On 29 August 2025, the Ministry of Finance published a draft amendment to the CIT Act introducing a number of changes concerning family foundations. The aim is to reduce tax abuse and ensure that foundations fulfil their original purpose of facilitating the stable succession of assets within the family. Let’s take a look at what exactly will change.
A 3- or even 4-year lock-up period for the sale of assets
The foundation will only be able to sell assets (such as real estate or company shares) without paying income tax beginning 36 months from the end of the year in which they were contributed by or acquired from related parties (e.g. the founder or their family).
In practice, this could mean a period of up to four years during which the assets are ‘frozen’. Importantly, the transitional provisions will also cover assets contributed after 31 August 2025, i.e. before the Act comes into force.
CFC regime, exit tax and hidden profits
Family foundations will be subject to the CFC regime, meaning that income generated by controlled foreign companies will be taxed. In addition, an exit tax will be imposed in the event of a transfer of assets abroad or a change in the tax residence of the foundation, similarly as for the sale of assets.
The proposed regulations also further define the list of hidden profits of family foundations. Under the new regulations, the value of claims from loans granted by a family foundation that have been remitted, expired or deemed irrecoverable will also be considered a hidden profit. This applies to loans granted to beneficiaries and founders, as well as to natural persons related to them or to the family foundation itself.
Restrictions on short-term rentals
Another change concerns tax preferences for residential rentals. These preferences will only apply to long-term rentals carried out directly by the foundation. Hotel, guesthouse, and short-term tourist rental agreements will not qualify for the tax relief.
Summary
The Ministry of Finance intends to counteract situations where family foundations are primarily used for tax optimisation rather than asset succession. The changes are to come into force on 1 January 2026, though some will take effect earlier — for example, in relation to assets contributed after 31 August 2025.
Conclusions and recommendations
In theory, the changes will come into force at the beginning of next year, but the draft should encourage founders and planning to set up a foundation to review their tax situation. The three basic steps of such a review are as follows:
- Verification of the property rental model
Foundations operating in the field of short-term rentals should urgently review their operating models, as the planned regulations will exclude these forms of rental from preferential taxation. This may have a significant impact on the profitability of such projects.
- Identification of foreign exposure (CFC, exit tax)
Foundations with foreign subsidiaries or real estate abroad, or those planning to change their tax residence, should assess the potential effects of becoming subject to CFC rules or exit tax as soon as possible. Existing holding strategies may need to be adjusted or tightened up in terms of documentation.
- Documentation, procedures and compliance audit
In view of the planned changes, it would be worthwhile to conduct an internal audit of the foundation. This should cover both the asset structure and the adopted procedures. Thorough documentation and preparation of a compliance policy could be crucial, both in the event of an inspection and when the tax authorities interpret new regulations.
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