Gdańska - Kamienice, by Marcin Polak,
via Flickr
Every true history must force us to remember that the past was once as real as the present and as uncertain as the future.
G. M. Trevelyan, British historian
TAX ISSUES — IN POLAND AND ABROAD
This webpage will be soon updated and revised.
Tax Obligations in Poland (based on current Polish Law, as of January 2016)
Q. What are the tax obligations in Poland of successful claimants?
A. Persons who recover Expropriated assets in Poland (successful claimants) are not required to pay income tax in Poland on the value of the assets they recovered.
However, when successful claimants are the heirs of former owners, after recovery they are required to pay succession tax (inheritance tax) in Poland.
Q. What is the rate of succession tax in Poland?
A. In Poland, the rate of succession tax depends on the heir's relationship with the immediate legal predecessors. The closer this relationship, the lower the tax rate. If the inheritance goes through several steps (such as from great-aunt to grandfather to father and finally to his daughter — the present heir) the applicable tax rate is determined by father-daughter family relationship, the father being the immediate legal predecessor.
The lowest rate (Tax Group 1 in Poland) applies to inheritance from parents, siblings, spouses, etc. Except for very small amounts, on which no succession tax applies, the rate of succession tax in Group 1 is 7% of the value of inheritance.
In the event of immediate (direct) inheritance from more distant relatives (Tax Groups 2 and 3), succession tax may be to 12% or even 20%.
To repeat, the tax group is based on the last succession in sequence, which usually is from one’s parents. Therefore, 7% is the most common rate of succession tax.
Q. What are tax obligations in Poland of successful claimants who earn income from assets they recovered?
A. As in other jurisdictions, they have to pay in Poland income tax on related net income.
Q. What are tax obligations in Poland of successful claimants who monetize recovered assets and transfer funds abroad?
A. There are no taxes in Poland in connection with the transfer of funds abroad.
Q. Are payments which claimants made for the purpose of recovering inherited assets tax deductible in Poland?
A. It depends. Some such payments are tax deductible in Poland.
We will post more information on related Polish taxes soon.
Tax Obligations in USA
We received the following general accounting information from Mr. R. Lackner, CPA of Consulting For Results LLC (www.consultingforresults.com) in this matter. IMPORTANT: This is only general information for orientation purposes. Claimants should consult Mr. Lackner or their own tax advisors.
Q. How should successful American claimants report in the USA the assets they recovered in Poland?
A. If successful claimants are former owners who have recovered assets taken away under Communism, they are not required to pay succession tax in the USA.
If successful claimants are heirs of former owners, they may have to pay US federal and state inheritance taxes on these assets. This depends on whether they have utilized the lifetime exemptions available under the Internal Revenue Code (IRC) and under the tax codes of the US State they reside in.
Q. What are the tax obligations in the USA of successful claimants concerning income they earned in Poland from the recovered assets?
A. They have to pay income tax in the USA on related net income. However, under the treaties to avoid double taxation between USA and Poland, they can offset the income tax they paid in Poland against the income tax payable in the USA.
Q. Can successful American claimants deduct the taxes they paid in Poland from the taxes they pay in the USA?
A. In calculating the Polish inheritance for US tax purposes, they can deduct the inheritance tax they paid in Poland.
As mentioned above, they can also offset from their US income tax the income tax they paid in Poland. Specific rules may apply.
Q. Are costs incurred by American claimants to recover assets in Poland deductible from taxes they pay in the USA?
A. This may depend on circumstances. Generally, expenses incurred in expectation of earning income are tax deductible in the USA.
Notably, in Poland, a claim to reverse expropriation of a property generally includes a claim for lost income from that property for the last 10 (ten) years. In circumstances where there is a reasonable expectation of recovery of such lost income, the expenses born by American claimants for the purpose of recovering Polish assets, should be tax deductible in the USA.
We will post more information on related American taxes soon.
Tax Obligations in Canada
Canadian tax obligations of successful claimants and rights of Canadian claimants to deduct costs they incurred to recover assets in Poland, are similar as those of American claimants. Claimants should consult their own tax advisors.
Łódź- Piłsudskiego Centrum Biznesu (Piłsudskiego Business Centre),
By Nemo5576 (Own work), via Wikimedia Commons
