New solution for succession planning: family foundation

General Concept

1. The ‘Family Foundation’ will be a succession planning instrument dedicated to entrepreneurs running family businesses;
   
   
2. From a legal perspective, a family foundation will be a separate legal entity;
   
   
3. A family foundation will be established to accumulate and manage property for the interest of the beneficiaries;
   
   
4. It will provide benefits to beneficiaries;
   
   
5. A family foundation may conduct a business activity within a limited scope (incl. disposing and leasing of 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) may only be a natural person, who contributes assets valued at PLN 100,000 (or more);
   
   
7. The beneficiaries may be natural persons (including founders themselves) or NGOs.

Tax Implications

1. The establishment and the transfer of assets to a foundation will not be subject to taxation;
   
   
2. A foundation’s income from its business activity will be exempt from corporate income tax (CIT) as long as it is conducted within the scope specified by the new provisions;
   
   
3. If the business operations of a foundation go beyond the permitted scope, the foundation’s income (generated from such operations) will be subject to a 25% CIT rate (‘penalty’ rate);
   
   
4. A family foundation will pay 15% CIT when it transfers benefits to the founder or beneficiaries;

Benefits received by the beneficiaries will be:

1. Exempt from personal income tax (PIT) as well as inheritance and donations tax, in case the beneficiaries belong to the closest family of the founder (so-called ‘zero tax group’);
   
   
2. Subject to 15% PIT in case of other beneficiaries;
   
   
3. The distribution of assets upon the liquidation (dissolution) of the foundation will be subject to 15% CIT with the right to recognise tax-deductible costs (inc. historical tax value of assets contributed to the foundation);
   
   
4. Transfer of funds from the family foundation will not be subject to inheritance and donations tax.

For more details, please contact Piotr Prokocki.

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