Family foundations have been operating in Poland for over a year, with their number now exceeding a thousand and continuing to grow. During their development, several shortcomings have been noticed.
What is a family foundation? Regulations regarding family foundations came into effect on May 22, 2023. A family foundation is intended to facilitate the seamless succession of a company, allowing the separation of business matters from family affairs and ensuring the continuity of asset management. It is a legal entity established to accumulate assets, manage them in the interest of beneficiaries, and provide benefits to them. According to lawyers, it is an effective treasury for securing family assets because beneficiaries do not become owners of the funds. The founder can be a natural person with full legal capacity. A foundation can have only one founder if established through a will; in other cases, there can be more. To establish such a foundation, a minimum contribution of 100,000 PLN to the founding fund is required.
Problems and the need for change It is necessary to eliminate unjustified taxation of foundations established by siblings and to create a safe transfer of capital from foreign foundations to Polish ones. It is also important to exempt foundations from the tax on building revenues and precisely define the rules regarding the permissible business activities of foundations. It is particularly crucial to clearly determine whether the sale of investment-acquired items, such as artworks, is permissible business activity, thereby eliminating existing legal uncertainties. Additionally, ambiguities related to the payment of benefits from the foundation have emerged. In response, the National Tax Information recognized that the entire benefit for founders from the immediate family is fully exempt from PIT, which could increase the attractiveness of family foundations as a wealth management tool.
Family foundation as effective asset protection Through a family foundation, one can effectively manage family assets, ensuring protection from various threats, such as creditor claims or financial problems of family members. Thus, the foundation can act as a buffer, safeguarding assets from the negative effects of unforeseen events. They also enable long-term planning, which is crucial for ensuring the stability and continuity of family businesses.
Attractive tax rules According to the regulations, a family foundation is exempt from income tax unless its business activity exceeds the permissible scope. CIT on the payment of benefits must be paid by the founders or beneficiaries, while for individuals from the zero tax group, this is the only tax due.
Summary Family foundations are a useful tool for asset management and long-term planning. Although they require some legislative changes and are associated with various problems, they have proven popular among Polish entrepreneurs. Adjusting regulations and tax interpretations could further increase their attractiveness, providing greater legal certainty and tax benefits for founders and beneficiaries.
