Donations without deduction? Government tightens the loop, your relief threatened!

Will the generosity of Poles be punished? Will the anticipation of deducting donations from tax, 1 of the fewer real mechanisms for supporting social organisations and those in need, shortly become history? Although no 1 officially speaks of the complete abolition of this relief, as an expert examining fiscal policy and its social consequences, I see alarming signals. Government narrations about the "closure of the taxation system" and increasingly advanced control tools of the National taxation Administration (KAS) cast a shadow on the future of deductions of donations. The brutal fact is, Any taxation relief is simply a possible cut target, and times of carefree usage of deductions, without fear of careful control, may slow come to an end.

The taxation deduction mechanics for income taxation (PIT and CIT) is 1 of the pillars of support public benefit organisations (OPPs), spiritual worship, as well as another socially useful purposes. all year Poles transmit this way hundreds of millions of PLNwho truly support charity, education, culture or aid. It's money that frequently goes where you don't get in or how you don't get in. Will the government, in pursuit of additional budget revenues, decide to screw this screw?

How do donation deductions work today? Key principles

Before moving on to possible threats, let us remind you of the principles under which donations can now be deducted. It's crucial to realize what we can lose.

1. Deduction limit: PIT taxpayers can deduct from their income (not tax!) donations of a full not exceeding 6% of yearly income. For CIT taxpayers, this limit is higher and is 10% of yearly income. Important: limit 6% or 10% includes all donations to be deducted in a given year (with certain exceptions, e.g. for donations for church purposes which have a separate, possibly full deduction but are subject to another evidence rigors).
2. For what purposes can a donation be made? The PIT Act lists a wide list of purposes for which donations are deducted. The most crucial of these are donations to:
   • Public Benefit Organisation (OPP): It's the most common intent of donations. These are organisations that prosecute socially useful objectives, as listed in the Public Benefit Act (e.g. social assistance, wellness care, education, culture, ecology). The position of the OPP must be confirmed by an entry in the National Court Register.
   • Religious Worship: Donations to churches, spiritual unions for their cult purposes (e.g. church building, chapel renovation, acquisition of liturgical paraments).
   • Blood: Honorary blood donors can deduct the cash equivalent for donated blood and its components (the conversion rate is set by regulation, now this 130 PLN per litre of blood). Limit 6% of income is valid including another donations.
   • Vocational training: Donations to public vocational training schools.
   • Reconstruction of the Saski Palace, Brühl Palace and the building at Royal Street in Warsaw (specific nonsubjective added in fresh years).
3. Form of donation: Both donations are deducted cashand in kind.
4. Necessity of documentation: This is absolutely crucial!
   • Money donations: Be fitted proof of payment to the bank account of the talented organisation. Transfer of cash to hand (even if we receive a receipt) does not entitle to deduct (except for circumstantial situations specified as natural disasters).
   • Donations in kind: Be fitted a paper indicating the value of the donation (e.g. donation agreement, talented statement). The value of the donation shall be determined on the basis of market prices of the day of its transmission. If the subject of the donation is VAT-taxed goods, the value of the gift shall be considered to be the value of the goods together with VAT (in part exceeding the amount of input taxation which the taxable individual was entitled to deduct).
5. Exemptions: The deduction shall not be made for donations to individuals or certain entities (e.g. political parties, trade unions).

The deduction of donations from the transfer mechanics must besides be clearly distinguished 1.5% taxation due to the OPP. Transmission 1,5 % is done “from tax” which we would gotta pay anyway, does not lower our taxation base and is implemented by the taxation office on the basis of our indication in the yearly statement. The deduction of donations is our direct deposit to an organisation which lower our income to be taxed and thus reduces the final tax.

Why is the donation strategy under scrutiny? Fiscus is awake.

Despite its advanced goals, the donation deduction mechanism, like any taxation relief, can be an abuse field. And it is this possible abuse, combined with the general tendency to seal the system, that can be a pretext for tightening the rules or increased controls. What are the main areas of hazard and interest in the tax?

