Family foundations in Poland – structure and tax rules

What is a family foundation?

A family foundation is a legal structure that builds an organizational structure aimed at securing family assets. It acts as a kind of treasure trove for the founder, protecting his family and business from accidents. Such foundations are popular in other countries such as Austria, Liechtenstein, Germany and Switzerland. A family foundation operates on the basis of a statute (and any regulations), with the founder having a great deal of freedom in determining the principles of its operation. Thanks to the flexibility in shaping the foundation structure and favorable taxation rules (the effective rate is about 13%), it is a tool ideally suited to the expectations of entrepreneurs who have long advocated for the introduction of such a solution in the Polish legal system. The interested party (the founder) is able to draw up a will as well as to establish a family foundation during their lifetime, which will manage their assets.

According to the current data, (as of March 2025) new family foundations are being created every month in Poland. The court registered 2,218 of them, an average of 102 new entities per month. The record was set in October 2024, when 198 foundations were registered.[1]

How to set up a family foundation?

1. A declaration of the establishment of a family foundation must be submitted to a notary in the deed of incorporation or in the will. Art. 3 of the Act of 26 January 2023 on the family foundation (Journal of Laws, item 326, as amended) imposes the obligation to include “Family Foundation” or “FR” in the name. The founder can only be a natural person with full legal capacity, such a requirement is imposed by Art. 11 of the Family Foundation Act. However, it is necessary to remember Art. 12 of the Family Foundation Act here. A family foundation established by testament may have only one founder, while in the case of its establishment in the form of a notarial deed, it may have more founders.
2. Article 26 imposes on the founder the obligation to prepare the statute in notarial form. Essentia negotii are specified in the second paragraph of this provision

• name of the family foundation;
• seat of the family foundation;
• specific purpose of the family foundation;
• the beneficiary or the manner of determining it and the scope of the beneficiary’s rights;
• rules for maintaining the list of beneficiaries;
• rules, including detailed procedures for waiving rights by the beneficiary;
• the duration of the family foundation, if specified;
• value of the founding fund;
• the principles of appointing and dismissing and the rights and obligations of members of the bodies of a family foundation, as well as the principles of representing the family foundation by the management board or by other bodies of the family foundation in the cases specified in the Act;
• entity authorized to approve the activities of the management board of a family foundation in the organization;
• at least one beneficiary entitled to participate in the meeting of beneficiaries;
• principles of amending the statutes;
• the purpose of the family foundation’s property following its dissolution, including the designation of the beneficiary entitled to the property in connection with the dissolution of the family foundation.

The statute may optionally specify other issues, including:

• principles of cooperation or collaboration between the bodies of a family foundation;
• detailed circumstances of the dissolution of a family foundation;
• guidelines for investing family foundation assets;
• provide for the creation of a local unit or local units.

3. The property must be transferred to the foundation with a value of no less than PLN 100,000 (Article 17). A family foundation cannot return to the founder the property contributed to cover the founding fund, either in whole or in part, unless the act provides otherwise. Any copyrights to works must have at least this value. As for real estate and premises, which are the simplest components of property, the founder should regulate their testamentary relations before contributing them to the foundation, in order to avoid claims after his death.
4. Until the foundation is entered in the register of family foundations, it is a family foundation in organization, art. 23 on the family foundation Act states that it should add the designation “in organization”. However, paragraph 3 allows a family foundation in organization to manage its own assets. It is represented by the founder or proxy, and in some cases by the board. Another provision, art. 24 states that only upon registration does the foundation acquire legal personality. The register of family foundations is kept by the Regional Court in Piotrków Trybunalski, as the registry court. The register of family foundations is public.

Taxation of a family foundation – CIT

In accordance with art. 6 sec. 1 item 25 of the Corporate Income Tax Act (Journal of Laws of 1992, No. 21, item 86, as amended ), a family foundation is exempt from CIT tax in the scope of activities specified in art. 5 of the Family Foundation Act. This means that income from dividends, interest, rents or capital gains is not subject to taxation until it is paid to beneficiaries.

However, in the event of conducting business activity exceeding the permitted scope, the family foundation loses the right to exemption and is subject to taxation at the rate of 25% (Article 24r section 1 of the CIT Act). Furthermore, it is not entitled to any reliefs or deductions provided for in Articles 17–18f of this Act.

In addition, a family foundation is obliged to pay tax on income from buildings if the initial value of the real estate owned exceeds PLN 10 million (Article 24b of the CIT Act).

