In the current realities of economic life, many people choose to do their own business. Hence, families in which both spouses run their own separate business are more and more common. Often, there is also a situation where one the spouses shall transfer the whole undertaking, its part or a single asset to economic activity second.
At the planning stage of such a project, it would be appropriate to consider the tax effects of such events on the basis of income tax and tax on goods and services. Importantly, they will not be determined solely by tax legislation.
The property relations of the spouses are regulated Article 31(1) The Family and Care Code Act.
Which includes panty union
This provision provides that, when a marriage is concluded, a property union (statutory commonality) is created between spouses under the law, covering assets acquired during the course of the marriage by both spouses or by one of them (common property).
The common assets shall include, inter alia, salaries for work and income from other gainful activities of each spouse, including economic activity. This is confirmed in Article 33 A family and caring code that lists assets belonging to the property of a separate spouse. Among them there are no business subjects.
Non-legal property belongs to the personal property of each spouse.
In the judgment of the court, the transfer of assets between the undertakings of spouses cannot be of a paid nature and therefore cannot be regarded as the delivery of goods for consideration
Attention should also be paid to Article 34.1 The Code of Family and Care, according to which each spouse is entitled to share and enjoy the property in the common property in such a way as to be compatible with the co-ownership and use of the property by the other spouse.
By contrast, Article 35 The Code of Family and Care during the duration of the statutory partnership may not require the division of the common assets. Nor may he dispose of or undertake to dispose of a share which, in the event of the ceasing of his common interest, will be in the common property or in the individual items belonging to that property.
The transfer of the company will not generate revenue
These provisions of the Family and Care Code will be relevant to tax law. The transfer of the company or its individual components in the event of the existence of an association between spouses will not result in revenue. This is because each spouse owns the assets used by the other spouse in her business. In such a situation, there is no disposal of assets. Such action shall not result in any development, increase of assets on either side.
Similarly, the tax effects will be reflected in the tax on goods and services. VAT is subject, in principle, to the provision of goods and services paid for. In the case of the transfer of an undertaking or its organised part, the case seems quite obvious. The provisions of the VAT Act Article 6(1) indicate that the disposal transactions of the undertaking or its organised part are not subject to tax on goods and services.
The property partnership excludes the payment of assets to the spouse
The situation of transfer of individual assets between companies raises greater tax concerns. Fortunately, for taxpayers, the case law of administrative courts now predominates the view that no delivery of goods is made between entrepreneurs covered by the marital property union.
Chief Administrative Court in judgment of 4 April 2018 reference no. I FSK 887/16, In examining the above facts, it concluded that: where there is a statutory property union between spouses, any transactions which are concluded between spouses engaged in separate economic activities may not be of a paid nature.
In such a case, it is not possible to settle the fees between the spouses. one the spouses cannot pay the remuneration second the spouses with the funds covered by the statutory community for the assets forming part of the statutory community.
In the judgment of the court, the transfer of assets between the undertakings of the spouses cannot be of a paid nature and therefore cannot be regarded as a delivery of goods for consideration. A similar position was taken by the Provincial Administrative Court in Gdańsk in the judgment of 11 December 2018 Act No. I SA/Gd 939/18.
Transfer of assets at property separation
A slightly different situation will occur when there is a property separation between spouses. Then, on the basis of personal income tax on the part of a spouse receiving free assets, income will arise. However, the legislator prefers this income to benefit from the tax exemption.
According to Article 21(1)(125) The income tax-free PIT Act is the value of benefits in kind and other unpaid benefits received from persons included in the I and II tax groups within the meaning of inheritance and gift tax legislation.
Nor will this act be subject to tax on inheritances and donations subject to its notification to the Chief Revenue Officer. Such a donation will benefit from an exemption due to a close in the so-called zero tax group covering, among others, spouses, children, parents.
As regards VAT, the transfer of the whole or part of the company in the case of spouses with property separation, as in the case of property union, will not be subject to taxation. However, the transfer of individual assets will result in VAT on the activity concerned.
In view of the different tax consequences of transferring the whole company, its parts or individual assets to the business of the spouse, such action requires a detailed examination of the legal situation of taxpayers. Planning such a project can bring tangible tax savings.
If you would like to learn more or have additional questions, please feel free to contact us.