Family foundations after changes from June 2022
Work is underway to implement a new form into the legal order, namely the family foundation. Initially, it was assumed that it would start on 1 January 2022. The latest version of the draft points to 1 June next year.
The first draft law implementing family foundations was published on 22 March. In October, a new version of it was published, which contains numerous and quite significant changes. What has changed?
– A family foundation will still not be able to carry out business activities. There will, however, be certain exceptions, e.g. with regard to leasing, renting of property it owns, acquiring and disposing of securities, participating in companies or granting loans to selected recipients.
– There have been significant changes in the taxation of foundations. Initially, all its income was to be subject to 19 per cent CIT (which would result in multiple-taxation). Now the draft provides that foundations will be exempt from tax on income from capital gains (dividends) and interest. Additionally, the circle of the closest persons entitled to exemption (with respect to benefits obtained from assets contributed by the founder) from inheritance and donation tax has been expanded to include daughter-in-law, son-in-law, and parents-in-law. However, when the payments for the benefit of the closest relatives come from the revenue of the foundations which enjoyed CIT exemption, they will be taxed with inheritance and donation tax at the rate of 19 per cent.
– Acquisition of other benefits will be generally subject to tax based on the scale specified in the act on the inheritance and donation tax (a not 19 per cent rate as previously assumed).
Among the important changes, it is worth mentioning that the founder will be able to shape the composition of the foundation’s bodies more freely (the heavily criticised requirement that the beneficiaries cannot hold more than 50 per cent of votes was dropped) – explains Konrad Masłowski, manager at Thedy & Partners.
The amendments submitted to the project as part of the consultations amounted to over 800 pages. If you are interested in more detailed information about the foundation – please contact us.