The family foundation in Poland: A new tool for succession and asset protection

From mid-2023, Polish entrepreneurs have gained a long-awaited tool for family business succession and asset protection – the family foundation. This solution, which has been successfully operating for years in many other European countries – such as Germany, Austria or Liechtenstein, is also gaining popularity in Poland as an alternative to the classic forms of inheritance and running a business in successive generations.

What is a family foundation?

A family foundation under Polish law is a legal entity established by a founder (or several founders) with the aim of managing and distributing assets to specific beneficiaries – most often family members of the founder. Unlike a traditional foundation, it is not charitable in nature, but serves private estate and succession purposes.

Who can set up a family foundation?

A foundation can be established by an individual with full legal capacity – both a Polish citizen and a foreigner. A foundation is established on the basis of a foundation deed (or a will) and must be registered in a special register of family foundations kept by the District Court.

A formal requirement for the establishment of a family foundation is that the founder contributes a minimum of PLN 100,000 in assets – in cash or assets equivalent to this value – to the family foundation in the form of a founding fund.

What is the family foundation for?

A family foundation can serve many functions, depending on the needs of the funder. The most common uses are:

• Family business succession — ensuring the continuity of the business after the owner’s death, without having to distribute shares or assets.
• Protection of private assets — separation of the private assets of the funder from the personal legal and financial liability of the business run.
• Tax planning and structuring — simplifying the management of complex assets, companies or investments.
• Safeguarding the interests of beneficiaries — e.g. children, grandchildren, life partners, also excluding direct inheritance.

How does a family foundation work?

The Foundation operates on the basis of its statutes and in accordance with the will of the founder. Its key bodies are:

• Founder – plays a key role in determining the foundation’s rules. It is he who decides on the statutes, identifies the beneficiaries and the way in which the assets are managed. He or she can also reserve specific powers to himself or herself (e.g. the right to dismiss the board of directors or approve decisions) and even serve on the foundation’s bodies.
• Management Board – manages the day-to-day affairs of the foundation, represents the foundation externally and is responsible for achieving its statutory objectives.
• Beneficiaries’ assembly – an advisory and decision-making body (if provided for in the statutes), bringing together those entitled to the foundation’s benefits and deciding on its most important directions.
• Supervisory board – a controlling body, mandatory if the number of beneficiaries exceeds 25. It can monitor the activities of the management board and approve important decisions.

Business activities of the family foundation

A family foundation may carry out limited economic activities, but only within a strictly defined scope. The aim is not to carry out active operations, but to manage and multiply the assets.

Permissible forms of activity include:

• renting, leasing and providing access to assets (e.g. real estate),
• trading in shares, stocks and securities,
• joining companies, funds and other entities,
• making loans to beneficiaries and to companies in which the foundation or beneficiaries hold shares,
• Trading in currencies, cash and financial instruments.

Income from this type of activity is not subject to CIT until it is paid to the beneficiaries – then there is an obligation to pay PIT, usually at preferential rates.

Summary

The family foundation is a modern asset protection and succession planning tool in Poland that allows to combine management flexibility with legal security and favourable taxation.

If you are planning a succession, want to secure a business or family —  it is worth considering setting one up with our help.

Author: Aleksander Skirpan

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