On 12 August 2024, the Government published information regarding a proposal for amendment to the Personal Income Tax Act, the Corporate Income Tax Act and certain other acts. The envisaged amendments include changes to the taxation rules for family foundations. The legislative proposal has not yet been published, but the Deputy Minister of Finance said that the Government’s aim is to tighten tax rules on family foundations to reduce use of these foundations for tax optimization purposes.

Consequently, the Government plans to abolish the rule that in general a foundation does not pay tax on its income, but only on benefits paid to its beneficiaries. To that end, the Ministry will propose for instance a 19 % tax on the sale of any assets of a family foundation sold within 15 years of the date on which the foundation purchases them. The tax paid by the family foundation [would] be deductible from the tax due on the payment of benefits to beneficiaries.

Income tax is to be imposed on other sources of income of family foundations as well, such as income obtained from the rental of real estate belonging to the family foundation or from shares held in fiscally transparent entities. A solidarity contribution is also to be levied on the beneficiaries of family foundations, and this means that the solidarity contribution calculation base will include benefits paid to the foundations' beneficiaries.

The proposed amendment is intended to combat the practice of contributing assets to a family foundation and then quickly selling them. Subsequently, the funds obtained from a transaction of this kind may be used, for example, to purchase shares in a company in order to avoid the tax due if this operation were carried out outside the foundation and then to benefit tax-free (within the family foundation) dividends. The changes may also affect foreign managers of Polish companies who use a family foundation for effective wealth management in Poland and even abroad.

In view of the proposals announced by the Ministry of Finance, the Enterprise Council (pl. “Rada Przedsiębiorczości” - a forum of representatives of the nine largest organizations of entrepreneurs and employers in Poland) has appealed to the Minister of Finance to suspend work and conduct real dialogue with entrepreneurs. The Deputy Minister of Finance stipulated that most of the provisions presented in the bill are proposals, “an introduction to the discussion with the parties concerned”.

Author: Jan Potyrała