Donation in cash but tax free? The latest judgment of the Provincial Administrative Court in Łódź confirms previous judgments of other courts and contradicts this, and the tax offices insist.
A cash donation is a hassle with the office
We have already written about the problems with the donation in cash – even if it was the closest family – on the Bezprawnik website several times. If we receive a donation not exceeding PLN 9,637 from the closest family (tax group I), no tax obligation arises. When we get more, the tax still does not have to be paid, as long as we report the donation to the tax office in due time.
Unfortunately, it is worse if the donation was in cash – this is a problem with the office. If the value of the acquired property in the period of 5 years preceding the year in which the last acquisition took place (provided that the donation is from one person) exceeds the above-mentioned amount of PLN 9,637, then in order not to pay tax, we must document the receipt of the donation. The proof of this is a bank transfer or postal order. Unfortunately – even if someone receives a donation in cash and then immediately deposits it into their account, for the tax office it is not a reason to exempt the recipient from tax. Cash donation tax so it may not miss us.
The August judgment of the Provincial Administrative Court in Łódź (file reference number I SA / Łd 861/19) may therefore seem really interesting when it comes to whether a tax-free cash donation is possible.
Cash donation without tax: judgment of the Provincial Administrative Court in Łódź
The woman received a donation of € 110,000 from her father to build a house. The woman and her father entered into a donation agreement; according to it, the amount received was to be transferred to the recipient’s personal account within 7 days. However, the money was paid into the account by the woman herself (within the time limit specified in the contract). As could be expected, the tax office did not like it – the office questioned the proper documentation of the donation and imposed a tax. The recipient in her complaint to the Provincial Administrative Court in Łódź requested that this decision be revoked and the costs of the proceedings be awarded to her. The Tax Office which issued the decision obviously requested that it be dismissed as unfounded.
However, the Provincial Administrative Court in Łódź was of a different opinion. He did not agree with the Tax Office that “own contributions” did not meet the condition of proving the donation. The WSA cited earlier judgments. In this – the judgment of the Supreme Administrative Court of 8 December 2010. The court then decided that “refusing (…) the right to tax exemption for a donation for the immediate family just because it was not made by bank transfer, is an excessive tax formalism”. It is worth emphasizing that this is the dominant line of jurisprudence – nevertheless, the tax offices still question this interpretation of the provisions, which means that cases are regularly brought to courts.
Therefore, the Provincial Administrative Court in Łódź stated that
used in the provision of Art. 4a sec. 1 point 2 upsd, the return “will document their receipt with a proof of transfer to the buyer’s payment account” should be understood as the obligation to prove that there has been a transfer of funds from the donor’s assets to the beneficiary’s assets (making a donation), with the manner of making this transfer of secondary importance – no it must be a cashless transfer (from the donor’s bank account to the recipient’s bank account). In the event that the recipient receives cash, for the exemption in question to apply, it is sufficient for the recipient to pay the funds received in this form to their own bank account – as was the case in the case under examination.
The court finally quashed the contested decision.
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