Taxation of benefits for beneficiaries – CIT and PIT

The payment of benefits to the founder or beneficiaries results in the foundation’s obligation to pay CIT in the amount of 15% of the value of the transferred property (Article 24q section 1 of the CIT Act).

In turn, the beneficiaries are required to pay personal income tax (PIT). The tax rate is 15%, however, beneficiaries included in the so-called zero tax group towards the founder (spouse, descendants, ancestors, stepchildren, siblings, stepfather, stepmother) are exempt from this tax (Article 4a, Section 1 of the Inheritance and Gift Tax Act). Beneficiaries from the I and II tax groups towards the founder pay PIT at the rate of 10% (Article 30, Section 1, Item 5a of the PIT Act).

Contribution of property to a family foundation

Contribution of property to a family foundation by the founder is tax neutral, which means that it does not result in the obligation to pay income tax on the part of either the founder or the foundation (Article 6, paragraph 1, item 25 of the CIT Act).

Declaration obligations

A family foundation is required to submit a declaration of the amount of income (revenue) achieved in the tax year by the end of the third month of the following year (Article 24s paragraph 1 of the CIT Act). The declaration should be submitted using electronic means of communication, in accordance with the provisions of the Tax Ordinance (Article 24s paragraph 2 of the CIT Act).

ADVANTAGES of a family foundation

1. Protection of family assets against legal and economic risks

A family foundation enables the permanent separation of private assets from the assets of the foundation. After contributing, for example, real estate or shares in companies to the foundation, the founder is no longer their owner – which means that they are not subject to enforcement, do not form part of the estate or the joint property of the marriage.

Example: an entrepreneur contributes shares in an operating company to a foundation. In the event of his death, divorce, or financial problems of the founder, the assets remain intact.

Legal basis: Articles 2 and 58 of the Family Foundation Act

2. Facilitated and orderly intergenerational succession

A family foundation allows to establish rules for transferring family assets – without having to open inheritance proceedings or divide the assets into smaller parts. The founder can designate beneficiaries, establish rules for payments, and create a plan for decades.

Example: the founder indicates that the children are to receive PLN 5,000 per month for 10 years, and after that time the foundation finances the education of the grandchildren. This prevents the assets from being quickly “squandered”.

Legal basis: Article 3, Article 30 of the Family Foundation Act

3. Significant tax preferences

A family foundation does not pay CIT on so-called passive income (e.g. dividends, lease, sale of shares), which means effective “deferral” of taxation until the benefit is paid to the beneficiary. Additionally, beneficiaries from the so-called “zero tax group” are completely exempt from PIT.

Effect: income reinvested by the foundation can be accumulated for years without tax – which gives an advantage over individuals or companies.

Legal basis:

CIT: Article 6, section 1, point 25 and Article 24q of the CIT Act

PIT: Article 21, paragraph 1, point 157, Article 30, paragraph 1, point 5a of the Personal Income Tax Act

Inheritance and Donations Act: Article 4a

4. Full control over assets – even after the founder’s death

The founder can precisely determine who, when and under what conditions will receive benefits from the foundation. He can also establish supervisory bodies (a council) that will ensure compliance with his will.

Example: the founder stipulates that the son will receive the funds only after he turns 30 and obtains a university degree.

Legal basis: Article 30, Article 33, Article 36 of the Family Foundation Act

5. Possibility of reinvesting funds by the foundation

Thanks to tax preferences, the foundation can effectively raise capital, invest it in funds, bonds, real estate, grant loans or participate in companies. It therefore acts as an investment vehicle with high tax efficiency.

DISADVANTAGES of a family foundation

1. Costs of establishment and ongoing operation

Establishing a foundation requires the development of a statute (often by a law firm), contribution of property (at least PLN 100,000 – Article 23 of the Act), registration in court, and the obligation to keep full accounting records. Legal, tax and advisory services may also be necessary.

Effect: the foundation may be unprofitable for assets below PLN 2–3 million.

Legal basis: Articles 22–29 and 56–63 of the Family Foundation Act

2. Complex taxation system – with potential double taxation

Although the foundation pays CIT 15% on payments to beneficiaries, people outside the founder’s immediate family may additionally pay PIT 15% – which effectively amounts to a 30% burden. The distinction between tax groups is also often incomprehensible.

