A life estate agreement (“umowa dożywocia”) is legally treated as a form of compensated transfer of real estate. Both administrative courts and tax authorities consistently confirm this interpretation. However, the tax consequences for the parties involved are somewhat unusual. 

For the person transferring the property, the arrangement can be surprisingly beneficial. Even if the transfer takes place within five years from acquiring the property, no personal income tax (PIT) is due. This results from the fact that the law requires determining the transaction price in order to calculate taxable income, which is not possible in a life estate agreement. 

The situation is different for the acquiring party. They must pay a civil law transaction tax (PCC) amounting to 2% of the market value of the property. Importantly, family relationships between the parties do not provide any exemption from this tax. 

No PIT despite early transfer 

For many years there were doubts whether transferring property under a life estate agreement within five years from acquisition should trigger the standard 19% PIT applicable to real estate sales. 

A favorable interpretation for taxpayers was confirmed by the Director of the National Tax Information (KIS) in an individual ruling dated 14 January 2026. 

The case involved a married couple who purchased a house in 2025 and planned to transfer it to their son under a life estate agreement. In return, the son was to provide lifetime care, maintenance and cover funeral costs. Despite the five-year period not having expired, the tax authority concluded that no income tax would arise. 

The reason lies in the structure of the agreement. Unlike a sale contract, a life estate agreement does not specify a purchase price. Instead, the acquirer commits to providing personal services such as housing, food, care and assistance. Since the value and duration of these obligations cannot be determined at the time of signing the agreement, taxable income cannot be calculated. 

Key ruling of the Supreme Administrative Court 

This interpretation is based on a landmark resolution of the Polish Supreme Administrative Court (NSA) from 17 November 2014. 

The court stated that although a life estate agreement constitutes a compensated transfer of property, the rules for determining taxable income under PIT cannot be applied to such transactions. Without a determinable tax base, the tax obligation simply does not arise. 

PCC tax remains unavoidable 

While PIT does not apply, the civil law transaction tax is unavoidable. 

Polish law explicitly lists life estate agreements as taxable transactions. The tax rate is 2% of the property’s market value and is collected by the notary executing the notarial deed. 

Tax authorities consistently confirm that no exemptions apply, even between spouses or close relatives. 

Termination of the agreement may reset the tax clock 

Another issue worth considering is the potential tax impact of terminating a life estate agreement. 

Tax authorities indicate that the previously paid PCC cannot be reclaimed even if both parties agree to terminate the agreement. 

Moreover, if the property returns to the original owner after termination, this may be treated as a new acquisition for income tax purposes. Consequently, the five-year holding period for tax-free property sales starts again from that date.