The Ministry of Development, Labor and Technology published a draft law on a family foundation in the Public Information Bulletin of the Government Legislation Center. The planned date for the adoption of the draft by the Council of Ministers is the second quarter of 2021, and the entry into force of the act – on January 1, 2022. It is a completely new legal vehicle under Polish law – a family foundation will be able to become the owner of an enterprise, shares in companies, securities, as well as real estate and movable property. As indicated in the justification of the project, its aim is to solve the problem of succession of family businesses. As tax issues are an important factor in making business decisions, the establishment of a family foundation will not entail negative tax consequences for the entrepreneur.

According to the draft law on family foundations, the taxation rules for this type of foundations will be as follows:

  • The property contributed to the foundation by the founder, intended for the implementation of the foundation’s goals, will not be income within the meaning of the Corporate Income Tax Act (CIT).
  • Contribution of property to the family foundation by the founder will not be associated with tax burden.
  • The operating activity of the family foundation will be taxed according to general rules.
  • The income of the founder and the beneficiary from the so-called the zero group, received from a family foundation, will not be subject to personal income tax (PIT).

In the event of liquidation of the foundation:

  • Benefits or property acquired in this way will be subject to inheritance and donation tax.
  • People closest to the founder (spouse, descendants, ascendants, stepson, siblings, stepfather and stepmother) will be exempt from tax if the subject of the benefit is property contributed to the foundation by the founder.

The remaining benefit buyers will pay tax in the amount of 19% of the tax base. For comparison, currently such income (e.g. income from other sources referred to in Article 10 (1) (9) of the PIT Act) could be taxed even at the rate of 32%.

It will be possible to establish a foundation by drawing up a founding deed or a will at a notary. The family foundation will be a legal entity based in Poland. The founder will be able to include the most important issues related to its functioning in the statute. The Foundation will be able to be equipped with broadly understood property, within the meaning of the Civil Code, e.g. money, securities, movables and real estate, shares or stocks. The founder will also have a lot of freedom in defining the rules for managing this entity. The circle of beneficiaries will be independently determined by the founder. These could be natural persons, e.g. family members of the entrepreneur whom he wants to secure the future for. They can also be public benefit organizations, with the mission of which the founder feels particularly connected.