Tax on civil law transactions

The catalogue of these activities is strictly defined in the Article 1(1) of the aforementioned Act and is not subject to extension. According to its wording, these include, inter alia, an agreement for the sale and exchange of property or property rights, a loan agreement, a donation agreement, a life-tenancy agreement, an agreement for the division of inheritance and an agreement for the liquidation of co-ownership and amendments to these agreements, as well as a partnership agreement. Court judgments and concluded settlements that have the same legal effects as the aforementioned contracts are also taxable.

However, the moment at which this obligation arises may be different. For example, in the case of a loan agreement, the obligation may arise at the time of each disbursement of money, if the agreement states that the disbursement is to take place repeatedly and the total amount is not known. On the other hand, if, while not performing a civil law transaction, we obtain a court judgement or conclude a settlement producing similar effects as those that would be produced if we had performed a specific civil law transaction, the tax obligation arises at the moment the judgement becomes final or at the moment such a settlement is concluded.

If we have not paid tax on civil law transactions by failing to submit the appropriate tax declaration to the relevant tax office, and then, as a result of various events, within five years of the expiry of the tax payment deadline, invoke the fact of having carried out a taxable transaction before the tax authorities, the tax obligation will arise at that precise moment.

Tax on civil law transactions is charged to taxpayers of this tax, who are, according to Article 4 of the Act on Tax on Civil Law Transactions:

If several persons or parties to a contract are liable for tax, they have a joint and several liability to pay tax on civil law transactions.

Taxpayers of tax on civil law transactions are obliged to submit a duly completed declaration on form PCC-3 to the head of their competent tax office. They should also calculate the amount of tax themselves and pay it. The deadline for doing so is 14 days, and it begins on the day on which the tax obligation arises.

However, this procedure does not apply in the case of a civil law transaction in the form of a notarial deed with a notary who, as the payer of the PCC, collects and remits it to the relevant tax office.

Tax rates vary depending on the activity creating the tax obligation. As a rule, they are a certain percentage of the tax base representing the market value of the subject of the agreement. The lowest tax rate amounts to 0.1% on the amount of receivables secured by a mortgage established as collateral for existing receivables, while the highest rate, 2%, applies to such agreements as, inter alia: an agreement on sale of real estate or perpetual usufruct right, as well as a loan agreement or an irregular deposit agreement.

In some cases, however, the tax rate may be as high as 20%. This is the case if, in the course of actions carried out by the tax authorities or tax inspection authorities, we refer, for example, to the fact that we have concluded a loan agreement, but at the same time we have not paid the tax due or we have not documented the receipt of funds to a bank account or by postal order.

A number of persons and legal entities benefit from statutory tax exemption. These include: public benefit organisations, local government units and the State Treasury.
Act on tax on civil law transactions also provides for a certain catalogue of civil law transactions that are exempt from this tax.
There are many issues related to civil law transactions: from calculating the tax on civil law transactions, determining the competent tax office to determining whether we are entitled to exemption from payment of this tax, the proper completion of formalities can be difficult and even inefficient if we lack knowledge of tax law. In such cases, it is worthwhile to make use of the services of chambers of legal counsel, who - with their expertise and experience - will look after our interests.