The tax on a consolidated loan from a private person is 2%. The tax obligation arises at the time the contract is concluded and rests with the borrower. The tax base is the amount or value of the consolidated loan.
Tax on a consolidated loan from a private individual – is it obligatory?
The tax on civil law transactions is taxed:
- money consolidated loan agreements,
- consolidated loans for items marked only for the species,
- changes in the consolidated loan agreement, as long as they result in tax increase of PCC,
- court decisions and settlements, if their consequence are changes in the consolidated loan agreement.
A consolidated loan agreement from a private person is taxable when:
- The consolidated loan concerns money or things in Poland or property rights in Poland. It does not matter where the contract was written, or where the pages that make up it live. The criterion determining the arising of the tax obligation is the place of placing the subject of the contract at the time of its preparation.
- The subject of the consolidated loan are items located abroad, but the purchaser lives or is based in Poland and the consolidated loan agreement has been concluded in Poland. Importantly, in the latter case, both conditions must be met jointly. This means that the tax obligation arises when the borrower lives in Poland and when the consolidated loan agreement was concluded on the territory of the Republic of Poland.
The consolidated loan agreement is a consensual contract and subject to taxation regardless of the consolidated loan subject. If you take a consolidated loan from a company that deals with this type of business on a daily basis, then such a consolidated loan will be exempt from PCC tax. The obligation to pay it applies only to consolidated loans from private persons who do not carry out economic activities related to the provision of financial services. If we do not comply with the tax obligation, we will pay an increased tax rate on the consolidated loan. It is up to 20% and it is so-called sanction tax rate. Such a high tax will be charged to us when:
- the taxpayer, in the situation of tax control, tax proceedings or customs and tax control, informed about the fact of preparing the consolidated loan agreement, and the tax on this activity was not paid;
- the borrower borrowed money from the immediate family and a consolidated loan agreement was made, but he did not document that he had received certain funds.
When is the tax obligation arisen?
The tax liability for a consolidated loan from a private person arises at the moment:
- civil law transactions – ie the conclusion of a contract or any changes to the contract, if they result in an increase in the amount of tax,
- each withdrawal of funds, if the consolidated loan agreement specifies that the funds will be “selected” repeatedly, and the sum of all payments is not known at the time of drawing up the consolidated loan agreement,
- validation of a court decision, delivery of an arbitration award or settlement.
Who is entitled to tax exemption from PCC?
consolidated loans granted between persons belonging to the first tax group are exempt from tax on civil law transactions. Importantly, this exemption applies only to PLN 9,737. We do not have to pay tax when we borrowed money from the spouse, ascendants, descendants, stepchild, son-in-law, daughter-in-law, siblings, stepfather, stepmother and parents-in-law. The amount indicated above is the upper limit on how much we can borrow within 5 years from one person if we want to avoid tax.
In addition, we also have the option of obtaining an unlimited consolidated loan from the aforementioned entities, with the exception of consolidated loans between the parents-in-law and son-in-law. If we want to use this option, we must submit a declaration regarding the tax on civil law transactions. We submit it to the competent tax authority within 14 days from the date of the performance of the taxable activity. We must also document that we have received the money.
When will we not pay the tax?
It is worth knowing that there is a catalog of activities that are not subject to PCC tax. These are consolidated loan agreements regarding:
- alimony, care, guardianship and adoption matters;
- social insurance, health insurance, social welfare, reliefs specified in special regulations for non-professional soldiers and persons performing substitute service and their families, as well as rights for disabled persons and persons covered by provisions with special rights for veterans;
- election of the President of the Republic of Poland, election to the Sejm, Senate and local self-government bodies and referendum;
- universal defense duty;
- employment, social benefits and remuneration for work;
- science, education and out-of-school education and health;
- subject to regulations on real estate management or toll motorways regulations;
- related to the provisions on specific rules for the preparation and implementation of investments in the area of national roads;
- subject to the provisions on special rules for the reconstruction, renovation and demolition of buildings destroyed or damaged as a result of the action of the element.
A consolidated loan from friends and tax
The issue of consolidated loans from persons with whom we are not related is different. These consolidated loans may also be subject to tax exemption. This is art. 9 par. 10 of the Act on tax on civil law transactions. We will not pay the tax for consolidated loans:
- from one person in the amount not higher than PLN 5,000 or PLN 25,000 from many people – received within 3 consecutive calendar years, starting from January 1, 2009;
- granted by entrepreneurs who do not have their registered office in Poland and who conduct activities related to granting consolidated loans or credits;
- from cash registers or plant and related funds,
- other special-purpose funds established by way of the act,
- obtained from a partner (shareholder) in a capital company.
Tax on consolidated loans from a private person. Summary
The basis for taxing a consolidated loan from a private person is its amount. If the contract contains a provision for multiple withdrawals, the taxable amount is always the amount collected. Usually, the tax on civil law transactions is 2%. If we do not fulfill the tax obligation, we will pay as much as 20% of the tax.