Family foundation – Poland’s succession planning scheme

The FFA came into force on 21 May 2023 and, within just one year, 1,538 applications were submitted for registration, indicating robust interest in the new legal structure.

General concept

1. Family foundation is a succession planning instrument for entrepreneurs running family businesses. 
2. From a legal perspective, it is a separate legal entity.
3. The family foundation is established to accumulate and manage property for the interest of beneficiaries. 
4. The family foundation will provide benefits to the beneficiaries. 
5. It may conduct business activities within a limited scope (disposing of and leasing property, investing in commercial companies and investment funds, investing in securities and derivatives, and granting loans to a limited group of borrowers).
6. The founder(s) of a family foundation may only be a natural person who contributes assets valued at PLN 100 million (or more).
7. The beneficiaries of the foundation may be natural persons (including the founders themselves) or NGOs.

Tax implications

1. Establishment and transfer of assets to the family foundation is not subject to taxation. 
2. The foundation’s income from its business activity is exempt from corporate income tax as long as it is conducted within the scope specified by the provisions. 
3. If the business operations of the foundation go beyond the permitted scope, the foundation’s income is subject to a 25% corporate income tax (CIT) rate.
4. A family foundation pays 15% CIT when it transfers benefits to the founder or beneficiaries. 
5. Benefits received by the beneficiaries are:

• exempt from personal income tax as well as inheritance and donations tax, if the beneficiaries belong to the closest family of the founder;
• subject to 15% personal income tax (PIT) in case of other beneficiaries. 

1. The distribution of assets upon liquidation of the foundation is subject to 15% CIT with the right to recognise tax-deductible costs (including historical tax value of assets contributed to the foundation).
2. Transfer of funds from the family foundation is not subject to inheritance and donations tax. 

Positive reception 

The number of applications continues to grow, with a record 227 applications filed in April 2024 alone. The establishment of family foundations is viewed positively among business owners and families looking for efficient succession planning tools. Many see it as a long-awaited solution that simplifies asset management and protects wealth across generations. This is particularly important as Poland’s family businesses have prospered greatly in the thirty or so years since the fall of communism. This gives them a chance to grow further. 

There are downsides, of course. There are many proposals for aggressive tax optimisation using family foundations (including the use of foundations to sell businesses tax-free). In response, the Ministry of Finance has announced changes aimed at limiting the tax benefits associated with owning a family foundation.

However, the general outlook is positive as the structure allows for greater flexibility compared with traditional inheritance methods, enabling founders to tailor the foundation’s management and distribution rules according to their specific needs. This adaptability is a significant factor in its growing popularity.

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Piotr Prokocki specialises in comprehensive tax services for M&A and develops effective structures for financing transactions, capital withdrawal, and profit distribution.