When does a family foundation have to pay taxes?

Legalny pobyt obywateli Ukrainy

A family foundation is subject to Corporate Income Tax (CIT). However, the family foundation is exempt from this tax. This exemption is subjective, covering all income earned by the family foundation. There are exceptions to this rule, making the structure of a family foundation similar to Estonian CIT. Taxation occurs only when the beneficiaries receive certain benefits.

CIT Tax – Exemption, but…

One of the purposes of a family foundation, besides managing the assets of the family business, is to provide benefits to the foundation’s beneficiaries. However, any such payment results in the family foundation being liable to pay Corporate Income Tax (CIT). When providing benefits to beneficiaries, the family foundation will pay CIT on the value of the provided benefits at a rate of 15%. For example, if it is a monetary benefit of 10,000 PLN, the family foundation, in addition to disbursing the benefit to the beneficiary, will be obligated to “contribute” tax, amounting to 1,500 PLN. The same situation applies to non-monetary benefits. The family foundation must determine the value of the benefit and “contribute” 15% of the corporate income tax.

Czy od świadczeń na rzecz beneficjentów jest PIT?

Is Personal Income Tax (PIT) applicable to benefits for beneficiaries?

If the beneficiaries of the family foundation are exclusively the ancestors or descendants of the founder (e.g., parents and children), receiving benefits from the family foundation is generally not subject to Personal Income Tax (PIT). It is important to remember that PIT does not apply to the extent that beneficiaries are entitled to receive benefits based on the foundation’s statute.

However, the Director of the National Tax Information, in an interpretation under file number 0114-KDIP3-1.4011.810.2023.1.EC, clarified the circumstances in which a family foundation may be obliged to collect and settle PIT. He stated that the use of a car by beneficiaries of the foundation constitutes a non-monetary benefit and, as such, constitutes income from other sources, resulting in an obligation to tax. In such cases, the foundation, as the payer, is obliged to calculate, collect, and remit income tax on this income. Tax authorities emphasized that this income is subject to taxation based on the rules specified in Article 30(1)(17) of the PIT Act, taking into account the specific exemption defined in Article 21(1)(157) of the PIT Act. The exemption from personal income tax applies only to the part of income corresponding to the proportion of the value of property contributed to the foundation by the founder or the foundation.