Poland’s groundbreaking family foundation bill
By Wojciech Jaskuła, Penteris
In principle, the purpose of establishing a family foundation in Poland is to manage a family company’s assets and secure property for the group of individuals indicated by the founder.
The foundation is established by a notary deed (or through a testament) in which the beneficiaries of the foundation are indicated. Amongst the beneficiaries, the founder may also indicate a non- governmental organisation which will be entitled to receive benefits from the foundation, or its property following its dissolution.
The bill allows a foundation to run a business activity, but only in specified areas as follows:
- To dispose of property, unless it was acquired solely for the purpose of further disposal;
- To participate in commercial companies, investment funds, cooperatives and similar entities;
- To purchase and sell securities, derivatives and similar rights (e.g. shares and stocks);
- To extend loans to affiliated entities, and trade in foreign currency for payments; and
- To carry on doing business related to the rental, lease and provision of property, or operate a farm.
A family foundation will generally be exempt from corporate income tax, including the establishment of the foundation and the transfer of assets. The foundation is also not obligated to pay corporate income tax on an ongoing basis as long as the source of income is within the areas specified above and until profits will not be distributed amongst beneficiaries.
When profits are distributed, 15 percent corporate income tax will be paid. However, if the activities of the foundation go beyond its permitted statutory scope, that part of the foundation’s income will be taxed at a “penalty” rate of 25 percent corporate income tax.
When receiving benefits from the foundation, beneficiaries will be exempt from personal income tax as well as inheritance and gift tax, provided that the beneficiaries are the founder’s close relatives. If the beneficiaries are unrelated (or distant relatives), the benefits received from the foundation will be subject to 15 percent personal income tax. The same rules of taxation will apply to the liquidation of the foundation.
The bill will come into force in Poland in 2023.
Wojciech JaskulaGGI member firm
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Wojciech is a tax professional who has recently been nominated “Rising Star” by the Legal 500. His expertise focuses on tax issues with respect to transactions and international restructuring.
International Taxation Newsletter, No. 18, Spring 2023 l Photo: Mike Mareen - stock.adobe.com