The introduction of the family foundation institution into the Polish legal system was intended to stimulate multi-generational succession and retain capital in the country. Preferential taxation rules, which included exemption from corporate income tax during the asset accumulation and multiplication phase and deferred taxation until benefits were paid to beneficiaries, made foundations an attractive asset structuring tool. However, the widespread use of foundations in M&A transactions caught the attention of the Head of the National Revenue Administration.
The relationship between the taxpayer's statutory right to choose the optimal legal path and the prohibition against abusing the law has become a key interpretative issue. According to the tax authority, transferring shares or stocks of a corporation to a family foundation immediately prior to their sale to an external investor is often an artificial arrangement, the primary purpose of which is to avoid paying personal income tax on the shareholder's part.
Position of the Council for Combating Tax Avoidance
In Resolution No. 3/2025, the Council for Combating Tax Avoidance carried out an in-depth and multi-faceted analysis of the admissibility of applying the GAAR clause specified in Article 119a of the Tax Ordinance to a set of activities including the establishment of a foundation, the donation of shares and their immediate sale to an investor.
It was found that the application of the GAAR clause was justified only with respect to the portion of the proceeds from the sale of shares that was immediately transferred from the foundation to the beneficiary without any real investment activity. In the remaining scope, concerning the funds retained by the foundation and allocated for its statutory purposes, there was no basis for a finding of abusive conduct.
A key element of the Council's argument was the precise definition of what is called an appropriate act. In his request for an opinion, the Head of the National Tax Administration (KAS) stated that the appropriate act should be the direct sale of shares by an individual and the subsequent transfer of the resulting after-tax proceeds to a family foundation. However, the Council correctly noted that adopting such a hypothesis would lead to double taxation of the same capital, violating the principle of proportionality and the reasonableness test.
A prudent donor who wishes to provide another entity with assets transfers the asset itself, avoiding unnecessary transaction costs and tax burdens.
Contradiction with the Act
Examining the premise that a tax benefit is inconsistent with the purpose of the statutory provision requires addressing the essence of the tax regime for family foundations. The CIT exemption provided for in Article 6, Section 1, Item 25 of the CIT Act is intended to facilitate the accumulation of assets, their management in the interests of beneficiaries, and the pursuit of succession goals. However, it is not absolute. If the contribution of shares to a foundation occurs during advanced negotiations with the investor, and after the transaction, a significant portion of the resulting price is paid to the founder or beneficiaries, the foundation serves merely as an intermediary. In such a case, deferring taxation and applying a lower tax rate contradict the purpose of the statutory exemption. The foundation ceases to fulfill the function of capital accumulation, becoming merely an instrumental flow vehicle for reducing tax liability.
The assessment is different when the proceeds from the sale remain within the family foundation's structure and are reinvested in other assets, such as securities, real estate, or financial instruments. In such cases, the goal of increasing family wealth and building a sustainable succession fund is fully realized. The mere fact of quickly selling shares after establishing the foundation does not constitute artificiality, as long as the assets do not leave the foundation structure without justification.
The Artificiality Test and the Dominant Economic Purpose
The assessment of the artificiality of a method of operation in the context of Article 119c of the Tax Ordinance is based on the criterion of an entity acting reasonably. In the case of family foundations, this interpretation faces particular challenges, as the foundation's purposes are often intangible, personal, or familial in nature, escaping purely calculable economic metrics.
The PUO Council resolution emphasizes that the timing of the entry into force of the family foundation regulations and the closing of the M&A transaction cannot, in itself, create a presumption of artificiality. A taxpayer's use of a newly introduced legal instrument at the earliest opportunity is rational. If the process of seeking an investor lasted for many years and the adoption of the family foundation law coincided with the closing of the transaction, the choice of a new legal form does not constitute abusive behavior.
However, presenting a coherent economic and personal argument is crucial to defending the structure. The goals justifying the choice of a foundation include, in particular, protecting assets from fragmentation during succession, ensuring the long-term support of family members, eliminating the risk of a shareholder's personal liability for representations and warranties made in the share purchase agreement, and establishing professional oversight of family assets.
What should you remember?
The opinion of the Council for the Prevention of Tax Avoidance leads to the formulation of several key practical recommendations for persons planning to contribute transaction assets to a family foundation.
First, the sequence of events and proper documentation of the founder's motivations, well before the transaction with the investor is finalized, are crucial. The earlier the negotiations, at which the contribution of shares to the foundation takes place, the lower the risk of the foundation being deemed artificially engaged.
Secondly, the foundation's statutes and resolutions of its governing bodies should clearly and precisely define the long-term investment strategy and succession rules. Demonstrating a realistic plan for reinvesting funds obtained from the sale of assets is a fundamental argument protecting the structure from challenge by the Head of the National Revenue Administration.
Third, immediate distributions of significant amounts from the foundation to beneficiaries immediately after receiving the investor's payment should be avoided. Any distributions should be based on the beneficiaries' actual, justified needs, as defined in the statute, and should be within the reasonable limits of the foundation's liquidity policy.
Applying the GAAR clause to a family foundation requires a constant balance between legal certainty and protecting the public interest. While a family foundation remains an extremely effective and fully legal asset management tool, its use in business sale transactions requires a thorough analysis of tax risks and careful preparation of evidence.
This article is for informational purposes only and does not constitute legal advice.
The law is current as of August 17, 2026.
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