Ministry of Finance plans to amend the law that will allow to sell inherited property without having to pay 19% income tax. The five-year period will remain, but it will be much more favorable.
The apartment acquired by inheritance is better sold after the expiration five years (since the end of the year in which the inheritance opened). If someone sells the inherited apartment e.g. after two years, it must in principle be the obligation to pay income tax at stake 19% the tax base.
If the announced project of the Ministry of Finance enters into force, the tax on the sale of the property will be abolished before the expiry of the five-year period, i.e. the possibility of tax-free sale of the inherited apartment will arise without waiting by five years since the end of the year in which the decline opened.
If the property was acquired by the dropper e.g. ten years before the opening of the inheritance, the heir will be given the possibility of tax-exempt sale of the property immediately after the opening of the inheritance.
The key change is that the five-year tax exemption period will start at another point, i.e. from the end of the year in which the inheritance acquires the property, rather than the end of the year in which the inheritance was opened.
What is the benefit for the heir? If the property was acquired by the dropper e.g. ten years before the opening of the inheritance, the heir will be given the possibility of tax-exempt sale of the property immediately after the opening of the inheritance.
At the same time, it is possible for the heir to be able to sell exempt after a period of less than five years. For example – the inheritance acquires the property 1 March 2018, the opening of the decline occurred in the year 2020. Then the five-year period will be calculated from 1 January 2019. The heir will be given the opportunity to sell exempt 1 January 2024
The genesis of the current structure
The current "unfavourable" rules on the sale of inherited dwellings are not the result of a deliberate error of the legislature. Writing laws sometimes involves “copying” certain solutions on similar issues. This issue is also similar.
A person who acquires an apartment can sell it without having to pay income tax after the expiry of five years from the end of the year in which the acquisition took place. Early sale may mean paying income tax. It can be said that the Ministry of Finance project assumes a departure from a certain legal analogy that does not have much justification. Unfortunately, this is not the only example of a not-thought-out regulation involving potentially many people.
Is it possible to lose all your assets due to your inheritance?
Fortunately, the legal regulations on this issue have changed to much more beneficial as a result of the change from the beginning 2015 Act dated 20 March 2015 amending the Act - Civil Code and some other laws (Journal of Laws, item 539) removed some legal absurdity.
Previously, there was a potential possibility that someone would “miss” the letter of receipt of the inheritance and therefore lose all of his assets. How is that possible?
The decrease can be accepted either ‘right’ or ‘with the benefit of inventory’. Of which second the case can be inherited, at worst, zero Gold. However, the ‘simple’ adoption of the inheritance also means liability for potential inheritance debts that may exceed the value of the inheritance received. It is definitely safer to adopt a decline with the benefit of inventory.
What can be expected if no statement is made about the inheritance within the statutory six-month deadline? Currently, the failure to make such a declaration is considered to be the adoption of a decline in the "safer" version (with the benefit of inventory). The previous version of the provision assumed that: “The absence of a statement by the heir within the above period is clear with the simple acceptance of the inheritance.”
In other words, you might have missed a letter of inheritance or ignored such a letter, and then lost the entire estate (including the apartment) if the heir had left huge debts. This construction was created in the times of the Polish People's Republic and was in force for several consecutive term of the Sejm.
Ridiculous legal structure was "removed" only by the Sejm of the term of office 2011-2015. Both of these inheritance issues show that some laws may contain serious errors. This in turn illustrates the important role that associations and the constitutional body of the Ombudsman can play. The role of the RPO is, among other things, to "catch" such legislative imperfections and to call for changes in the law.
Author: Andrzej Dmowski
Lawyer and Doctor of Legal Sciences of the University of Warsaw. From 2011 one from Corporate Management Partners Russell Bedford Poland. Previously on the BDO advisory network, as well as Deloitte & Touche. Author of the book “Transfer Prices”, co-author of the commentary “The Corporate Income Tax Act”, author of many publications on tax law.