The Ministry of Finance (MF – Ministerstwo Finansów) has revealed planned changes to the taxation of family foundations, set to take effect in 2025. The proposed legislative amendment focuses primarily on tightening the tax system to limit excessive use of tax reliefs that deviate from the original intent of the law.
New Regulations Aimed at Closing Tax Loopholes
According to the Legislative and Program Work Schedule of the Council of Ministers, the goal of the proposed changes is to streamline provisions related to personal income tax (PIT – Podatek dochodowy od osób fizycznych) and corporate income tax (CIT – Podatek dochodowy od osób prawnych). The new regulations also aim to eliminate interpretative discrepancies and reduce opportunities for tax optimization through the use of family foundations.
As stated in the official schedule: “The proposed solutions respond to the current need to organize tax regulations, eliminate ambiguities and interpretative inconsistencies, and tighten the tax system. They reflect the current government’s programmatic commitment to building a simple, user-friendly, and comprehensible tax system.”
The Ministry intends to impose income tax on the sale of assets by family foundations. Specifically, a 19% tax would apply to the sale of assets contributed to the foundation by the founder, beneficiary, or related entities, if the transaction occurs within a specified period. The proposed period is 15 years. After this time, the sale of assets owned by the foundation would no longer be subject to taxation.
Changes to Beneficiary Payments and the Solidarity Levy
Another significant change involves expanding the base for calculating the solidarity levy to include payments made to beneficiaries of family foundations. Currently, the 4% solidarity levy applies to individuals whose annual income exceeds PLN 1 million. Under the proposed changes, payments from family foundations to beneficiaries would be added to other income, increasing the taxable base and potentially triggering the levy.
Taxation of Business Income Generated by Family Foundations
The draft amendment to the PIT and CIT Acts also includes changes to the taxation of income earned by family foundations through their holdings in tax-transparent entities. Currently, such income is often exempt from taxation, which encourages the use of this structure. The new regulations aim to tax this income in a manner consistent with other forms of business activity.
The Deputy Minister emphasized that the proposed changes are intended to initiate dialogue with stakeholders and are aimed solely at curbing abuse. These changes do not mean that family foundations will become full-fledged taxpayers. The Ministry seeks only to introduce provisions that prevent the use of foundations as tools for tax avoidance.
Sanctions for Unauthorized Business Activity
The Ministry also highlighted vague provisions regarding sanctions for conducting unauthorized business activities by family foundations. Currently, foundations operating in violation of the law are penalized only with increased tax rates, which, according to the Ministry, fails to serve as an effective deterrent. The proposed changes aim to introduce stricter sanctions, including the possibility of court-ordered dissolution of the foundation.
Timeline for Implementation
The planned date for adoption of the legislative proposal is the third or fourth quarter of 2024. The changes are expected to come into force at the beginning of 2025, giving foundations time to adapt to the new regulations.
Summary
The proposed amendments to the Family Foundation Act aim to tighten the tax system by limiting abuse of preferential tax arrangements and combating aggressive tax optimization. The introduction of new regulations will undoubtedly impact how family foundations operate in Poland, leading to changes in their governance and strategic planning.
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