Support for Polish flood relief efforts: CIT, PIT, and VAT provisions

Severe floods struck Poland in September 2024, prompting significant relief efforts from businesses and individuals. In response, the government introduced tax measures to support these efforts. Given the large number of entities already aiding flood victims, it is worth taking advantage of the available tax tools.

Below is a summary of the key provisions related to corporate income tax (CIT), personal income tax (PIT), and VAT that are designed to support persons facilitating flood recovery.

While Poland's CIT law lacks specific tax relief measures for flood-related donations, general provisions allow businesses to deduct certain donations from taxable income. This deduction applies to contributions made to non-governmental organisations involved in public benefit activities, such as disaster relief, human protection, or rescue operations.

Eligible recipients for these donations include foundations, associations, and religious entities that operate without profit and engage in public benefit tasks. Donations made directly to individuals or organisations outside this scope do not qualify for tax deductions.

• Deduction limits – businesses can claim a maximum deduction of 10% of their taxable income for donations made in the fiscal year, and this deduction must be reported on the company’s annual CIT return.

• Documenting donations – to qualify for the deduction, companies must maintain proper documentation. For cash donations, a bank transfer confirmation suffices, while non-cash donations require proof of the item's value and a statement from the recipient acknowledging receipt.

• Corporate social responsibility (CSR) and deductible costs – CSR activities that support flood recovery may be considered deductible costs if they meet certain criteria. Unlike donations, which are not treated as tax deductible, CSR expenses are eligible because they benefit the community and enhance the company’s reputation. These expenses can qualify as deductible costs specifically if they are related to the business activities and are properly documented.

To incentivise donations, the Polish government introduced temporary VAT relief for businesses donating goods and services to flood victims. This measure aims to alleviate the tax burden on businesses contributing to flood recovery, ensuring essential supplies reach those affected.

• A VAT rate of 0% for general donations – from September 12 2024 to December 31 2024, a 0% VAT rate applies to the free supply of goods and services intended to support flood victims. Eligible donations include essential goods and services provided to public benefit organisations, local government units, and healthcare providers responsible for distributing aid to flood victims.

• Requirements for applying 0% VAT – businesses must sign a written agreement with one of the specified entities to apply the 0% VAT rate. This agreement can be in electronic form, based on previous experiences, and must confirm that the donation is intended for flood relief.

• A VAT rate of 0% for building materials – another VAT relief measure applies to donations of building materials for flood-affected properties. This 0% VAT rate is valid from September 24 2024 to March 31 2025, supporting the rebuilding or repair of structures damaged by the floods. Eligible recipients include individuals and institutions, such as schools, healthcare facilities, and social welfare organisations operating in flood-affected areas.

To benefit from this relief, businesses must enter into a written donation agreement with the property owner and provide documentation proving that the property was damaged by the floods.

For individual taxpayers, the PIT law allows deductions for donations made to support flood relief efforts. As with CIT, there are no specific provisions for flood-related donations, so general rules apply.

• Eligible donations – individuals can deduct contributions made to public benefit organisations, including charitable foundations and religious institutions, provided the donations are used for disaster relief. Donations made directly to individuals are not deductible under PIT rules.

• Deduction limits – individuals can deduct up to 6% of their annual taxable income for qualifying donations. This deduction must be claimed in the annual PIT return.

• Documenting donations – to claim deductions, appropriate documentation is required. Cash donations need proof of payment, such as bank transfer confirmations, while non-cash donations should include details about the item's value and the recipient’s acknowledgment.

Poland’s tax system offers several ways for businesses and individuals to support flood recovery through CIT, PIT, and VAT provisions. While no specific CIT or PIT measures were introduced for flood relief, the existing rules allow deductions for donations to public benefit organisations, with limits on the deductible amounts. Proper documentation is essential to ensure compliance with the tax authorities.

The temporary VAT relief reduces the tax burden on businesses donating goods, services, and building materials.

Given that many entities have already chosen to support flood victims, it is worth taking advantage of the available tax measures.