There are three tax groups in terms of relationship. If a person is gifted in a close relationship with the donor, there is a legal way provided by the legislator not to pay tax on donations.
Car donation – legal basis and example situation
It is very easy to imagine a situation in which parents intend to buy a new car and give the older, previously used, to the child. The older car is functional, so it can still be used by the new owner. This is not bad at all. Such a decision must, however, be supported by appropriate legal steps, because otherwise you may be exposed to, inter alia, the tax office.
Issues related to the donation are governed mainly by two legal bases: the Inheritance and Donation Tax Act and Art. 888 of the Civil Code, which specifies the meaning of the donation agreement: “by the donation agreement, the donor undertakes to provide a free benefit to the recipient at the expense of his property” . Further guidance is provided in the following articles of the Code.
Car donation agreement – how to prepare it and what should it contain?
At the beginning of art. 890 of the Civil Code, it follows that the donation agreement should be made in a notary form. However, does a parent handing over a car to a child necessarily have to go in such a seemingly trivial matter to a notary public who will collect remuneration for his service? Not necessarily – hereafter this article states that if the promised donation is fulfilled after the conclusion of the contract (without a notary public), i.e. both parties perform their obligations specified in the drawn up contract, then the donation declaration does not have to be made in the notary form. It is important, however, that the donation agreement cannot be concluded electronically – it must be in writing.
Everyone can draw up a car or other property donation contract. The document should contain:
date and place of conclusion of the contract,
data of the parties concluding the contract (dignity, addresses, social security numbers, series and numbers of ID cards or passports),
in the case of a car, a specific designation of the subject of the contract (make and model, year of manufacture, engine number, registration number and vehicle card),
determining the value of the donation,
declaration of the donor about the lack of obligations of the subject of the donation to third parties and full car ownership rights,
date of donation,
donor’s statement on the relationship with the recipient,
signatures of both parties.
Car donation tax
Do I have to pay tax when transferring a car to a family member? It depends. In general, it can be said that the tax must be paid in almost every situation. There are three tax groups that the legislator has separated due to the criterion of the degree of kinship. The immediate family, i.e. spouse, descendants and ascendants (parents, grandparents, children, grandchildren), stepchild, son-in-law, siblings, stepfather, stepmother, in-laws, belong to the first tax group. In accordance with art. 4a paragraph 1 of the Act on inheritance and tax donations, you can not pay when the new owner individually reports the purchase of the car by donation to the head of the relevant tax office within six months from the date of the donation. This applies to donations only for group I.
If this condition is not met, you will have to pay tax in the amount of:
- 5% when the value of the donation exceeds $ 10,278
- 7% after exceeding the value of $ 20,556.
In the case of tax groups II and III, the tax obligation cannot be met. Amounts are identical, but the tax rate is different: for group II it is 7%, 9% and 12%, respectively, and for group III 12%, 16%, 20%.