Family foundation

Family foundation

While (still) a novelty in Poland, family foundations are very common in Western European countries. We will spare you the cliché about how they are supposed to serve as a family treasury. For us, they are simply a solution that is supposed to make it easier for Polish entrepreneurs to build family wealth for future generations. To this end, the Family Foundation Act provides that assets accumulated by the founder may remain in “the hands of the family” (i.e. in a foundation), while family members or other people designated by the founder (beneficiaries) become entitled to obtain benefits specified by the founder in the foundation’s by-laws. In brief, the family foundation allows to lay down succession rules that may differ from more strict rules of Polish inheritance law.

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    Who is it intended for?

    A family foundation may be used not only as a succession planning tool, but also as an investment vehicle.

    The transfer of assets to a family foundation should, therefore, be considered by any entrepreneur who:

    • would like to preserve family estate for future generations
    • has no obvious successors whom they could entrust managing business affairs
    • would like to separate ownership and management of family estate from risks related to personal or family circumstances
    • would like to specify how and to what extent family estate may be used by family members and other people close to that entrepreneur

    Family foundations and taxes

    Building family wealth will also be facilitated by a special tax regime applicable to family foundations.

    Within such a regime no tax is due on:

    • the transfer of family estate to a family foundation
    • the income derived by a family foundation from its business activity (to the extent business activity falls within the limits set forth in the tax regulations)
    • the income of beneficiaries included in the “zero group” (e.g. the founder’s spouse, children or siblings) received in a form of distributions made by family foundation

    The family foundation is taxed pursuant to 15% CIT rate on any distributions made to any beneficiaries.

    Distributions from by the family foundation to beneficiaries from other groups than group “zero” are taxed pursuant to 10% / 15% rates.

    How can we help?
    • we will go through the specifics of the family foundation such as purpose of setting up of the family foundation, the scope of the estate that will be transferred, scope of beneficiaries and benefits that will be distributed
    • we will conduct a legal and tax review of the client’s estate, including any legal restrictions related to the transfer of assets to the foundation
    • we will prepare an analysis of the scope of taxation of the foundation’s planned business activities and benefits paid to beneficiaries, including the issue of hidden profit distribution
    • we will implement the agreed family foundation model, including helping to appropriately draw up the foundation’s by-laws, addressing important aspects of the day-to-day management of the foundation’s assets, the scope of the foundation’s business activities, the beneficiaries or the scope of benefits paid to the beneficiaries