Family Foundation in Poland

Updated: 24.06.2024

What is Polish Family Foundation?

The Polish Family Foundation is a legal entity designed to manage and protect family assets, ensuring their distribution to close relatives. It serves as a powerful tool for asset protection and succession planning, providing families with a way to safeguard their wealth across generations.

Additionally, the foundation offers significant tax optimization benefits, including deferred taxation and reduced tax rates on payouts to beneficiaries. It also provides a very flexible mechanism for inheritance and succession planning, much more adaptable than traditional Polish testament and inheritance regulations. This flexibility, combined with its separate legal personality, makes it an efficient and secure method for wealth management and succession​

What are the key tax benefits of Family Foundation?

Key tax benefits of the Polish Family Foundation:

1. 0% tax on received revenue: The foundation is exempt from corporate income tax on received revenues such as dividends, interest, or rents from real estate leases. These funds can remain within the foundation and be reinvested without incurring any tax, facilitating efficient wealth accumulation. This means that any earnings generated by the foundation can grow tax-free, significantly enhancing the foundation’s ability to preserve and increase its assets over time.
2. Corporate income tax on distribution of the funds to the beneficiaries: The foundation incurs a corporate tax only when funds are distributed to beneficiaries. This tax is applied to the amount distributed, and if the beneficiaries are close relatives (falling under the zero tax group), there is no additional personal income tax (PIT) burden. Therefore, the effective total tax rate on distributions to close relatives is approximately 14%. This allows for a significant tax advantage compared to traditional inheritance methods, which can involve higher tax rates and additional obligations.

In summary, the Polish Family Foundation is an exceptional tax optimization tool. It allows for wealth accumulation and reinvestment with zero tax on received revenues, and it imposes only around a 14% tax (effective) when distributing funds to close relatives.

This structure not only ensures the protection and growth of family assets but also offers a flexible and efficient mechanism for inheritance and succession planning, making it far superior to traditional Polish testament and inheritance regulations​

Key Facts about the Polish Family Foundation

How does the Family Foundation protect your wealth?

By creating a separate legal entity, the foundation safeguards family assets from personal liabilities and potential creditors. The most crucial protection feature of the Polish Family Foundation is that the founder does not hold any shares or comparable rights towards the foundation, which could be subject to seizure or enforcement, unlike in corporate companies.

The founder’s role is simply a function and cannot be subject to enforcement, thereby strengthening to almost bulletproof the corporate shield protecting foundation assets from the founder’s liabilities.

Additionally, the foundation’s structure allows for strategic asset management and reinvestment, enhancing wealth preservation and growth over time. It also enables precise control over asset distribution, ensuring that wealth is passed on according to the founder’s wishes, minimizing conflicts and legal disputes among heirs.

As an exception, the foundation will only be responsible for the founder’s liabilities if the debt existed at the moment of the foundation’s creation and only to the limit of the value of the assets contributed to the foundation.

How to register a Family Foundation in Poland?

In order to register a Family Foundation in Poland the following steps shall be takes:

1. Declaration of Establishment: The founder(s) must make a declaration to establish the Family Foundation before a notary in the form of a founding act or a will. This formalizes the intent to create the foundation and sets the legal groundwork.
2. Drafting the Statute: A statute outlining the rules and regulations governing the foundation must be prepared. This document includes the foundation’s objectives, the governance structure, and the rights and obligations of beneficiaries.
3. Contribution of Initial Capital: The founder must contribute assets worth at least 100,000 PLN to the foundation’s initial fund. This capital forms the financial basis of the foundation, ensuring it has sufficient resources to fulfill its objectives.
4. Establishment of Governing Bodies: The foundation must have its governing bodies established, typically including a management board and, if necessary, a supervisory board or other oversight mechanisms. These bodies are responsible for the day-to-day management and strategic oversight of the foundation.
5. Registration with the Court: The foundation must be registered in the Family Foundations Register maintained by the court. This registration confers legal personality to the foundation, enabling it to operate as an independent legal entity.

By following these steps, a Family Foundation can be effectively established, providing robust protection and management for family assets while optimizing tax liabilities.

Corporate Governance in Family Foundation

Minimum capital

The minimum capital required to establish a Family Foundation in Poland is 100,000 PLN. This initial capital can be covered through various types of assets, including cash, securities, real estate, or other valuable property. The contributed assets must be clearly defined and valued to meet the minimum capital requirement.

The founder must ensure that these assets are transferred to the foundation’s ownership to provide it with a stable financial base for its operations and objectives. This contribution forms the cornerstone of the foundation’s financial structure.

Corporate bodies

The corporate bodies of a Family Foundation in Poland are essential for its governance and management. These bodies include:

1. Foundation Board: This is the primary executive body responsible for managing the foundation’s daily operations. The board is appointed by the founder and has similar roles to a management board in corporate entities. It makes decisions regarding the administration and utilization of the foundation’s assets.
2. Board of Protectors: This supervisory body is not mandatory unless certain conditions are met. It becomes obligatory when the number of beneficiaries exceeds 25. The Board of Protectors oversees the activities of the Foundation Board, ensuring compliance with legal regulations and the foundation’s statutes. It acts as a check and balance within the foundation’s governance structure, providing oversight and accountability.
3. Meeting of Beneficiaries: This body consists of the foundation’s beneficiaries. It holds significant powers, such as appointing and dismissing members of the Foundation Board and adopting resolutions on matters specified in the foundation’s statutes or legal provisions. This ensures that the interests of the beneficiaries are represented and protected.

