Sale of real estate by a family foundation and exemption from income tax – an important decision of the Provincial Administrative Court

Introduction family foundation into the Polish legal system was a milestone in family wealth management and business succession. This tool has gained significant popularity, thanks in part to favorable tax regulations.

Pursuant to Article 6, Section 1, Item 25 of the Corporate Income Tax Act, a family foundation – if it conducts business activities listed in Article 5 of the Family Foundation Act (hereinafter referred to as the Family Foundation Act) – may benefit from income tax exemption. Therefore, it is crucial to properly assess whether a given activity falls within the permitted list.

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Problem: selling real estate and tax exemption

One of the important practical dilemmas was the question: can a family foundation sell the property after a few years from its acquisition and at the same time benefit from the above-mentioned tax exemption?

This case was the subject of an application for an individual interpretation submitted to the Director of the National Tax Information (KIS). The family foundation planned purchase of real estate for investment purposes (e.g. rental) and then – after at least 10 years – sale.

The basic question was whether such actions are consistent with Article 5, Section 1, Item 1 of the Foundations' Act, which allows foundations to conduct business activities consisting in the disposal of property – provided that it was not acquired only for the purpose of further sale?

Negative interpretation of the Director of KIS

In his interpretation of January 17, 2025 (no. 0111-KDIB1-2.4010.700.2024.1.DK), the Director of the National Tax Information Office (KIS) found that the planned sale of the real estate by the foundation does not meet the conditions for benefiting from the tax exemption. In his opinion, if the foundation "ultimately" intends to sell the real estate, this means that it has been acquired only for the purpose of further sale – which excludes the possibility of tax exemption.

The dispute goes to court – an important judgment of the Provincial Administrative Court

The Foundation disagreed with this interpretation and referred the matter to the Provincial Administrative Court in Rzeszów. In its judgment of 22 May 2025 (ref. I SA/Rz 172/25), the court repealed the contested interpretation.

The Provincial Administrative Court clearly stated that:

• real estate sales planning itself does not determine also that it was acquired solely for this purpose;
• if the property was used for rent for a long time and the income from it financed other activities of the foundation, it cannot be considered a purchase "solely" for the purpose of selling it;
• the legislator's goal was to enable foundations to flexibly manage their assets, unless they run a business strictly commercial.

The court also stressed the difference between the words "ultimately" and "exclusively" – the latter has an unambiguous, restrictive meaning that should not be extended.

Practical conclusions

The Provincial Administrative Court's ruling has significant implications for the practice of family foundations in Poland. It demonstrates that:

• the foundation may sell the property, even if it had this intention from the beginning, unless that was her only goal upon purchase;
• the way the property is used is crucial – for example, if it was rented, selling it after many years does not invalidate the right to tax exemption;

Summary

Family foundations may conduct business activities, but only within the limits specified by law. These activities, in accordance with Article 5 of the Family Foundations Act, may benefit from income tax exemption under Article 6, Section 1, Item 25 of the Corporate Income Tax Act.

In case of real estate purchase, the intention to sell later does not exclude the possibility of benefiting from the relief – if the purchase was not solely for this purposeHowever, each case requires individual analysis and prudent action.

It is worth seeking the help of specialists – lawyers and tax advisors – who will help you safely plan activities within your family foundation to fully utilize its potential and avoid unnecessary tax burdens.