A family foundation may conduct business activities, including rental, leasing, or allowing the use of property on another basis. Tax regulations for family foundations are structured in such a way that the income generated from permitted business activities is exempt from income tax. For this reason, founders often contribute real estate to the family foundation for rental purposes. But can a family foundation engage in short-term rentals (e.g., for tourists) while maintaining this tax exemption?
Can a family foundation engage in short-term rental?
According to the law, a family foundation’s permissible activities include rental, leasing, or allowing the use of property on another basis. However, conducting business activities beyond the boundaries set in Article 5 of the Family Foundation Act results in negative tax consequences, i.e., a higher income tax rate than the standard corporate income tax rate of 19%. If the property is to be rented out for a short period, for example, to tourists or employees, the usual business activity chosen is tourist accommodation and short-term lodging (PKD code 55.20.Z). The Director of the National Tax Information (KIS), in several individual interpretations, has stated that the income of a family foundation from such activity does not fall within the scope of permitted business activities, and as a result, is subject to a punitive income tax rate of 25%. The Director of KIS based his position on the differences between a standard rental or lease agreement and short-term rental, pointing out, among other things, the duration of the agreement.
What do administrative courts say about short-term rentals?
According to the Provincial Administrative Court in Gdańsk (case no. I SA/Gd 219/24), short-term apartment rentals fall within the scope of permissible business activities for a family foundation. The court argued that the law does not distinguish between long-term and short-term rentals. Short-term residential leases, which are subject to the general rules of rental provided in the Civil Code, only require different registration requirements compared to long-term residential leases. The goal of the regulation published on April 29, 2024, regarding the collection and provision of data on short-term rental services (Regulation 2024/1028 on the collection and provision of data on short-term rental services and amending Regulation (EU) 2018/1724), was to create a functional registration system with common rules for establishing registration procedures. The WSA concluded that there is no basis for differentiating the tax consequences of rental and short-term rental for family foundations, as Article 5(1)(2) of the Family Foundation Act does not impose criteria such as a written agreement, security deposits, or longer-term durations. This provision, which allows for the permissible activity of allowing property use on another basis, confirms the lack of grounds to exclude short-term rental from such activities.
