Polish Income Tax Payable on Inheritance for UK Citizen

Hi, I've searched the forums but can't seem to find an answer on this one.

I'm a British Citizen and I recently inherited a small amount of money (about £5,000) from a deceased relative in Poland. All inheritance taxes were paid at the time.

I'm now being told by a relative (who also received an inheritance) that I need to pay 19% (I believe income tax) on the inheritance by the end of April. Failure to pay will result in hefty fines from the Polish tax authorities.

Can anyone advise please?

You would have no liability for Polish income tax if you are not resident in Poland for 183 days or more. The Polish tax authorities have no jurisdiction to fine you if you are not tax resident in Poland.

Whether you have extra inheritance tax to pay in Poland is a more complex issue but I doubt they would bother to chase you for 1000 quid in an unclear situation.

Wow, that was a quick reply - thank you!

The alleged tax liability was made because the (part) inheritance came from the sale of a property.
This wouldn't make any difference to your advice above?

Any ideas why the tax people in Poland wouldn't seem to know that I'm not liable for tax...?

Certainly if you are not resident you have no obligation to file your PIT 11 form which governs your personal income tax (and actually the deadline is today :) ).

Probably your relatives don't know that or have not thought about it.

As I said you might have to separately pay inheritance tax but its such a small amount that practically the local tax authroties will not hassle you about this.

CMS, thank you once again for your super speedy and helpful reply.

The inheritance tax was paid at the time. I remember it being quite a long drawn out and bureaucratic nightmare, being passed from pillar to post, one window to the next to get an even simple answer! And this was with my Polish relatives (born and bred Poles) doing the talking.

I've re-read the email from my relative and it does specifically mention the sale of real estate:

Dowiedziałam się wreszcie na pewno (z Warszawy),że obywatel innego kraju sprzedający nieruchomość na terenie kraju podlega polskiemu prawu podatkowemu.

Which google kindly translates as :

I learned last for sure (from Warsaw), that a citizen of another country selling real estate in the country is subject to Polish tax law.

Surely it's just the final estate value that's important, not the individual components? And like you say, if I'm not a resident I'm under no obligation to file an income tax return. (And in the UK, even the total estate was nowhere near the IHT threshold, never mind my portion.)

The deadline has apparently been extended until May 2nd because April 30th is a Saturday! :)

A quick reply but totally wrong. You (suzy) as a non resident are liable for the 19% tax as stated by your relatives.

Sadly it's not that simple.

Now I'm confused!

You owe 19% tax. It's not very complicated.

Thanks for the reply Marsupial.

You obviously understood that my "confusion" didn't stem from my lack of understanding mcm's or Harry's reply, but the contradiction between their replies stating that I owed tax and cms's replies that I didn't.

Cms went into detail as to why, as a UK resident I didn't need to file a Polish tax return (PIT 11 form) and therefore didn't owe tax.

Everyone else has simply stated that I owe tax without going into any further details.

Is it any wonder that I'm "confused" with such contradictory advice?

You need some sort of polish accountant or someone like that.

When you yourself sell a property (or obtain any money from the sale of a property owned by someone else) you are liable to pay 19% income tax on the proceeds, unless you can prove that you have used the money to buy another property within the next 2 years. Your tax becomes due, if you have not purchased another property. It is up to YOU to ask the right questions.

If the house was owned by a relative (close or otherwise) - there may not be any inheritance tax to pay, but this is totally SEPARATE from the proceeds on the sale of the actual property. It does not make any difference whether you are Polish, British, Spanish or any other nationality and whether you have ever been to Poland, have been there for one day or 180 days.

This is 'sale of property tax'.
If you do not pay it is more than very likely that the Tax Authorities may come after other people who have benefited from the sale in order to obtain their pound of flesh.

Inheritance tax normally is dealt with with 6 months of transfer but with sales they can take up to 5 years to deal with any case. If you inherited and then sold within 5 years then you ffectively pay 19.5% on the sale price (usually its 19.5 of sale minus purchase price but in case of inheritance purchase is zero).

My view is this - you did not sell the property yourself, but received a cash gift. On that gift inheritance tax was already paid as you state. Which is correct. There is a tax free alliwance that varies but could be about 9000 zlots in your circumstance.

Capital gains does not apply since you had no asset in the first place. This is clearly gift / inheritance issue.

Income tax does not apply - you are not due to pay tax on worldwide earnings since you are not there 183 days. As Harry says it is not so simple because they can also look at where your kids, property is but I assume thats in Britain so again it does not apply. This means you are due only to pay tax on Polish events which you say you have done.

So I dont know why you are being told more tax is due - probably your relatives realize they are due for some more tax than they thought.

Also an opinion from Warsaw carries no more weight than one from your local tax office.

It is highly unlikely that a tax office would chase you or bother about this - you presumably have evidence of paying the inheritance tax and they do not have the resources to deal with foreigners outside Poland - they are too busy harrassing small businesses here.

