A family foundation is an increasingly popular tool for wealth management and succession planning, introduced to the Polish legal system in 2023. Its attractiveness stems not only from the protection of assets and the liquidity of succession, but also from preferential taxation. But does a family foundation actually pay taxes? The answer to this question depends on several key factors, which we will discuss below.
Contents
1. Taxation of family foundation income
A family foundation in Poland is a taxpayer of corporate income tax (CIT). However, unlike standard companies, it does not pay CIT on all income. The legislator has provided preferential rules:
- Income exempt from CIT: Income from typical investment activities, such as dividends, interest, sale of securities, real estate or profits from shares in subsidiaries, is exempt from CIT until it is paid to the beneficiaries.
- Income taxed CIT (19%): The foundation pays CIT tax when benefits are paid or assets are transferred to beneficiaries, as well as when it is liquidated. The CIT rate is 19%.
2. Tax on payments to beneficiaries
Payments to beneficiaries of a family foundation are taxed differently, depending on the degree of relationship:
- Immediate family (group "0"): Beneficiaries from the founder's immediate family, i.e. children, grandchildren, spouse or parents, are exempt from income tax from benefits received from the foundation. This is one of the most important facilities that distinguishes a family foundation from other legal entities.
- Other beneficiaries: People outside the founder's immediate family (e.g. friends or distant relatives) pay income tax on distributions from the foundation at the rate 15% PIT.
3. Other taxes
A family foundation, despite special tax rules, may be required to pay other taxes if it carries out certain activities:
- Property tax: If the foundation owns real estate, it pays local real estate taxes in accordance with municipal regulations.
- VAT: Family Foundation is not a VAT payer, because it does not conduct business activity in the classic sense. However, it may be subject to VAT if it decides to carry out certain transactions, e.g. the sale of real estate.
4. Inheritance and donation tax
Contribution of assets to a family foundation by the founder not subject to inheritance and gift tax, which is another advantage of this solution. Thanks to this, the founder can transfer assets, even those of significant value, without additional costs.
5. Taxation upon liquidation of a foundation
In the event of liquidation of a family foundation, the assets remaining after settling all liabilities may be transferred to the beneficiaries. In such a case, they are subject to CIT taxation at the rate of 19%.
Summary
A family foundation in Poland benefits from a number of tax reliefs and preferences, which makes it an effective tool in succession planning and property protection. It pays corporate income tax (CIT) only on the payment of benefits or property to beneficiaries and at the time of liquidation. Beneficiaries closest to the founder's family are exempt from income tax, which additionally increases the attractiveness of this form of property management.
Thanks to favorable regulations, a family foundation is an effective way to manage assets, minimizing tax burdens and enabling the smooth transfer of assets to subsequent generations.
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