Publication date: November 18, 2025
The essence of family foundations
Since the Act on Family Foundations came into force in 2023, they have become incredibly popular among Poles. The numbers alone demonstrate this: by April 2025, approximately 2,500 Family Foundations had already been registered, and as many as 4,000 applications had been submitted. Their primary purpose is to provide essential funds to beneficiaries, who may include relatives (funds allocated to beneficiaries who are individuals may include living and education costs). Furthermore, they play a crucial role in inheritance. They prevent excessive fragmentation of family assets and disputes that may arise as a result of inheritance. The founder can contribute assets (e.g., company shares) to the foundation, ensuring that designated assets will not be inherited under the Civil Code (they will not be included in the deceased’s estate), meaning only those designated by the founder as beneficiaries will have access to them. A family foundation, therefore, allows for a more effective reduction in potential disputes by clearly advancing the testator’s interests while maintaining its family character and professional management. However, recently, these legal entities have also been observed being used for other purposes, including tax optimization. Therefore, on August 8, 2025, the Polish Ministry of Finance announced legislative changes that could significantly impact the situation of family foundations.
Covering family foundations with taxation for its share in a controlled foreign entity (CFC) and clarifying the taxation rules in the case of holding shares in a tax-transparent foreign company
Previously, family foundations were not subject to taxation upon acquisition of shares in a company falling within the definition of a controlled foreign entity (CFC). While family foundations were explicitly exempt from paying corporate income tax (CIT), legal scholars disputed whether this exemption also applied to the tax levied on CFCs. Tax rulings generally favored foundations, claiming that not only foundations but also their beneficiaries were exempt from tax. For example, in a situation where a Polish family foundation were to acquire a foreign company and the question arose as to whether the beneficiary of that company would be required to pay personal income tax (PIT), it was determined that the taxpayer would not meet the definition of a CFC, as the foundation, not the taxpayer, would hold the shares and thus exercise control over the foreign entity. Moreover, the foundation itself cannot be considered to have indirect shares under the provisions on personal income tax, because they do not meet the requirements specified in the Act, the family foundation does not meet the definition of a subsidiary, because it is not an entity in which the taxpayer itself holds at least 50% of the shares, voting rights, or the right to participate in the profit, and therefore the beneficiary of the foundation will not have to pay the liabilities related to the CFC[1].
The regulations regarding controlled foreign entities were introduced to prevent tax avoidance through the transfer of income to subsidiaries located in other countries, considered tax havens. A similar justification is provided for the changes proposed by the Ministry, which aim to tax foundations on their shareholding in a controlled foreign entity. This is intended to equalize them with other entities defined in Article 24a of the Corporate Income Tax Act and, consequently, prevent their use for tax avoidance. This may include Luxembourg-based SCSps issuing investment certificates that can be acquired by Polish family foundations. Numerous interpretations, for example, have stated that profits earned by a Polish Closed-End Investment Fund from the purchase of guarantee certificates issued by an SCSp will not be subject to taxation under Polish rules[2]. This change would impose a 19% tax on a family foundation’s share in a CFC and subject it to the general requirements of the Corporate Income Tax Act (e.g., taxation for holding more than 50% of the capital or voting rights in control, decision-making, or management bodies). This would preserve the original, family-oriented nature of the RF. Family foundations would also be placed on an equal footing with other entities recognized as CFCs. The proposed changes also aim to eliminate legal loopholes exploited by entrepreneurs and to repolonize capital.
Three-year exclusion from tax exemption for the sale of assets contributed or transferred to a family foundation
In the current legal situation, the discussed tax exemption for the sale of assets contributed or transferred to a family foundation was excluded when the property acquired by the foundation was acquired solely for the purpose of further sale; however, this exclusion has not yet applied to shares and stocks contributed to the foundation, which could be sold immediately after their acquisition by the foundation.
As already mentioned, family foundations are currently generally exempt from corporate income tax (CIT). However, exceptions to this rule are specified in Article 6, Sections 6-8, and Chapter 5c of the CIT Act. Therefore, tax will apply to foundation assets transferred to beneficiaries for use, fees on loans granted to the foundation by the founder or beneficiary (at 15% of the tax base), and the foundation’s business activities beyond the scope specified in the Act (at 25% of the tax base)[3].
Generally, beneficiaries of a family foundation will be required to pay personal income tax (PIT) at a rate of 10% (for individuals classified in tax groups I and II under the Inheritance and Gift Tax Act[4]) or 15% (for other beneficiaries). However, a special exception is provided for beneficiaries of a family foundation. A beneficiary who is the founder or their spouse, descendant, ascendant, stepchild, sibling, stepfather, or stepmother is exempt from personal income tax[5]. However, the extent of this exemption depends on the ratio of the value of the assets contributed by the founder to the value of the assets contributed by all the beneficiaries and the foundation itself[6].
