Three years. That’s how long we’ve been waiting for what the Council of Ministers had seen in the data from the outset – and has now disclosed in its review of the Family Foundation Act. The document not only diagnoses the problems, but also previews substantial changes to rules that founders and their advisers treated as settled and stable.
And therein lies a problem that goes far beyond tax matters. If the rules of the game are changed while the game is being played, there can be neither planning stability nor trust in the law. It is no coincidence that one of the greatest concerns among entrepreneurs considering setting up a foundation is not the level of taxation, but the stability of the legal framework – which today is once again being called into question.
The figures behind family foundations are too significant to ignore
The legislature anticipated that approximately 300 to 500 family foundations would be established in the first year of the Act’s implementation. However, 917 registration applications were filed in 2023 alone.
Foundation income exempt from corporate income tax (CIT) amounted to PLN 5.4 billion in 2023, PLN 12.4 billion in 2024, and PLN 15.3 billion in 2025. At the standard 19% CIT rate, this would correspond to a hypothetical annual loss to the budget of PLN 1 billion, PLN 2.4 billion and PLN 2.9 billion – calculated on the assumption that the same income would have been earned directly by individuals or companies and taxed under the general rules. These figures are not merely striking, but carry real political pressure.
The scale of tax-avoidance schemes involving foundations is equally unprecedented.
82% of MDR disclosures (mandatory disclosure regime filings) involving a family foundation indicated that a tax advantage was the principal, or one of the principal, motives behind the arrangement.[1]
By way of comparison: throughout the entire period of operation of the GAAR (General Anti-Avoidance Rule) since 2016, approximately 230 such proceedings have been initiated in total. In just three years, family foundations have thus accounted for a third of that figure.
From a budgetary standpoint, intervention was therefore necessary. The proper response to abuse, however, should be to plug the loopholes with precision and not to redesign the entire model.
Short-term lettings in family foundations: winning battles does not mean the war is over
For two years, foundations letting apartments on a nightly basis, condo-hotels and commercial properties have prevailed in disputes with the tax authorities, arguing that the Act draws no distinction between long-term and short-term lettings in terms of tax exemption. This has been confirmed by court rulings, including those of the Provincial Administrative Courts (WSA) in Gdańsk[2], Wrocław[3] and Bydgoszcz.[4]
The government sought to put an end to this line of case law at the statutory level. The legislation[5] vetoed by the President would have limited the exemption to residential lettings for personal use only. The draft review confirms that the Council of Ministers intends to revisit the issue.
Such a change would not, however, put an end to the disputes. Instead of asking whether short-term lettings fall within the statutory list, the question would become whether a particular letting is exclusively residential, with the entire burden of proof falling on the foundation and leaving scope for endless interpretations. What about letting premises to a company to house an employee? Or what about a tenant occasionally working from home? The proposed regulations require the foundation itself, without intermediaries, to be a party to the lease. That condition would strip the exemption from any foundation that outsources letting management to a specialist company.
If the amendment were to come into force, a foundation holding property for short-term letting would be liable to CIT on the income derived from it. Exiting such an investment could also be costly from a tax perspective, particularly if it coincided with the restrictions described below. Foundations with a portfolio of such properties should already be analysing their situation and assessing possible tax scenarios.
A 36-month lock-up is a good idea, but the arithmetic is wrong
The most common scheme identified by the Head of the National Revenue Administration works as follows: a founder contributes shares to a foundation, the foundation sells them under the CIT exemption, and the profit is then distributed to beneficiaries or the foundation is wound up.
The lock-up period is designed to block that scheme for 36 months from the contribution or acquisition of assets from a related party, during which any disposal would not be eligible for the exemption.
However, there is a problem with the parameters. The period runs from the end of the calendar year, not from the month of the triggering event. For an asset purchased in, say, June 2026, the exemption would not resume until 1 January 2030 – a full three years and seven months.
If the legislature wants a 36-month lock-up, it should count it from the month following the event, or express the period in years rather than months. These are not minor technicalities. The difference could prove very costly for the founder.
In addition, those who contributed assets in 2024 or 2025 want to know whether and when they will be able to dispose of them without losing their tax exemption.
