On 6 February 2023 The President of Poland signed Act dated 26 January 2023 About the family foundation.[1] The entry into force of the Act is planned for 3 months after the day of its announcement. A new institution was introduced into the Polish legal order, which is intended to ensure the protection of the capital of Polish companies. The institution is modelled on the solutions of our foreign neighbours, such institutions have been operating in Austria, Germany and Liechtenstein for years.
The dominant majority of companies in Poland are micro and small enterprises, a large part of them family companies. Practically every family company in Poland will have to face the transfer of assets to subsequent legal successors. At this stage, many factual circumstances may arise that are not conducive to the development of the company, e.g. lack of willingness by one of the heirs to continue business activity.
Main assumptions of the family foundation
The main idea of setting up a family foundation is to give it the power to manage family assets, protecting it from “split” during succession. Thanks to this institution, the company's assets will be able to be held in hands one the families, which is intended to translate into faster business development and increased investment.
The family foundation aims to create an organizational structure that will ensure the continuation of business activities. The main purpose of setting up a family foundation is to separate family property from family members, as the property is transferred to the property of the established foundation.
The main advantages of the family foundation are:
- protection and regulation transferred to property,
- possibility of withdrawing the funder – entrepreneurs from active business without loss of income,
- family financial security,
- diversification of family and business affairs,
- maintenance of property in the family,
- enabling succession over many generations without unnecessary formalities.
Assembly of beneficiaries and taxation of the family foundation
The family foundation will have legal personality and will be appointed by the founder. Like any foundation, it will also have its beneficiaries.
The activities of a legal person will be carried out by the Management Board, while the beneficiaries will form an assembly of beneficiaries, which will be family members having an impact on the main issues related to the activities of the entity.
In order to establish a family foundation, a fund of at least value should be transferred 100,000 PLN. It is also worth pointing out that the family foundation is not a business entity, it will exceptionally be able to operate in the field of property trading.
An interesting solution is also the issue of the taxation of the family foundation, as in principle family relationships with the funder are taken into account and are tax neutral. The foundation's foundation and the transfer of assets to it will not be taxed.
The family foundation will be obliged to pay 15% corporation tax only at the time of the transfer of funds to its beneficiaries. On the other hand, beneficiaries who are natural persons will be exempt from tax if they are a funder or family member, the other persons will pay 15% personal income tax.
[1] For details of the legislative process see:
https://www.sejm.gov.pl/sejm9.nsf/PrzebiegProc.xsp?nr=2798
Author: Darya Bannaya
Tax consultant in Russell Bedford Poland. Graduate of Law at the Faculty of Law and Administration at the University of Warsaw, graduate of Global Business, Finance and Management at Warsaw School of Economics. Winner of the Ministry of Finance competition “Tax of Leaders” 7. edition. Conducting trainings and conferences for foreigners in tax aspects of conducting and establishing business in Poland. He specializes in tax law, advising clients on current matters relating primarily to income taxes.