In recent days, an updated draft of the Family Foundation Act appeared on the website of the Government Legislative Centre. The new wording of the bill provides for far-reaching changes in the tax area of the foundation itself, as well as its beneficiaries and founders.
In the light of the latest version of the bill, the family foundation can be an interesting solution as an optimal tax instrument for the succession of multigenerational family business.
The draft law provides that the income tax payable by the taxable person who is the beneficiary of the family foundation for the benefit received from that foundation or for its liquidation will be 15% the tax base.
Tax exemptions
The proposed bill continues to provide for the originally proposed exemption from inheritance tax and property acquisition donations:
- which is the subject of a benefit to the beneficiary of the foundation or which is entrusted to it by the family foundation or family foundation in the organisation, or
- property received in connection with the dissolution of a family foundation or family foundation in an organisation.
As regards the question of income tax on individuals, from the perspective of the beneficiary of the foundation, the income from benefits received from the family foundation will be included in the so-called other sources of income, taxable 15% flat-rate income tax. At the same time, where the beneficiary of the foundation is its founder, the income from benefits received from the family foundation will be exempt from income tax.
CIT directory extended to family foundations
Interesting solutions are also provided under corporate income tax. The list of CIT taxpayers to be extended to include family foundations in the organisation is to be amended. Importantly, family foundations are to be subject to general corporate income tax exemption. This means that any income generated by the family foundation, including, for example, dividends received, will not be subject to income tax.
At the same time, the draft law provides that the income tax payable by the taxpayer who is the beneficiary of the family foundation for the benefit received from that foundation or for its liquidation will be 15% the tax base – without the possibility of taking into account the cost of obtaining income, thus a solution identical to that of beneficiaries who are PIT taxpayers.
These regulations are not definitive, so it should be assumed that they will be subject to more or less changes. Nevertheless, it is worth taking care of the success of the company and planning a generational change in the company.
Author: Jan Markowicz Advocate, graduate of the Faculty of Law and Administration of the University of Silesia in Katowice in the direction of Law. In professional practice, it focuses on the legal and tax service of economic operators and individuals. Author of publications and articles on tax law.