Apartments for medals and tax confusion. An expert explains the regulations

Apartments for medals and tax confusion. An expert explains the regulations

Four Polish medalists will soon receive the keys to two-room apartments somewhere in the Warsaw metropolitan area. This may involve a tax liability – although on the other hand, our regulations allow for so many loopholes that, under special rules, the competitors may as well be exempt from tax.

In terms of results, these were some of the worst Olympic Games in years. Only one athlete – Aleksandra Mirosław – brought home gold, and our athletes also won 4 silver and 5 bronze medals. Our athletes won 10 medals in Athens 2004, but there 3 of them were gold. However, this does not take away the pride and joy of those who managed to win a medal.

Who deserves a medal-worthy apartment?

The athletes who won the podium will also receive very tangible prizes in kind. For winning the gold, Aleksandra Mirosław will receive PLN 250,000 from the Polish Olympic Committee, PLN 100,000 will be donated by the Ministry of Sport and Tourism. Additionally, she will receive the keys to an apartment that will be built somewhere in the Warsaw metropolitan area by the company Profbud.

A two-room apartment was promised to the winner or winners of gold medals in individual disciplines. If kayakers stood on the highest podium, they would receive keys to studio apartments. Such apartments were promised to gold medalists in doubles, mixed, relays or crews. Volleyball players would be wronged – there were no apartments planned for team sports competitors, and “only” PLN 2 million to be divided.

A few days ago, the developer announced that it was “changing the rules of the game” and would also give silver medalists Klaudia Zwolińska, Julia Szeremeta and Daria Pikulik apartments. Each of the athletes will be able to freely dispose of the apartment: keep it for residential purposes, sell it or rent it. Business Insider has learned that the location of the estate will be announced at the turn of the third and fourth quarter. This will happen during a special media event, during which the four Polish representatives will receive their keys.

A medal-worthy apartment and tax

Prizes are always a very nice thing, but the atmosphere of celebration is somewhat spoiled by tax advisors who remind us that the recipients of prizes in kind should pay tax. Although – it should be stated right away – in the face of ambiguity and different interpretations, there is no certainty about tax liability.

Grant Thornton reminds that while the prizes paid by the Polish Olympic Committee and the Polish Paralympic Committeefor achieving results at the Olympic and Paralympic Games are exempt from tax and this results from the Personal Income Tax Act, there is an individual interpretation of the Director of the National Tax Information of November 29, 2023 regarding Members of the Polish Representation, who stated that the exemption from taxation applies only to cash prizes.

We read there that the exemption covers only cash prizes, because that is how the word “paid” used in the act should be understood. If the legislator wanted to include non-cash prizes in the exemption, they would write about “prizes received from (…)”.

The KIS Director therefore introduced a simple division: cash prizes for sports results at the games are exempt from personal income tax, but prizes in kind are not.

The tax can probably be avoided

The author of the analysis, Małgorzata Samborska, notes that although the Director of KIS did not indicate the PIT rate in his interpretation, the appropriate rate seems to be 10%, as for winnings in competitions. Does this mean that the Polish representatives will have to pay approximately one hundred thousand złoty to the tax office (a new two-room apartment in Warsaw can cost one million złoty, depending on the location)? Not necessarily. First, “appropriate agreements regulating the rules and conditions of awarding prizes” will be concluded with the winners, and a donor can also help.

“A common practice is to gross up the prize in kind, i.e. to fund an additional cash prize in an amount that will cover the tax due to the tax office. Especially since the value of prizes in kind is not known, and the value of items such as a painting is highly subjective,” explains Małgorzata Samborska, tax advisor at Grant Thornton.

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