizations (e.g. fundations and associations that are not public finance sector entities and do not operate for profit, as well as churches, associations of local government units or social cooperatives);
- In the case of public benefit activities conducted by local government units, a donation made to an association run by the city for the purpose of helping flood victims can be deducted, but not to the city office.
The donation deduction is not available in the case of:
- making a donation directly to an individual;
- returning the donation to the donor in any form;
- the entrepreneur’s inclusion of a donation in the costs of obtaining income.
Donation deduction limit:
The amount of the deduction is subject to a limit – it can amount to a maximum of 6% of the income/revenue achieved in a given tax year.
Documenting the right to deduct a donation:
In order for the deduction to be applied, the donation must be documented in an appropriate manner:
- In the case of a cash donation – proof of payment to the organization’s payment account or a bank account other than the payment account. Donations made in cash do not allow for the deduction.
- In the case of a non-cash donation – proof of identification of the donor along with the value of the donation made and the organization’s declaration of its acceptance. The documentation must enable the value of the donated items to be determined, so the donor should have, for example, invoices for their purchase.
How to make a deduction?
A taxpayer making a donation is obliged to report the donation in the PIT-37, PIT-36 or PIT-28 tax return, indicating in the PIT/O attachment the value of the donation, the value of the deduction and the identification data of the donee, in particular the name.
Income tax exemptions for recipients
According to the provisions of the Personal Income Tax Act, the following are exempt from income tax:
- benefits received in the event of individual accidental events, natural disasters, long-term illness or death:
- from the social fund, company social benefits fund, trade union funds or in accordance with separate regulations issued by the relevant minister - regardless of their amount,
- from other sources – up to the amount not exceeding PLN 6,000 in the tax year;
- income of members of the Volunteer Fire Departments obtained from participation in training, exercises, rescue operations, rescue actions and actions related to the elimination of natural disasters.
Additionally, until December 31, 2025, the following entities are exempt from PIT:
- the injured party’s income (revenue) received for the removal of flood effects from:
- free or partially paid benefits,
- donations to which the Inheritance and Gift Tax Act does not apply;
- the injured party’s income received as part of the aid:
- for injured employees from the company’s social benefits fund,
- selected funds from the State Fund for the Rehabilitations of Disabled Persons,
- selected funds from the company’s rehabilitation fund for disabled persons,
- cancellation of selected loans from PFRON granted before the flood and benefits in the amount of unemployment benefit granted at the request of the injured unemployed person.
In the case of donations:
Until December 31, 2025, donations made by the recipient to remove the effects of flooding are exempt from Inheritance and Gift Tax. However, the condition is that they are used for this purpose by the end of 2025.
Documentation obligations:
It is necessary to keep all documents in case of a tax audit and for settlement purposes.
Taxpayers who benefit from PIT tax exemptions must carefully document the benefits, donations and assistance received, e.g. through certificates, donations agreements or decisions on granting benefits. In the case of flood-related damage, it is also necessary to have evidence of damage that complicates the financial situation.
PwC comment
If donations have been/will be made this year, they may significantly affect the possibility of reducing the basis for calculating tax liabilities. However, it should be remembered that the regulations condition the possibility of using the reduction of the tax base on the type of donated entity – first of all, it is not permissible to make donations directly to natural persons. In addition, the deduction will not be allowed if the donation is made in cash, as well as the lack of the required documentation (including the declaration of the donated entity about accepting the donation when a donation in kind was made).
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