When can you benefit from inheritance and gift tax exemption - 2024/2025

Polski

The taxation of inheritances and gifts depends on the relationship between the beneficiary and the donor or the heir and the testator. These relationships are important to determine which tax group the beneficiary can be classified into.

As of July 1, 2023, new, higher tax-free amounts and new tax scales apply to inheritance and gift taxes. These changes result from the regulation of the Minister of Finance dated June 28, 2023.

There are three tax groups for inheritance and gift tax: I, II, or III. The tax rate ranges from 3% to 20% (depending on the value of the gift and the tax group the taxpayer is classified into). The tax is calculated on the excess of the tax base over the tax-free amount.

Tax-Free amounts for inheritance and gift tax

The net value amounts of acquired items and property rights not subject to taxation, as specified in Article 9, paragraph 1 of the inheritance and gift tax law, are:

• 36,120 PLN - if the beneficiary is classified into the I tax group (spouse, descendants (children, grandchildren, etc.), ascendants (parents, grandparents, etc.), stepchild, son-in-law, daughter-in-law, siblings, stepfather, stepmother, and parents-in-law);
• 27,090 PLN - if the beneficiary is classified into the II tax group (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);
• 5,733 PLN - if the beneficiary is classified into the III tax group (other persons).

Within the I tax group, there is a so-called zero tax group. The regulations include the closest family (spouse, children, grandchildren, parents, grandparents, stepchildren, siblings, stepfather, and stepmother). Since October 27, 2020, foster children, children in family group homes, in care and educational facilities, or in regional care and therapeutic facilities are also included in the I group. The definition of ascendants has also been expanded to include persons forming a foster family, running a family group home, or working with children in care and educational facilities or in regional care and therapeutic facilities.

The tax-free amounts for gifts intended for specific housing purposes, as defined in the law, have also been increased (Article 4, paragraph 1, point 5 of the inheritance and gift tax law). These amounts are:

• 11,095 PLN – limit from one donor,
• 22,189 PLN – limit from multiple donors combined over five years from the date of the first gift.

Inheritance and gift tax rates 2024/2025

The regulation of the Ministry of Finance from June 28, 2023, also introduced changes in the tax scale, i.e., the brackets to which the respective tax rates apply have increased. The tax is calculated on the excess of the tax base over the tax-free amount according to the following scales:

The provisions of this regulation apply to cases where the tax obligation arose from June 28, 2023, including gifts received from this date or inheritances whose acquisition was confirmed by a court or notary after June 27, 2023.

The closest family benefits from the exemption and important deadlines and formalities

Within the zero tax group, the immediate family benefits from full exemption (without limit), provided that the taxpayer:

• in case of acquisition of ownership of things or property rights - within 6 months from the date of the tax obligation arising;
• and in the case of acquisition through inheritance – within 6 months from the date of the final court decision confirming the acquisition of the inheritance - reports this fact to the head of the tax office using the SD-Z2 form.

Missing this deadline will require paying the full tax, while if the fact of receiving a gift is revealed during an audit, the tax rate is 20% of the value of the acquired assets.

What is important is that donations from one person over the last five years should be added up

In the case of multiple gifts, to determine whether the gift limit from a specific donor has been exceeded, the net value of items and property rights obtained from that donor in the current year and the five preceding years are summed.

If the value of the gift or inheritance does not exceed the limit depending on the recipient's tax group classification, the recipient may still benefit from tax exemption, even if they do not report it to the appropriate tax office.

Examples:

• A person who received a gift in 2024 should sum the value of items and property rights acquired from the same donor in 2024 and in the years 2019 – 2023 (over the five years preceding 2024).
• A person who will receive a gift in 2025 must consider the value of items and property rights acquired from the same donor in 2025 and in the years 2020 – 2024 (i.e., over the five years preceding 2025).

Even if the gift did not exceed the threshold and does not require reporting to the tax office, taxpayers should keep documentation of the values of gifts received in subsequent years. It may turn out that the limit is exceeded, for example, in subsequent years and then it will be necessary to report the gift and pay tax on the amount exceeding the tax-free limit. When summing gifts, the limit applicable at the time of receiving the last gift should always be considered.

Formal requirement for documentation

A direct transfer from the donor's account to the recipient's account meets the formal documentation requirement for monetary gifts and allows for the benefit of the exemption.

PwC Commentary

Despite clear regulations, a taxpayer wishing to apply for exemptions from inheritance and gift tax should transfer gifts cautiously after thorough analysis of the amended regulations.