But if you want more clarity then ask the tax office why incime tax would be due if you already laid inheirance tax. You could involve an accountant but with this issue being only worth a few thiusand zloty then anyone that speaks english would cost more than that anyway.

We have already said that tax due on an inheritance is totally separate i.e. different to the tax due on the sale of property.

It is a case of suck it and see, but when the Tax Authorities (who are now keener than ever to get their pound of flesh) come after the the people who have benefited from the sale of the property (no matter under what circumstances) then as long as your conscience is clear when they end up in prison - then everything is o.k.

I would ask advice of a appropriately qualified person.
In my view, 'polish investor' above as well as me have already stated our case. Income tax payable on the sale of properties is due when you do not use the funds to buy another property.

But it was not her property and she did not sell it. So there is no reason to apply this tax to her. Yes she benefitted from it indirectly but then at a guess so did Suzy's local hairstylist and chinese takeout.

Its obvioudly nonsense to talk about prison - they would have to find, extradite and convict someone - all for the sake of a few hundred bucks. The tax authorities are interested in collecting cash, not in starting legal processes. They would have to show her a reason why she needs to pay the tax - they do not just make random demands.

As i said before the best course of action if she has doubts is to show she already paid inheritance tax and ask on what basis more is due. Its possible that her relatives have just realised that they have an unpaid tax liability, and they would like her to contribute to that. That makes it rather a family matter than a tax office matter. If she shows good faith by asking the tax office why she needs to pay extra tax then that would mean that they would view her more favourably anyway.

Yes Suzy can ask for tax advice, but my guess is that will start at about 200 zloty per hour - for a tiny issue.

I don't think you realize that when you (or anyone) sells a property then tax becomes due unless the money is used to buy another property. It does not matter that she received money from the sale, or sold the house herself or someone else sold it for her. The money is from the sale of a house and thus is liable to tax.

The prison is not waiting for her (please read my posts carefully in future) but for her relatives.

Thanks for all your input guys.

I'll summarise the situation leading up to where I am and answer some speculation which has arisen on this board.

A family relative died quite young and unexpectedly in Poland. He died intestate.
It took quite a while to get what is the Polish equivalent of probate granted through the courts.
There were about half a dozen beneficiaries identified and the estate comprised of some savings and an apartment.
I seem to remember that there were three tiers of inheritance tax and as a close relative I think I ended up paying 12%.
My portion of the inheritance ended up being about £5,000 after inheritance tax had been paid.
I received the money towards the end of 2015.

That was I thought that, until I received an urgent email last week from the relative in Poland who handled the entire affair.
The relative stated that they'd discovered I owed income tax in Poland on the value of the property (19% which would be about £1,000). I assume they discovered my tax liability whilst submitting their own end of financial year tax returns.

Contrary to some speculation, the relative doesn't want the cash transferring to her directly, but has given me the bank account details of the tax office in Poland as the tax office apparently want the tax paid from the bank account of the person who owes it.

I can understand inheritance tax being paid in the country of death according to local laws, but income tax seemed an odd one since I'm not a Polish citizen, hence the reason for me asking for help and advice here.

Something isn't quite right here. You aren't tax resident in Poland (and there's no way you could be deemed to be - you don't stay here for more than 185 days/you don't have your "centre of vital interests" here) - so perhaps the best way forward is to pay 50zł and ask the tax office for a binding ruling as to your residency?

Once you're declared to be non-resident for tax purposes, you can tell the tax office to get lost :)

I know that If you buy a property and then sell it within 5 years for more than the purchase price, you should pay the tax on the difference. For example, you buy a flat for 200k, sell it 3 years later for 220k (and don't use that money to buy another one), you get the "extra" 20k taxed... that makes some sense I think... in your case logically you shouldn't pay that tax but that's just my guess...

Edit: bankier.pl/wiadomosc/Sprzedajesz-otrzymana-w-spadku-nieruchomosc-Zobacz-kiedy-zaplacisz-podatek-3400097.html -> it seems that in general tax should be paid... but I'm not sure how they treat the purchase price, tax residency etc.

where do you live? if you don't live in poland, don't intend living in poland and have no interests in poland just ignore it

I'm a British citizen, live in the UK and have done so for over fifty years.
I haven't spent more than a month or so in Poland at any one time (in one year) and I doubt I've spent anywhere near 180 days in Poland in the last half century.

Poles being poles will sell their grandmothers for 10zl. If you speak polish i would contact the tax office directly by telephone and ask them to outline the exact asset in question and who it concerns. 19% is the linear income tax and should concern you as a non resident in this case. Sales tax on property is 19.5% and is a different matter.

Pay up, disgraceful tax dodgers.

sorry that should be shouldnt concern you as a resident.

Thanks for all your help guys.