The Family Foundations Act has been in force in the Polish legal system for a year now. During this time, over 800 foundations have been registered. The popularity of this form of wealth accumulation is due, among other things, to its favorable taxation. Generally, a family foundation's tax liability is not related to generating income, but rather to paying benefits to beneficiaries. For tax purposes, the income earned by the foundation is irrelevant; what matters is the amount of benefits paid to beneficiaries. The foundation will pay 15% corporate income tax on this amount. However, this rule applies to income earned from activities permitted by law. In other cases, the foundation pays a penalty tax rate of 25% on the income earned.
This is clearly stated in the law. However, as is commonly known, "the devil is in the details." These details are often the subject of individual tax interpretations. This Monday and next, we will present the most interesting tax interpretations regarding family foundations issued over the past year.
Filing the founder's claim for tax-free profit distribution
The transfer of a claim by the founder, a shareholder in a company, to a family foundation for the payment of outstanding profits, and the payment of outstanding profits to the foundation, will not constitute taxable income for the foundation. Such an event constitutes a contribution of property to the foundation, which is not subject to taxation. However, it cannot be considered a business activity.
Interpretation of April 11, 2024, reference number 0114-KDIP2-1.4010.30.2024.1.KW
Taxation of loan receivables
The acquisition of a loan receivable by a family foundation exceeds the scope of business activity permitted by law. Income from such a receivable will be taxed at a penalty rate.
Interpretation of December 29, 2023, reference number 0111-KDIB1-2.4010.317.2023.2.DP
Income from currency trading with tax
A permitted activity for a family foundation is the trading of foreign currencies belonging to the family foundation solely for the purpose of making payments related to the family foundation's activities. If the foundation acquires foreign currency and then sells it, positive exchange rate differences are subject to a penalty tax rate.
Interpretation of December 29, 2023, reference number 0111-KDIB1-2.4010.317.2023.2.DP
Cryptocurrencies are not for foundations
Cryptocurrencies are not securities, derivatives, or similar rights. Trading them within a family foundation will not constitute a business activity permitted by law, and therefore the income will be taxed at a penalty rate.
Interpretation of August 4, 2023, reference number 0114-KDIP2-1.4010.312.2023.1.KS
The rent for the foundation's headquarters from the founder is not a hidden profit
If a family foundation leases premises from a founder to house its headquarters, the rent paid will not constitute hidden profit. Therefore, the foundation will not be liable for tax. However, it is important to note that the lease relationship is solely based on the agreement; the foundation is not obligated by its statute to lease the premises from the founder, and the rent reflects market conditions. The founder will be liable for taxation of income received from the family foundation in this manner, just like any other rental income.
Interpretation of August 11, 2023, reference number 0111-KDIB1-2.4010.291.2023.1.EJ
This article is for informational purposes only and does not constitute legal advice.
Legal status as of May 17, 2024
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