Table of Contents:
1. 15-year holding period for the sale of assets contributed to the foundation
2. Extension of the application of the solidarity levy
3. Taxation of rental income
4. Stricter penalties for conducting prohibited activities
Just over a year after the Family Foundation Act came into force, the Ministry of Finance has announced significant changes in regulations concerning family foundations. The aim of these changes is to “tighten the tax system” and prevent potential abuses.
It is worth recalling that the three main goals of the Polish family foundation are:
1. accumulation of assets,
2. management of assets in the interest of beneficiaries,
3. providing benefits to beneficiaries.
- A family foundation is an organization independent of the founder and beneficiaries.
- It is a non-shareholding legal entity – its assets cannot be subject to enforcement for liabilities, and it does not bear responsibility for the founder’s obligations, except for debts incurred before the foundation was established.
- The most important constitutional document is the Statute of the Foundation.
- The foundation can conduct business activity within the limited scope provided in the Family Foundation Act.
A key benefit of the family foundation is that individuals belonging to Group 0, as defined by the Inheritance and Donation Tax Act, do not pay PIT on benefits received. Only the Family Foundation itself is taxed, at a rate of 15%.
The planned changes to the family foundation regulations in 2025 are as follows:
1. 15-year holding period for asset sales
A 15-year holding period requirement is planned for the sale of assets contributed to the foundation. Income from such transactions (made before the end of the holding period) would be taxed at a rate of 19%. This would effectively freeze the foundation’s assets for 15 years. This solution is more restrictive than the regulations concerning the sale of real estate by individuals, where the sale is tax-exempt after five years of ownership.
2. Extension of the solidarity levy
Planned regulations aim to include family foundation payouts in the calculation of the solidarity levy. In such cases, payouts exceeding one million PLN to a single beneficiary would be subject to an additional 4% tax.
3. Taxation of rental income
According to the Ministry of Finance’s proposal, income from property rental by family foundations would be taxed under general rules, eliminating their current tax preference.
4. Stricter penalties for prohibited activities
It is proposed that conducting business activities not permitted by the foundation could lead to its dissolution. Currently, family foundations are subject to a 25% CIT rate if they engage in activities beyond their statutory goals.
It should be noted that these solutions have not yet come into force, and it is unclear when and how the final draft of the Family Foundation Act will look.
