28/5/2026
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A family foundation is a relatively new solution in the Polish legal system that allows for effective asset protection and succession planning. Thanks to tax preferences, it is becoming increasingly popular among entrepreneurs and high-net-worth individuals.
28/5/2026
A foundation is an entity without an owner, but it has beneficiaries and founders. Assets belong to the foundation, not to a private individual, which protects the founder in case of falling into debt – authorities cannot seize the foundation's assets. Establishing a family foundation can save on taxes in many situations, and capital reinvestment occurs tax-free. In such a situation, is it an ideal solution that everyone should use? The answer is no.
A family foundation is most profitable when the founder plans to reinvest accumulated assets (e.g., in real estate, stocks, company shares) rather than consuming them currently. Simply trading capital does not trigger a tax obligation, so one can buy and sell stocks, rent apartments, and not pay tax on it until funds are disbursed to the founder or beneficiary.
With smaller capital, the solution may be less beneficial, as the costs of running the foundation will absorb a significant portion of the profits. This solution is most profitable for individuals whose assets are in the millions, not hundreds of thousands. In addition to a substantial amount to allocate to assets, one must also have funds that do not disrupt daily obligations.
A family foundation can only perform specific activities, such as: buying and selling stocks and securities, earning profits from dividends, renting and leasing, acquiring shares in companies, disposing of property (if it's not property flipping), and granting loans to beneficiaries. Activities exceeding this scope result in a punitive corporate income tax (CIT) of 25% on the entire income.
Among others, trading cryptocurrencies, gold, or works of art is of questionable nature; their possession is permissible, but active trading in them is questioned. Therefore, before undertaking any activity, it is worth verifying whether the specific action complies with the family foundation regulations.
One of the main advantages of a family foundation is its favorable tax rules. Corporate Income Tax (CIT) of 15% is only levied upon the distribution of benefits to beneficiaries, which resembles the structure of Estonian CIT. It is worth noting that the founder and their close family are completely exempt from Personal Income Tax (PIT) upon distribution, thus avoiding double taxation. Taxation for this group is capped at 15% CIT, which is very advantageous. In the case of unrelated individuals or distant family, an additional 15% PIT must be paid. This allows the founder to progressively grow assets without paying ongoing tax on profits, paying it only when funds are disbursed at a chosen amount, and avoiding PIT. The foundation's taxation method aligns very well with limited liability companies (spółki z o.o.).
One thing to particularly watch out for is hidden profits. These are benefits that the family foundation provides directly or indirectly to individuals associated with the foundation, which are not foreseen or are inconsistent with the family foundation regulations. The regulations list such benefits as: interest, commissions, remuneration from loans granted to the foundation by the founder or beneficiaries, remuneration for advisory, legal, accounting, and advertising services.
An interesting case of hidden profits is the use of the foundation's assets for private purposes without paying fees, e.g., the use of the foundation's real estate or cars by the founder or family without a lease agreement and market rates. This means that if one transfers their private apartment to the foundation's assets and lives in it, there will be an obligation to pay fees at market rates to the foundation.
It is also worth noting that another form of hidden profit is granting oneself loans "never to be repaid" — this is a bad method for withdrawing money from the foundation. The maximum loan repayment period is 10 years, so if this deadline is exceeded, the tax office will impose penalties.
Running a foundation involves costs, making this solution particularly beneficial for individuals with substantial capital. Initially, a founding fund of at least PLN 100,000 must be paid, followed by court fees for registration – approximately PLN 500, notary fees for the founding act and statutes, ongoing accounting costs, and the cost of a mandatory financial audit conducted at least once every four years. Although the financial outlay is high, there is a significant group of people for whom this solution will be very profitable.
Only a natural person with full legal capacity can be the founder of a family foundation. The founder defines the statutes, which include the name, registered office, purpose, beneficiaries, and operating principles. Beneficiaries are individuals or public benefit organizations (OPP) specified in the foundation's statutes, who receive specific benefits from the family foundation or certain assets upon its dissolution. They do not have to be related to the founder, and the founder themselves can also be a beneficiary. Benefits can include monetary funds, goods, rights, or costs of maintenance or education. It is possible to condition the payment of benefits – periodically, upon reaching a certain age, after marriage, etc. There are many possibilities, and thanks to them, the rules established by the founder will remain in effect even after their death. Consequently, the founder can transfer assets in a controlled manner, protecting them from unfavorable disposal. The founder's private assets, upon their death, can be inherited by the foundation, which is also beneficial as it prevents the fragmentation of the inheritance and ensures it will be distributed according to the statutes.
A family foundation and Estonian CIT share common features, but generally serve different functions. A family foundation primarily allows for tax-free reinvestment of capital gains, while Estonian CIT serves to defer tax on a company's current profits. A foundation cannot conduct typical operational activities (e.g., running a shop), whereas for companies, this is not restricted. In a company, there is double taxation (CIT + PIT on dividends), while in a foundation, payments to the founder and their family are exempt from PIT – only CIT remains. It should be remembered that companies taxed under Estonian CIT cannot be transferred to a foundation – in such a case, they will lose the right to benefit from this advantage.
It is worth noting that combining a company with a foundation reduces tax burdens, making the payment of benefits through a foundation very advantageous. Typically, a company pays 9% or 19% CIT, and then a private individual pays 19% PIT on dividends. When a family foundation is used for this purpose, the company typically pays 9% or 19% CIT, then pays dividends to the family foundation, which is tax-exempt, and finally pays benefits to the founder or beneficiary, which is taxed at 15% CIT.
In brief, company payouts are taxed as follows:
- without a foundation: 9% / 19% CIT and 19% PIT,
- with the use of a family foundation: 9% / 19% CIT and 15% CIT.
Another advantage of a family foundation is that it is not subject to the solidarity levy, so the sale of shares transferred to the foundation (e.g., for PLN 1 million) occurs tax-free – without 19% PIT and without the solidarity levy.
If you are planning to establish a family foundation and are unsure how to handle all the formalities – contact us. As an experienced accounting firm, we will provide comprehensive assistance, select the most advantageous form of taxation, and manage your accounting.