The Family Foundation Act has been adopted by the lower chamber of Parliament. Following the rejection of certain proposed amendments on January 12, the Act was forwarded to the President for signature.

This marks the formal enactment of the Family Foundation Act, as described on the page “Family Foundation — a new institution in Polish law.” No veto is expected from family businesses or the legal community, which means the Act will most likely enter into force in May.

Rejected Amendments to the Family Foundation Act

During the vote, minor technical amendments were broadly accepted. However, several proposals were rejected, particularly those concerning the taxation of family foundations. These included:

  • Exemption of family foundations from tax obligations on income derived from commercial real estate
  • Personal income tax exemption for individuals repatriating capital from a family foundation previously established abroad — i.e., withdrawing assets from a foreign foundation and transferring them to a newly established Polish family foundation
  • Extension of preferential taxation under the so-called Estonian Corporate Income Tax (CIT) regime to companies with family foundations as shareholders — currently, this privilege applies only to natural persons

Parliament also rejected an amendment to the Agricultural System Act that would have excluded the right of first refusal held by the National Agricultural Support Centre (KOWR) in cases where shares in companies owning real estate are transferred to a family foundation or from a foundation to its beneficiaries.

Mandatory Review Clause

A key amendment introduces a mandatory review of the Family Foundation Act by the Council of Ministers three years after its entry into force. The purpose of this review is to assess the effectiveness and impact of the newly introduced legal framework for family foundations in Poland.

Strategic Planning Ahead of Implementation

Although the Act is expected to enter into force in May 2023 due to a three-month vacatio legis period, family businesses should not delay in planning their governance structures and organizing their assets in preparation for utilizing the new legal framework.