Example: the founder’s son-in-law (tax group II) receives PLN 100,000 from the foundation – the foundation pays PLN 15,000 CIT, and the son-in-law pays PLN 15,000 PIT = PLN 30,000 tax.

Legal basis: Article 24q of the CIT Act, Article 30 section 1 item 5a of the PIT Act

3. Very narrow scope of permissible economic activity

The foundation may only conduct strictly defined activities (e.g. renting, granting loans, investing in securities, participating in companies). Any exceedance of this scope results in a tax penalty – 25% CIT and loss of exemptions.

Example: a foundation organizes training courses – this activity is not permitted and results in taxation of the entire income.

Legal basis: Article 5 of the Family Foundation Act, Article 24r of the CIT Act

4. No complete anonymity

The register of family foundations (maintained by the court) discloses the details of the founder, board, supervisory board and beneficiaries. For many people (especially wealthy ones) it is important to maintain the confidentiality of the structure – and a foundation does not provide full discretion, as foundations in Liechtenstein do.

Legal basis: Articles 56–63 of the Family Foundation Act

5. Lack of case law and interpretation – tax risk

The institution of a family foundation has been operating in Poland since mid-2023. There is no established court practice, general interpretations or comments yet. This means a high level of uncertainty – for example, in the area of tax consequences of payments, successions or transformations.

Effect: each action should be preceded by consultation with a tax advisor.

6. Possibility of abuse and control by the National Tax Administration

The Ministry of Finance and the National Revenue Administration treat family foundations as a potential instrument for tax optimization. In the case of payments of “apparent” benefits or those inconsistent with the purpose of the foundation, it is possible to apply the clause for circumventing the law.

Legal basis: Article 119a of the Tax Ordinance

1. Interpretation ambiguities in the scope of taxation of benefits

Despite the introduction of regulations specifying the taxation of benefits paid to beneficiaries, the practice of their application raises doubts. Controversy concerns primarily the situation in which the beneficiaries are persons related to the founder, but not included in the so-called “zero group” within the meaning of the Inheritance and Gift Tax Act (i.e. persons close but not covered by the full exemption, e.g. cohabitants). In such cases, the tax rate and the method of its calculation are unclear – there are discrepancies between the provisions of the Personal Income Tax Act (Article 30, paragraph 1, item 5a) and the provisions of the Family Foundation Act.

2. Double taxation of benefits

The taxation mechanism provides that the family foundation pays 15% CIT when paying the benefit, and the beneficiary is additionally obliged to pay PIT – unless they belong to the “zero group”. There are voices that this is a form of double taxation, which may be inconsistent with the principle of tax justice and neutrality of the tax system. This applies in particular to beneficiaries from more distant relative groups, who can effectively bear a total tax burden of up to 30%.

3. Scope of permitted business activity

A family foundation may only conduct limited business activities (Article 5 of the Family Foundation Act). Exceeding this scope results in the loss of CIT exemption and taxation at the rate of 25% (Article 24r section 1 of the CIT Act). However, the regulations do not clearly specify which specific activities are permissible and which are not, which creates the risk of interpretation errors and potential disputes with tax authorities. An example would be real estate rental activity – is it a passive investment or already an operating activity?

4. Lack of full neutrality when contributing assets

Although the contribution of assets to a family foundation by the founder does not result in CIT taxation (Article 6, Section 1, Item 25 of the CIT Act), doubts are raised by the issue of potential VAT or PCC taxation. In the case of the contribution of real estate or a business, tax obligations may arise in the scope of the tax on civil law transactions, which contradicts the declared neutrality of this institution.

5. Excessive formalism and reporting obligations

A family foundation, despite being private in nature, is subject to rigorous reporting obligations, including the need to maintain full accounting records, submit financial statements, register in the register of family foundations and submit CIT declarations. For many smaller founders, the administrative costs and requirements may prove too high in relation to the potential benefits.

6. The risk of using the foundation for optimization purposes

There have been opinions that a family foundation can be used for optimisation purposes, especially in terms of shifting assets and avoiding taxation. This applies primarily to situations in which the founder contributes significant assets to the foundation, uses their income indirectly, and at the same time does not pay tax as a beneficiary. Tax authorities may question such structures in the future, invoking the law circumvention clause (Article 119a of the Tax Ordinance).

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[1]https://businessinsider.com.pl/prawo/fundacje-rodzinne-w-polsce-rekordowa-liczba-rejestracji-w-2024-r/r8q7vcv