A family foundation is a solution designed for individuals who want to plan succession, protect assets and benefit from tax preferences relating to passive activities specified in the Act. In practice, it is a tool that makes it possible to separate assets from day-to-day family and business matters, and to establish rules for their management and use by designated individuals.
A family foundation operates under special tax rules. As a rule, it does not pay CIT on income from activities permitted by the Act. This includes, for example, income from the rental or sale of real estate, the disposal of shares and the granting of certain loans. Contributing assets to a family foundation is also tax-neutral. This does not mean, however, that a family foundation always remains entirely untaxed. Its tax model is favourable, but it applies only within defined limits.
A family foundation is exempt from CIT provided it operates within the scope of activities permitted by law. If it goes beyond that scope, the tax consequences may be significantly less favourable. For example, if a family foundation carries out activities other than those permitted by the Family Foundation Act, income from those activities is subject to a 25% CIT rate. This is one of the key limits to consider when planning the overall structure.
The time when assets begin to be transferred is also significant. If a family foundation provides a benefit to a beneficiary or founder, 15% CIT generally applies to the value of that benefit. The same rate applies to the transfer of assets in connection with the dissolution of a family foundation.
The 15% CIT rate may also apply to so-called hidden profits, i.e. situations in which value is transferred in a way other than a classic payment, but economically gives the founder or beneficiary a similar benefit.
In practice, it is also important to remember that companies in which a family foundation holds shares cannot use Estonian CIT. This limitation should be considered at the stage of planning the overall asset and ownership structure.
Additional rules apply to certain real estate. If a family foundation owns a building with an initial value exceeding PLN 10 million and statutory conditions are met, including its location in Poland and making it available under a lease, tenancy or similar agreement, a monthly tax equal to thirty-five thousandths of one per cent of the building's initial value may apply.
A family foundation was not created to carry out any business activity. The Act clearly specifies which activities are permitted. This has significant practical implications, because going beyond the statutory scope may lead to less favourable tax consequences. In principle, a family foundation may carry out activities relating primarily to asset management, investment and deriving income from its assets, rather than standard operating activity.
Permitted activities of a family foundation include:
Disposal of Assets – A family foundation may sell its assets, provided they were not acquired solely for the purpose of resale. In other words, the foundation may dispose of its assets but should not operate as a trading entity.
Renting, leasing, and sharing assets – it is permissible to transfer assets to other entities for use, particularly under leases, tenancies, or similar agreements. In practice, this means that the foundation may derive income, for example, from real estate or other assets.
Participation in companies and other entities – A family foundation may participate in commercial companies, investment funds, cooperatives, and similar entities, both in Poland and abroad. It may also be a partner or participant in them.
Securities Trading – The Act allows a family foundation to acquire and sell securities, derivative instruments, and similar rights. This means the foundation may conduct investment activities based on financial instruments.
Granting Loans – A family foundation may grant loans, but only to specific entities. This applies to:
Trading in foreign currencies – a family foundation may also trade in foreign currencies belonging to it where this serves to make payments related to its activities.
The key point is that a family foundation can manage and invest assets, but should not be used as a standard vehicle for day-to-day operating activity. Its role is to preserve, grow and organize assets securely, rather than to participate actively in economic activity on a broad scale.
It is therefore worth verifying at the planning stage whether the foundation’s activities will remain within the limits set by the Act. This is an area where incorrect assumptions can have organizational as well as tax consequences.
The tax on benefits paid to a foundation’s beneficiaries depends on the so-called tax group to which the person belongs in relation to the founder, as determined under the Inheritance and Gift Tax Act.
Importantly, benefits paid to beneficiaries are not subject to ZUS contributions, regardless of the tax group to which the beneficiary belongs.