1. Fictional donations: Attempts to deduct donations that did not actually happen or paper them with false confirmations. Although this is more hard with the work to transfer a bank, collusion between a donor and an unfair organization is inactive possible.
2. Zawedthe value of donations in kind: Especially problematic erstwhile transferring utilized items, works of art or real estate. The temptation to enter in papers a value well above the real marketplace price is large, due to the fact that it allows to "generate" a larger deduction. The Fiscus has the right to challenge the declared value and appoint an expert expert.
3. Donations to ‘its’ organisations: Establishing foundations or associations by entrepreneurs to then donate to them (often in kind, e.g. goods produced by the company) and deduct them from the tax, while the actual social activity of the organization is minimal or serves primarily the marketing purposes of the donor.
4. Unclear gift status: Transfer of donations to organisations that do not have OPP position or do not meet another statutory requirements to receive discounted donations.
5. No appropriate documentation: Many taxpayers forget the request to have proof of deposit or adequate documentation of a donation in kind. In the event of a check, the absence of papers means automatically contesting the deduction.

National gross Administration (KAS) has increasingly better analytical tools. Information systems can capture different transactions, compare data from different sources, and identify taxpayers for control. Increased checks may concern both donors (verification of the right of deduction and its amount) and awarded organisations (checking whether the funds received were utilized for statutory purposes).

Do we have an end to deductions? Possible exacerbation scenarios

Although, as I mentioned, for the minute there are no official, circumstantial plans for the full elimination of donationsThis does not mean that the strategy will stay intact. The government may choose to “seal” it or modify it in another way. What scenarios are possible in the future?

• Reduction of deduction limits: alternatively of present 6% for PIT and 10% for CIT, the limits could be reduced, which would reduce the scale of possible deductions, especially for those and companies transferring larger amounts.
• Synchronising folder The government could decide to exclude certain objectives from the anticipation of deducting or tightening the criteria for organisations entitled to receive them.
• Introduction of additional documentation requirements: For example, the work to get detailed donation certificates from organisations, which would complicate the process for both parties.
• Elimination of the anticipation of deducting donations in kind: Due to the difficulties in their valuation and possible abuse, the government could limit deductions to donations only.
• Intensification of controls: Even without changing the rules, the KAS can simply intensify the controls in the area of donations, which in itself will have an freezing effect and discourage hazard taking or even the usage of relief.

Each of these scenarios, although not formally eliminating the relief, in practice would reduce its availability or attractivenesswhich would inevitably translate into reduction of private money flows into the non-governmental sector.

Social consequences of "sealing" - Who loses the most?

We must remember that there is real support for circumstantial social actions behind all dollar deducted from donations. Limiting the deductibility of donations would mainly affect:

• Public benefit organisations: For many of them donations from individuals and companies constitute a crucial part of the budget, allowing to carry out the mission – assistance to those in need, moving care facilities, educational activities, protecting monuments or the environment. little influence is little help.
• Beneficiaries of OPP actions: Children from children's homes, sick and disabled people, seniors, victims of force – they will yet feel the effects of little backing for organisations that aid them.
• Civic activity: The anticipation of deducting donations is not only a financial relief, but besides a symbolic expression of your appreciation for the engagement of citizens public affairs. The limitation of this anticipation may be perceived as a signal that the state does not value this activity, which may discourage philanthropy.

How do you defend yourself? liable donations in uncertain times

In the face of possible changes and increased fiscal attention, it becomes crucial responsible and transparent approach to donations:

1. Verify the talented 1 carefully: Check the position of the organisation (if there is an OPP, if it is operating in accordance with the Act). usage authoritative databases (e.g. KRS, OPP list run by the National Institute of Freedom).
2. Transfer donations by transfer: It's the safest form to give conclusive evidence. In the title of the transfer, it is worth to enter the ‘Delivery for statutory purposes’ or more specifically if it concerns a circumstantial purpose.
3. Store documentation: Collect transfer confirmations, donations in kind, papers confirming the value of donations in kind. store them at least by 5 years (term of limitation of taxation obligations).
4. Realistically value donations in kind: Avoid overvalue. In case of doubt, especially in valuable subjects, it is worth considering utilizing an expert opinion.
5. Don't abuse the relief: Act in accordance with the law and intention of the legislator. Avoid appearances or attempts to circumvent regulations.
6. Follow changes in regulations: Keep up-to-date with possible amendments to taxation laws on donations.

In conclusion, although alarmist titles about the “end of the deduction” are now exaggerated, cannot ignore the expanding force to seal the taxation system. Relief for donations, like any other, can become a goal of modification or increased control. For the sake of ourselves and the organisations we support, it is crucial to act transparently, legally and have solid documentation. The times erstwhile the taxation office turned a blind eye to insignificant irregularities on deductions may pass. Better be prepared for that.