The Polish family foundation is a new legal institution, effective May 22, 2023, for accumulating family wealth and allowing it to be retained in the country for many generations. The family foundation is intended as an instrument for accumulating Polish capital and building strong brands. In addition, the family foundation also offers tax benefits, including tax deferral.
A family foundation can be established by more than one person, including unrelated persons. A foundation can be established by a memorandum of association or a will, drawn up in the form of a notarial deed. A foundation established under a will will be allowed to have only one founder. The assets of the family foundation created as a result of the founder’s endowment constitute the founding fund, the value of which may not be less than PLN 100,000.
The main benefit of a Polish family foundation is the protection of the assets of the family business and the management of these assets in accordance with the will set by the founder. The foundation may manage and trade its property, and beneficiaries designated by the founder may share in the foundation’s profits. The foundation is a suitable tool for succession planning of a family business. The law provides for a great deal of flexibility in the rules for the operation of foundations, particularly the rules for the payment of benefits to beneficiaries and the rules for decision-making by foundation bodies.
A Polish family foundation is subject to corporate income tax (CIT). Taxation is deferred and follows principles similar to those operating in the case of Estonian CIT, i.e. the obligation to pay tax will only occur when the funds are disbursed to the beneficiaries. When the foundation transfers the benefits to the beneficiary, it will be required to pay CIT at 15% of the tax base. As a general rule, benefits received by foundation beneficiaries will be subject to personal income tax (PIT), but with the exception of the acquisition of benefits by the founder and his immediate family (spouse, descendants, ascendants, stepchildren, siblings, stepfather and stepmother). The founder and relatives are exempt from PIT on benefits received or property left to them after the dissolution of the family foundation. In addition, this income, as income from other sources not related to work, is not subject to social security and health insurance contributions. Non-family beneficiaries, on the other hand, face a PIT liability of 15% of the tax base.
