Improving the family foundation
The President in January signed a law introducing a new institution - the family foundation - into the Polish legal order, writes Marek Kończak, tax advisor and senior manager at Thedy & Partners, in Rzeczpospolita.
Before the Act even entered into force, the Act amending the Act on Investment Funds and Management of Alternative Investment Funds, the Act on Bonds, the Act on the Bank Guarantee Fund, the Deposit Guarantee System and Enforced Restructuring and certain other Acts (hereinafter: the “Amending Act”) was passed on 14 April 2023. Both Acts in respect of the family foundation will come into force on 22 May 2023.
The Amending Act, in addition to provisions that are unequivocally favourable to taxpayers (e.g. reduction of the PIT rate for family foundation beneficiaries belonging to tax group I or II in relation to the founder within the meaning of the inheritance and gift tax legislation to 10 per cent, or the possibility for companies owned by family foundation beneficiaries to benefit from the Estonian CIT), introduced a number of mechanisms aimed at sealing the legislation and limiting the possibility to use the family foundation for aggressive tax optimisation.
The most important changes introduced concerned:
1) the exclusion of the family foundation’s CIT exemption in relation to income from a lease, rental or other contract of a similar nature, the object of which is an enterprise, an organised part of an enterprise or assets used to carry out activities by the beneficiary, the founder or an entity related to the family foundation, the beneficiary or the founder;
2) exclusion of the family foundation’s exemption from CIT with respect to the income earned by the family foundation if it was not registered in the register of family foundations within six months of its establishment or if the decision of the registration court refusing to register it has become final;
3) the exclusion of the application of Article 15c(1)(1) of the CIT Act to the costs of debt financing related to obtaining, directly or indirectly, funds from a family foundation;
4) the taxation of benefits in the form of hidden profits obtained from a family foundation.
The entire article can be read in Rzeczpospolita of 16 May 2023, page D2