The tax authorities regard the fact of concluding a life estate deed or having a debt written off as income. However, they do not agree for this type of income to be used for residential purposes and, hence, exempted from personal income tax. 

Where does this inconsistency stem from? As far as writing off a debt is concerned, the tax authorities claim that such virtual income is, in fact, the reduction of one’s debts and not increasing one’s assets. At the same time, pursuant to article 21 section 1 point 131 of the PIT act, the tax exemption relates to specific amounts of income from a paid sale of a real estate being spent on one’s own residential purposes.    

Extending the definition of residential purposes to be considered

Under currently binding regulations, the interpretation of the tax authorities is justified. However, it does not correlate with the common understanding of the term “residential purposes”. Therefore, it would be good to look into this matter not only from formal (binding law) but also practical perspective.

Author: Mariusz Szulc
mariusz.szulc@infor.pl
Source: Dziennik Gazeta Prawna

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