Tax consultancy and accounting

Family Foundation


On February 6, 2023. the President signed into law a law on family foundations. This is a fairly new entity in Polish law. Consultations on it were already held in the fall of 2019. (Family Foundation Green Paper).


The essence of a family foundation is to accumulate family assets and maintain them for many generations. Thus, a family foundation will be responsible for managing the assets of the family business and securing the assets of a group of people designated by the founder (most often, these will be the founder’s family members). The structure is also intended to facilitate the succession of the family business – a family foundation established in a will will be able to be the heir.


A family foundation is a legal entity to which the founder will transfer certain assets. The founder can only be an individual (or more such individuals, including unrelated individuals). It operates on the basis of the law and statutes drawn up in the form of a notarial deed. It will be established by a memorandum of association or by a will in the form of a notarial deed.


According to the law, the purpose of its operation is to collect and manage property in the interests of beneficiaries and to provide benefits to them in the form of money, property or rights (e.g., to cover the beneficiary’s living or educational expenses, or, in the case of a beneficiary that is a public benefit organization in the form of a foundation or association, to support their activities). The beneficiary will also be able to receive components of the foundation’s property after its dissolution. It is worth noting that the beneficiary may also be the founder. The specific objectives of the foundation should be described by the founder in the statute.


A family foundation may conduct business activities only to the extent indicated in Article 5 of the Law, i.e., among other things:

  • disposing of property (if not acquired solely for the purpose of further disposal),
  • leasing, renting or otherwise providing property,
  • joining and participating in commercial companies, investment funds, cooperatives and similar entities,
  • acquisition and disposal of securities, derivatives and rights of a similar nature,
  • granting loans to certain entities,
  • trading in foreign means of payment,
  • production of non-industrially processed plant and animal products,
  • forest management.


As soon as the articles of incorporation are executed or the will is promulgated, a family foundation in organization will be established. It should then be registered in the register of family foundations within 6 months. Failure to comply with this obligation or the issuance of a court order (final) refusing to register the foundation will result in the dissolution of the family foundation in organization by operation of law. The family foundation will acquire legal personality only upon registration in the register of family foundations maintained by the District Court in Piotrków Trybunalski.


The initial property to cover the foundation’s initial fund must amount to at least 100,000 zlotys, and the founder is obliged to contribute it before the foundation is registered (or within 2 years after the foundation is entered in the registry if it is established by a will).


The governing body of the foundation is the board of directors (single or multi-member), and an optional body will be the supervisory board (mandatory above 25 beneficiaries).


The family foundation will be jointly and severally liable with the founder for his obligations arising before the establishment of the family foundation. It will also be able to be liable for the founder’s alimony obligations arising both before and after the establishment of the family foundation, if enforcement against his assets is ineffective. Claims by persons against the founder for maintenance obligations will be satisfied first.


The introduction of regulations on family foundations involves changes to three tax laws.


The Inheritance and Donation Tax Law will introduce an exclusion from taxation of the acquisition of property or property rights by beneficiaries of a benefit from a family foundation and constituting property received in connection with the dissolution of a family foundation or a family foundation in organization. Thus, the primary purpose of a family foundation is excluded from inheritance and donation taxation.


The Personal Income Tax Law introduces another subject exemption, according to which a portion of income from receiving or leaving a benefit in connection with the dissolution of a family foundation will be exempt from income tax.


This exemption is granted in the proportion that the property contributed to the foundation is attributable to the founder (property contributed by the founder’s spouse, descendants, ascendants or siblings is considered to be contributed by the founder). However, this portion will only be exempt in two cases:

– when the income was obtained by the founder or a person who is a person referred to in Article 4a (1) of the Inheritance and Donation Tax Law with respect to the founder (from the so-called “group 0”, i.e., for example, spouse, descendants, siblings) in connection with the dissolution of a family foundation, or

– when the income was received by a beneficiary of a family foundation, if the beneficiary is either the founder or a person who is a “group 0” person in relation to the founder.


For the rest, a flat tax rate of 15% applies, i.e. without deducting income from the costs of obtaining it.


The Corporate Income Tax Law introduces a new entity exemption that applies to family foundations.


This means that equipping a family foundation with assets by the founder will not give rise to any CIT obligations for the foundation. In addition, income derived from business activities to the extent indicated in the Foundation Law will also, in principle, not be subject to CIT.


However, this exemption does not apply to income from buildings or benefits directly or indirectly transferred or made available by the family foundation to the beneficiary or founder (being the beneficiary), and on property transferred in connection with the dissolution of the family foundation. Taxation on these activities will be 15% of the tax base (i.e., income corresponding to the value of the transferred benefit or property).


In the case of business activities beyond those indicated in the Family Foundation Law, the CIT rate is as high as 25% of the tax base.


The law will take effect 3 months after the date of promulgation. It is advisable to familiarize yourself with the changes in advance and consider establishing a family foundation, for example, in order to guarantee succession stability for your business.


Due to the quite new matter of this regulation and its complexity, the support of a professional attorney may be necessary to ensure the successful establishment of a family foundation.