Family foundation – a vehicle for succession and a tax shield?
A New Era in Polish Law
For nearly two years now, Polish entrepreneurs have had access to a powerful new tool that is transforming the rules of asset management, family succession, and tax planning: the family foundation. The Act of January 26, 2023, finally introduced an institution long known in countries such as Liechtenstein, Germany, and Austria. But how does the Polish version of the family foundation work in practice? And is it truly a remedy for succession chaos and excessive taxation?
What Is a Family Foundation?
A family foundation is a legal entity designed to accumulate and manage assets, and to provide benefits to designated beneficiaries—usually members of the founder’s family. Its purpose is not profit-making but the protection and long-term accumulation of intergenerational wealth. In essence, it functions like an institutionalized family office embedded within the Polish legal framework.
A Holding with a Soul
While the foundation’s core mission is not to engage in commercial activity, the law does allow it under certain conditions. A family foundation may:
rent out property,
sell assets (as long as they were not acquired solely for resale),
buy and sell securities,
grant loans to affiliated companies and beneficiaries,
invest in companies and funds,
conduct limited agricultural and forestry activities.
Crucially, any business activity must serve the foundation’s overarching purpose—it cannot become the purpose itself. The foundation is intended to be a passive investor, not an active entrepreneur. Operational business activity should remain within subsidiary companies owned by the foundation.
A Tax Game-Changer
One of the most significant advantages of the family foundation is its tax efficiency. Here are three standout benefits:
Tax-free dividends – When a foundation receives dividends as a shareholder, there is no PIT (personal income tax) or CIT (corporate income tax). This is a considerable advantage over individuals, who typically pay 19% PIT plus a 4% solidarity surcharge (on income over PLN 1 million)—not to mention the CIT already paid by the company (usually 9% or 19%).
No tax on reinvested profits – Earnings retained and reinvested by the foundation (e.g. in real estate or shares) are not subject to taxation.
Tax only upon distribution – CIT at a rate of 15% is charged only when benefits are paid out to beneficiaries—and only on the paid-out amount, not on the total dividend received by the foundation.
The result? The family foundation can function as a private holding vehicle, allowing for effective, flexible, and long-term wealth management and redistribution—tax efficiently.
Smart Succession Planning
The foundation allows the founder to retain control over their estate even after death. The founder can:
designate beneficiaries and define how benefits are distributed,
set rules for managing the foundation’s assets,
serve as a board member (including in companies owned by the foundation).
In this way, the foundation offers a solution to Poland’s commonly chaotic succession processes and helps prevent the all-too-frequent “second-generation wealth dissipation” effect.
A Word of Caution: This Is Not a Tax Avoidance Scheme
While the tax advantages are appealing, it is crucial to adhere to the principle that business activity must remain secondary to the foundation’s purpose. Attempts to circumvent this could result in denial of binding tax rulings or even the application of the GAAR (General Anti-Avoidance Rule). In short: the foundation must serve a real succession and family purpose—it cannot be a legal fiction.
Conclusion
The family foundation is a modern legal vehicle for entrepreneurial families—combining asset protection, succession planning, and tax optimization into a single structure. However, success depends on a well-drafted statute, a clearly defined purpose, and responsible governance. Rather than yet another limited liability company used for “creative structuring,” this is a tool for building lasting family governance. As always in finance, though—the devil is in the details.
Wondering whether a family foundation could help you manage your family’s wealth more effectively?
Contact us to explore whether this solution fits your needs.
