There is a new device under Polish law called the family foundation. The organisation and operation of such foundations is regulated by the Family Foundation Act of 26 January 2023 (“FFA”), which is to become effective three months after promulgation date.
A family foundation (“FF”) will be a legal person and have to be registered in a dedicated register. In accordance with FFA, an FF is created for the purpose of making and managing asset investments in the interests of its beneficiaries and making payments and distributions to them. An FF may only be founded by a natural person.
An FF will be authorised to conduct a limited range of business activities, namely:
- to dispose of assets, if such assets have not been acquired for the sole purpose of being resold;
- to lease or rent assets or let others have use thereof;
- to participate in or join commercial companies or partnerships, investment funds, co-operatives or similar entities, whether domestic or foreign,
- to purchase or sell securities, derivatives or similar instruments,
- to extend loans to FF beneficiaries or to companies or partnerships in which FF holds shares or has the status of a partner,
- to engage foreign currencies belonging to FR in order to make payments relating to FF operations,
- to make processed plant or animal products, except for industrially processed products, processed plant or animal products made in course of special farm production operations (działy specjalne produkcji rolnej), and products subject to excise duty, provided that at least 50% of the product has been made using plants or animals grown, kept or raised by FF itself,
- to engage in forest management.
An FF will generally be exempt from corporate income tax, as will the founder’s contributions and third party gifts/donations.
An FF will only be subject to the following taxes:
- commercial buildings income tax,
- CIT (at 15%) on payments and distributions to beneficiaries or founder,
- CIT (at 25%) on business income from activities beyond the statutory list.
The 15% CIT will also apply to distributions of assets remaining after FF dissolution, except that in such cases a deduction is available for the tax base of assets contributed by the founder.
If an FF engages in any business which is not authorised under FFA, it will be punished by withdrawal of the exemptions and deductions otherwise available under Articles 17 to 18f of the CIT Act, such as R&D relief, IP Box relief, or bad debt relief.
FF beneficiaries, being the founder and any persons eligible for zero tax due to their proximity to founder in accordance with the Gifts and Inheritance Tax Act (spouses, children, grandchildren, parents, grandparents, stepchildren, stepmother, and stepfather), will be exempt from personal income tax on payments or distributions received from FF. Any other persons receiving payments or distributions from FF will have to pay the tax at 15%.
FFA has been already signed by the President.
If this issue pertains to your business and you are interested in our assistance, please contact us.
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