Although the family foundation was introduced only two years ago as a modern tool to support family businesses, the government is already announcing changes to its taxation. This is surprising not only because the regulations themselves have been in force for a relatively short period of time, but also because they have previously declared their stability and announced possible adjustments only after three years of the provisions of the Family Foundation Act of 26 January 2023. Today, the Ministry of Finance is back with the announcement of a draft amendment that could change the situation for entrepreneurs using foundations.

Announced changes

In the list of legislative and programme works of the Council of Ministers, there was an announcement of a draft amendment to the Act on PIT, CIT and certain other acts (list no. UD116), which is expected to be adopted by the Council of Ministers in the second quarter of 2025 and which provides for, among other things:

sealing the taxation rules for family foundations – although it is not yet clear what this would consist of, it was previously announced that a 19% tax on the sale of assets would be introduced if the sale took place before the expiry of 15 years from their contribution to the foundation,
subjecting the benefits paid to the foundation’s beneficiaries to a solidarity levy,
including family foundations in the regulation on foreign controlled companies (CFCs) – which could mean imposing additional tax and reporting obligations on family foundations related to foreign assets, and this would generate additional costs for foundations.

What does it mean that distributions from family foundations will be subject to solidarity levy?

A family foundation is a tool for families to better manage their assets and pass them on to the next generation in an orderly and secure manner. One of its tasks is to pay benefits – that is, money or other advantages – to its beneficiaries. Until now, such payments have been favourably taxed or even tax-free in the case of the immediate family.

The government’s new proposals are that these payments are to be subject to an additional charge – the so-called solidarity levy. This is a 4 per cent tax levied on individuals whose annual income exceeds PLN 1 million. And here is the key change: if a family member received e.g. PLN 1.5 million from the foundation, he or she would have to pay 4 per cent tax on the surplus above PLN 1 million (i.e. on PLN 500,000) – in this case PLN 20,000.

Why are the potential changes incompatible with the provisions of the Act?

The Family Foundation Act contains a provision to review its operation only after three years in force, i.e. at the end of May 2026 at the earliest. The announcement of the changes is already perceived as a rupture of the “social contract” concluded between the state and citizens who, due to the certainty of their legal situation guaranteed by the Family Foundation Act, decided to establish family foundations.

Family foundations were originally intended to be a stable legal instrument to support long-term investment and the building of multi-generational businesses. Introducing the above changes before the provisions of the law in question have been in force for three years may be considered to undermine these assumptions.

What steps should be taken in the current situation?

In the current situation, we recommend ongoing monitoring of legislative progress and consideration of legal and tax safeguards in the event that the new legislation potentially comes into force.

If you use the institution of a family foundation or are considering setting one up – we invite you to contact our law firm. We will monitor the course of possible changes for you and, in the event of their introduction, we will help you take measures to minimise their negative effects.

Author: Marta Marciniak

author: mec. Joanna Żemojtel