Hidden profits are a catalogue of transactions that trigger an obligation for a family foundation to pay 15% CIT, even though they do not formally constitute a distribution of profit. They include situations where a family foundation provides the founder or beneficiaries with benefits giving an economic advantage similar to a profit distribution. There is no formal profit distribution; value is transferred in another form, for example as a loan, donation, expense coverage or service. The catalogue includes:
1) interest, commissions, remuneration and other charges on any type of loan granted to a family foundation by the beneficiary, founder or a party related to the beneficiary, founder or family foundation;
2) donations or other free-of-charge or partly paid benefits, other than benefits referred to in Article 2(2) of the Act of 26 January 2023 on the Family Foundation, transferred directly or indirectly to a beneficiary, founder or party related to the beneficiary, founder or family foundation;
3) benefits provided to a beneficiary, founder or party related to the beneficiary, founder or family foundation in respect of:
4) the difference between the market value of a transaction determined under Article 11c and the agreed price of that transaction, in the case of transactions other than those specified in point 3 between a family foundation and a beneficiary, founder or party related to the beneficiary, founder or family foundation;
5) a loan granted by a family foundation to a beneficiary, to the extent that it was due for repayment in a given tax year and had not been repaid by the deadline for filing the declaration referred to in Article 24s(1) for that tax year;
6) a loan granted by a family foundation to a beneficiary for a period of at least 10 years, or for a shorter period if the final term of the agreement is at least 10 years.
The statute of a family foundation is the document that in practice determines how the foundation will operate day to day and which rules will apply in the future. In it, the founder sets out the basic rules concerning the foundation’s purpose, beneficiaries, governing bodies and the management of assets. The statute must be executed as a notarial deed.
From a practical perspective, the statute should not be treated as a formal attachment required only to register the foundation. It is a document intended to organize asset, organizational and family relations and, over time, reduce the risk of disputes and interpretative uncertainty.
The Act specifies mandatory elements. These include in particular:
In other words, the statute answers the most important questions: why the foundation is being established, who is to benefit from it, who is to manage it and what is to happen to its assets in the future.
However, the statute’s role does not end there. The Act also permits additional provisions that are important to the practical operation of the foundation. These may include rules for cooperation between governing bodies, detailed grounds for dissolving the foundation or guidelines on investing assets. This is often where it becomes clear whether the statute was prepared solely for registration purposes or truly responds to the needs of a specific family and particular assets.
A well-prepared statute enables issues that could become a source of future conflict to be resolved in advance. This applies in particular to rules for benefits paid to beneficiaries, the powers of governing bodies, the founder’s influence on ongoing decisions and the manner of investing the foundation’s assets. Preparing the statute should be treated not as a technical step, but as a key stage in establishing a family foundation. At this stage, general succession and asset-related assumptions must be translated into specific legal mechanisms. A well-drafted statute should comply with the Act and also be consistent with the family situation, asset structure and actual purpose of the foundation. This is where support combining legal, tax and practical perspectives is most often needed.
The founding fund must be at least PLN 100 000. A contribution made by the founder is generally tax-neutral, meaning it does not give rise to income tax, VAT or PCC liability.
The name of a family foundation may be chosen freely, but it should include the additional designation ‘Fundacja Rodzinna’. The abbreviation F.R. may be used.
A family foundation uses its own Tax Identification Number (NIP), which serves as its primary tax identifier. It is required for all declarations and documents submitted to public administration bodies and other state institutions.
After the documents have been prepared and the application submitted, the registration process for a family foundation begins and ends with an entry in the Register of Family Foundations. Unfortunately, the waiting time for an application to be examined is not short. In practice, the process may take as long as a dozen or so months.
Only a natural person with full legal capacity can become the founder of a family foundation. This requires that they submit a declaration establishing the foundation, either in the form of a founding deed or in a will.
A beneficiary of a family foundation may be an individual or a non-governmental organization carrying out public benefit activities, provided that, under the statute, they may receive a benefit from the family foundation or assets in connection with its dissolution. The founder may also be a beneficiary.
A family foundation in the process of formation is an entity that comes into existence upon execution of the founding deed or announcement of the will, but has not yet been entered in the register. It already acts in its own name: it may manage assets, acquire rights, incur obligations and appear before a court. Its name must include the designation ‘w organizacji’.
Pursuant to Article 12 of the Family Foundation Act, there may be multiple founders. The exception is the establishment of a family foundation in a will. In such a situation, there is only one founder.
No, Article 16 of the Family Foundation Act expressly excludes the founder's liability for the obligations of the family foundation.
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Paweł Turek
Partner, Attorney-at-law, Tax Advisor
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Krzysztof Burzyński
Partner, Tax Advisor
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Grzegorz Podgórski
Partner, Attorney-at-law, Tax Advisor