These bodies collectively ensure that the foundation operates effectively, transparently, and in accordance with the founder’s objectives and legal requirements, providing robust governance and oversight mechanisms

Statute – key constitutional document

The Statute of a Family Foundation is a foundational legal document that outlines the framework and governance of the foundation. It is prepared during the establishment process and must be signed by the founder before a notary.

Content of the Statute:

1. Foundation’s Objectives and Purpose: Details on the mission and goals of the foundation.
2. Governance Structure: Information on the governing bodies (e.g., management board, supervisory board) and their roles and responsibilities.
3. Beneficiaries: Identification of beneficiaries and the terms of their benefits.
4. Asset Management: Guidelines on how the foundation’s assets will be managed and utilized.
5. Operational Rules: Procedures for decision-making, conflict resolution, and other operational aspects.

Role of the Statute:

• Legal Framework: Provides the legal basis for the foundation’s operations.
• Governance Guide: Acts as a manual for the foundation’s governance, ensuring transparency and accountability.
• Protection Mechanism: Establishes rules that protect the foundation’s assets and ensures they are used according to the founder’s intentions.

The Statute ensures the foundation operates smoothly and in alignment with its intended purpose, providing a clear structure for managing and protecting family wealth.

Taxation of Family Foundation

Polish Family Foundation is taxed at two levels – first corporate income tax – CIT (payable only when funds are distributed to third parties; hence there is 0% of tax on profits retention); second – on level of funds beneficiary / recipient – PIT (personal income tax) and donation tax. On both levels there important exemptions allowing to minimize the tax burden.

Taxation at the Foundation Level:

Corporate Income Tax (CIT):

• The foundation is subject to a 15% CIT on its revenue. However, this tax is only payable when the foundation distributes funds to beneficiaries, allowing for tax deferral on reinvested income.

Taxation at Beneficiary Level:

Personal Income Tax (PIT):

• Exempt Beneficiaries: Distributions to close family members such as the spouse, descendants, ascendants, stepchildren, siblings, stepfather, and stepmother are exempt from PIT.
• Non-Exempt Beneficiaries: Distributions to other beneficiaries are subject to a 15% PIT.

Donation Tax:

• Exemptions: Close family members, the same group exempted from PIT, are also exempt from donation tax.
• Taxable Beneficiaries: Other beneficiaries must pay the applicable donation tax rate.

This structure provides significant tax advantages by deferring taxation on reinvested income and offering exemptions for close family members, thus optimizing the overall tax burden on the foundation’s operations and distributions.

Auditing Requirements for a Family Foundation in Poland

1. Frequency of Audits: The Family Foundation must undergo an audit at least once every four years. However, if the foundation’s financial statements are subject to mandatory examination under the Accounting Act, the audit must coincide with this examination, which may require annual audits.
2. Audit Execution: The audit is conducted by an entity chosen by the assembly of beneficiaries. This can be an auditing firm or a team of auditors, which may include certified auditors, tax advisors, or legal professionals.
3. Scope of the Audit: The audit covers the management of the foundation’s assets, the fulfillment of obligations, and compliance with public law requirements. The audit assesses the foundation’s activities for accuracy, reliability, and adherence to legal and statutory requirements.
4. Audit Independence: Auditors must be independent, not involved in the foundation’s decision-making processes, and must not have provided financial audit or advisory services to the foundation.
5. Audit Report: The audit concludes with a report, which is submitted to the foundation’s management board and, if applicable, to the supervisory board or the assembly of beneficiaries. This ensures transparency and allows for corrective actions if necessary.

FAQ – Family Foundation

A founder of a Family Foundation in Poland must be an individual with full legal capacity, meaning they must have the right to freely manage their assets.

The foundation can be established by a single individual through a will or by multiple founders through a founding act. This ensures that only those fully capable of understanding and managing their legal and financial responsibilities can create a Family Foundation.

Beneficiaries of a Family Foundation can include both individuals and non-profit organizations engaged in public benefit activities.

Typically, family members are designated as beneficiaries, but the founder can also appoint third parties and public benefit organizations. This flexibility allows the foundation to support a wide range of individuals and causes as determined by the founder.

1. Draft Founding Act or Will before a notary.
2. Prepare the Statute.
3. Contribute initial capital of at least 100,000 PLN.
4. Establish Governing Bodies (Management Board, optional Board of Protectors).
5. Register with the Family Foundations Register maintained by the court.

Legal Services – Family Foundation in Poland

Are you looking for expert legal services to establish a Family Foundation in Poland? Reach out to us! We offer comprehensive advisory, establishment, and wealth management services tailored to your needs. Our team of seasoned tax advisors will guide you through the entire process of establishing and running your Polish Family Foundation.

We ensure that your foundation is set up efficiently, complying with all legal requirements while optimizing tax benefits. Our services include strategic asset management, governance structure planning, and ongoing legal support to safeguard and grow your family’s wealth. Contact us today to secure your family’s future with a robust and well-managed foundation. We provide services in our offices in Warsaw, Poznań and Krakow.

Expert DKP Legal

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Write an inquiry: [email protected]

Expert DKP Legal

Contact our expert

Write an inquiry: [email protected]

Expert DKP Legal

Contact our expert

Write an inquiry: [email protected]

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