Can a treatment donation be tax-exempt and when? More and more people struggling with cancer, in need of expensive drugs or rehabilitation, seek help from foundations where people of good will pay donations. Unfortunately, according to the law in force in Poland, people donated by foundations should pay tax on such donations.
Whenmedical donationistax exempt ? The principles of paying taxes by natural persons in Poland are mainly regulated by two acts: the Personal Income Tax Act (PIT) and the Act on inheritance and donation tax. The PIT Act covers income resulting from free benefits obtained by a specific person, with the exception of donations. The latter are taxed by the Donation Act. Both exempt from taxation gains in property resulting from donating money, things or making other free benefits by the immediate family.
It is enough to comply with certain requirements, and in particular, to inform the tax authorities about the donation in a timely manner and properly document them (e.g. by bank transfer ). But what happens when the donors are strangers donating their money to people who need help due to illness or disability?
Donation from the foundation
Aid provided by foundations may come from two sources. The first are donations from donors to specific individuals (targeted donations). The second is payments without specifying the person to whom they should go, and other income of the foundation. Foundation support can take various forms. And so: the foundation can transfer money to the ward or pay their bills without giving money directly to the client's hand. This has specific tax consequences. The donation is subject to inheritance and donation tax. On the other hand, other gratuitous benefits or benefits in kind are subject to personal income tax. But neither in the PIT Act, nor in the Act on Donation Tax, there are clear provisions referring to comprehensive tax exemption of aid received from public benefit organizations.
What is the result of this?
Well, the ward of the foundation will not pay the tax if the total value of donations made by the foundation to one person within 5 years does notexceeds PLN 4,902. Luckily for the foundation's charges, tax offices interpret the regulations favorably when making donations to the foundation's account for a specific patient. If four people pay an amount lower than PLN 4,902 to the patient, despite the fact that the foundation will provide the patient with a total of PLN 19,608, each donation may be treated separately. Therefore, the entire amount of PLN 19,608 will be tax-free. However, this only applies to a situation where, when transferring money to an account, e.g. for a foundation, we indicate a specific person to whom the money is to be sent.
Other tax exemptions
There is a provision in the PIT Act that exempts from taxation allowances received in the case of, inter alia, long-term illness up to the amount not exceeding PLN 2,280 in the tax year. Such an amount may be offered to the charge in each year, because it is not cumulative with the aid obtained in other years. If, however, the above-mentioned amount is exceeded, the charge must pay the tax on the excess over PLN 2,280. An analysis of the opinions issued in the last few years allows us to believe that both the Ministry of Finance and tax offices try to consider the necessity to tax the aid obtained by the beneficiaries of foundations or associations in favor of people affected by fate.
Neither in the PIT Act, nor in the act on donation tax, there are no clear provisions providing for comprehensive tax exemption for aid received from public benefit organizations.
1 percent tax
According to the law, the taxpayer may order that 1 percent of the tax he should pay will be transferred to the foundation or the specific person under its care. A tax that has ceased to be the property of the payer. In this situation, we cannot talk about donations from the taxpayer to a specific patient, even if he was indicated as the final beneficiary of 1%.
There are, however, two options that allow foundations to use resources from 1 percent of taxes so that the recipients do not have to pay another tax to the tax office.
- If the foundation wants to use this money to support the ward in the form of a donation within the meaning of the Civil Code, the amount of PLN 4902 remains tax-free.
- If it turns out that tens of thousands of zlotys were collected from the one-percent payments, then you need to - within the framework of the applicable law - switch to the PIT Act.
The PIT Act exempts from taxation benefits from social assistance, which can also be provided by public benefit organizations. So if the foundation orthe association has in its statute a provision on the provision of social assistance, and besides, there are clearly defined criteria for whom this assistance is en titled, the recipient of the assistance will be exempt from tax.
Exemption from taxation under social assistance there is no limit resulting from of the PIT Act, so theoretically, an unlimited amount could be transferred to the charge in the form of free services, benefits, payment for medical procedures, etc. However, it would be good for the Ministry of Finance to issue a general tax ruling (applicable to all interested parties, not only those asking for individual interpretations) explaining in detail to what extent this exemption can be used.