A family foundation offers quite a few advantages. Also tax
As early as 22 May 2023, the provisions on the family foundation will come into force. This is a new institution under Polish law, which provides for a lot of tax preferences. Marek Kończak - tax advisor, senior manager at Thedy & Partners - tells the portal Forum Polskiej Gospodarki.
What was the legislator’s objective in introducing the institution of a family foundation?
According to the explanatory memorandum to the bill, the main objective behind introducing the institution of a family foundation into the Polish legal system was to facilitate multi-generational succession while reconciling business and private interests. In other words, the aim was to ensure the safe transition of the business to a new generation while reconciling many different conflicting interests (business owners, successors, creditors, etc.).
Who should seriously think about setting up such a foundation?
A family foundation was primarily envisaged for those running a larger-scale business – especially one that does not require ongoing oversight by the owner and the management of which can (at least potentially) be left to specialists.
The legislator has set the minimum capital necessary to establish a foundation relatively low (PLN 100,000), but in practice it should be assumed that foundations will need assets – at least – several times (if not a dozen times) larger for their existence.
A foundation seems to be an interesting tool in the case of large or multi-generational families, as well as in situations where some of the children show particular ability (or awkwardness) in running the business. A family foundation allows the management to be delegated to the most competent persons (whether family members or external managers) while ensuring adequate benefits for the other beneficiaries.
Special tax accounting rules are provided for this type of foundation. What exactly do they consist of?
Foundations themselves are – in principle – exempt from taxation. Tax only appears at the moment of transferring the property to beneficiaries (15 per cent CIT on the foundation’s side). If the benefits are made to those closest to the founder, this is the only tax that will be payable (such beneficiaries are exempt from PIT).
Tax may also have to be paid when the foundation is used in certain optimisations, when the foundation carries out business activities to the extent not provided for by the law and when it is liquidated (but these should be rather exceptional events).
The entire article can be read at this link: Fundacja rodzinna daje sporo korzyści. Również podatkowych [NASZ WYWIAD] – Forum Polskiej Gospodarki (fpg24.pl)