Beneficiaries will also not be obliged to pay inheritance and gift tax, but the foundation will be subject to civil law transaction tax (PCC) within the scope of the activities listed in the Act (although it should be added that the contribution of property to the foundation in the form of a donation will no longer be subject to this tax, because under the PCC Act only donations involving the assumption of debts or other burdens and obligations of the donor are subject to taxation).
The proposed solution, which excludes the tax exemption for the sale of assets contributed or transferred to a family foundation for a three-year period, was proposed to prevent the transfer of assets to the foundation with the intention of disposing of them under a more favorable tax regime, a practice that has recently become common among Polish entrepreneurs. Disposing of such assets before this period would result in a 19% tax rate. If this three-year period were introduced, income from the sale of assets contributed to a family foundation would be taxed at the time of sale, rather than only upon payment of benefits to beneficiaries. The proposed changes could also negatively impact situations where there is a sudden and urgent need to finance beneficiaries’ needs (e.g., in the event of an accident).
The problem of short-term rentals
Under the Family Foundations Act, they may conduct business activities by leasing their property. The general rule is that such foundations are exempt from corporate income tax (CIT). This also applies to their business activities that do not violate the provisions of Article 5 of the Family Foundations Act. However, the income tax exemption will not apply to leases involving an enterprise, an organized part thereof, or assets used by the beneficiary or founder to conduct business, provided that the individual’s shareholding and rights in the leased premises are at least 5%. Therefore, if a foundation decides to lease premises to its beneficiary for the purpose of conducting their business (e.g., a hotel business), the exemption will not apply, and a 25% CIT tax will be due.
The position that short-term rentals will be exempt from taxation is inconsistent with existing tax interpretations. For example, one interpretation stated that services related to short-term rentals do not meet the characteristics of a lease and cannot be considered providing property for use on any other basis[7]. Administrative courts disagreed with this position. Due to the lack of a legal definition of “short-term rental,” such agreements should be treated like other leases under the Civil Code. A shorter duration does not constitute a basis for excluding such agreements from the list of business activities that can be conducted by short-term rentals; short-term rentals are merely subject to different registration requirements than “standard” rentals. Paradoxically, however, the position of the Ministry of Finance seems to confirm the actual exemption from fees associated with short-term rentals.
Another issue in this regard is the fact that the legislature has not yet defined the concept of “short-term rental.” However, there is a good chance that such a definition will eventually emerge due to the announced changes. On the other hand, the exemption will still cover long-term rentals.
This proposal is justified in a very similar way, as it is intended to prevent tax optimization and avoidance of taxes on income from real estate, which is to be achieved by eliminating the possibility of circumventing the regulations. The justifications also mention examples of other activities, such as using foundations to pay tax-free benefits in kind, distributing assets in the form of donations or sharing profits between foundations and family members without taxation.
What’s next with the changes?
As described above, the proposed regulatory changes are primarily intended to prevent the use of Family Foundation for tax optimization purposes. Ultimately, they are intended primarily for family and inheritance purposes, although there is also a risk of negative consequences (as in the case of the planned three-year exclusion of the tax exemption). The changes are scheduled to be implemented on January 1, 2026. However, they will only apply to income generated after that date. This will also imply additional challenges for entrepreneurs and funders, such as earlier and more thorough transaction planning to account for grace periods, updating short-term rental strategies, and reassessing CFC risks.
It is also worth adding that the proposed changes are not as far-reaching compared to those proposed back in 2024, when a longer period of exclusion from tax exemption was proposed (up to 15 years), dissolution of a family foundation in the event of conducting activities exceeding the scope specified in Article 5 of the Act on Foundations (according to the currently proposed changes, the effect will only be a higher tax), or subjecting beneficiaries of the Family Foundation to the solidarity levy, i.e. a 4% tax above PLN 1 million of benefits granted to the beneficiary, which has now been withdrawn.
[1] Individual interpretation of the Director of the National Tax Information of August 16, 2024, reference number 0114-KDIP3-1.4011.496.2024.1.MS2.
[2] Individual interpretation of the Director of the National Chamber in Warsaw of 17 December 2014, reference number IPPB5/423-1182/14-2/MK.
[3] Art. 5 of the Family Foundation Act of 26 January 2023.
[4] Article 14, paragraph 3, points 1 and 2 of the Inheritance and Gift Tax Act of 28 July 1983.
[5] Article 21, section 1, item 157 of the Personal Income Tax Act of 26 July 1991 and Article 4a, section 1 of the Inheritance and Gift Tax Act of 28 July 1983.
[6] Article 28, paragraph 1 of the Act on Family Foundations of January 26, 2023 and Article 21, paragraph 49 of the Personal Income Tax Act of July 26, 1991.
[7] Including individual interpretation of the Director of the National Tax Information Office of September 16, 2024, reference number 0111-KDIB1-2.4010.448.2024.1.DP.