The length of the lock-up period itself may also raise concerns. There are specific arguments for shortening it, such as a sudden need to restructure a portfolio, a change of strategy, the need to raise liquidity in difficult market conditions. These scenarios could affect any investor, yet the current regulation makes no allowance for them.
Foreign tax-transparent entities: a hidden trap for global portfolios
The vetoed legislation was intended to exclude from the exemption income derived from interests in foreign tax-transparent entities (i.e. entities such as partnerships that do not pay income tax in the country in which they are based).
According to the explanatory memorandum to the bill, the purpose of this exclusion was to eliminate situations in which a foundation ‘relocates’ its actual (active) operational activity abroad and conducts it through such an entity in an attempt to retain its tax preferences.
The provision itself, however, referred to the broad concept of ‘economic activity’ without providing guidance on how to distinguish between operational activity and passive asset management. As a result, the regulation could have captured not only structures that actually carry on a business, but also typical investment vehicles whose ‘activity’ amounts to nothing more than the deployment of capital. This discrepancy is no accident: the explanatory memorandum to the vetoed legislation suggested that entities passively managing assets were intended to retain the exemption. However, an explanatory memorandum is not a statutory provision.
What could the practical consequences be? Commonly used investment vehicles, such as the German Kommanditgesellschaft (KG) or the Luxembourg Special Limited Partnership (SCSp), operating as alternative investment funds, would find themselves in a zone of tax risk. They are tax-transparent, but their activity consists of portfolio management rather than operational activities. Yet the draft legislation drew no distinction between these cases.
Tax law should not operate as a trap set for good-faith investors. If a provision is intended to distinguish passive portfolio management from active operational activity – a distinction that is entirely legitimate – it must do so with precision. A provision based solely on the broad concept of economic activity does not meet that standard and should be refined before it re-enters the legislative process.
The three-tier model is an experiment that calls into question the very purpose of family foundations
The most far-reaching, and at the same time the most controversial, proposal in the review is a complete overhaul of the family foundations’ tax model. Under the current regime, a foundation accumulates assets free of current income tax, with tax (15% CIT) arising only when benefits are paid out to beneficiaries.
The effective tax rate for a beneficiary in the zero tax group is approximately 15%, whereas an individual investor pays 19%, rising to 23% on capital gains subject to the solidarity levy.
The government proposes replacing the existing mechanism with three separate stages of taxation:
- The first stage occurs before the foundation has earned a single zloty: a tax on the market value of contributed assets at the point of contribution (with the exception of cash and assets transferred to the founding fund)
- The second stage involves ending the entity-based exemption and introducing ongoing CIT taxation of income from lettings, interest and portfolio disposals of shares. The draft envisages replacing the entity-based exemption with selected income-category exemptions for strictly defined categories of income linked to long-term asset accumulation. This does not, however, alter the substance: the foundation will lose its status as an exempt entity and become liable for CIT on its day-to-day investment activities
- The third stage completes – and at the same time exposes – the scheme: the foundation becomes a withholding agent for personal income tax (PIT) on benefits paid out. These are treated as a share in the profits of a legal person, and the beneficiary is taxed as a shareholder of a company rather than as a family member benefiting from a multi-generational wealth structure
The model would be mandatory for foundations established after the new rules come into force, and voluntary for existing ones.
Under such an arrangement, foundations would cease to be vehicles for wealth accumulation and would become taxable entities like any other.
This is not an adjustment. This is a dismantling.
Taxing contributed assets at market value at the point of contribution negates the very essence of the foundation, which is the long-term accumulation of wealth under conditions of deferred taxation. A founder contributing shares worth PLN 10 million would have to pay tax before the foundation had made a single move.
The proposal has been described as open to broad discussion, so its final shape is not predetermined. But the direction is clear. Anyone considering establishing a foundation now has a compelling reason not to delay.
What is to be done?
The review is not a statute, so nothing will change today.
But the direction is sufficiently clear that acting after the amendment has been enacted will be too late. Every family foundation should address at least four questions:
- Do I hold properties used for short-term or commercial lettings, and what will happen to them if the rules change?
- Am I planning to contribute assets, and what is a realistic timeframe for their disposal?
- Do I hold interests in foreign tax-transparent entities?
- Is the current taxation model more favourable to me than the three-tier model, and is it worth considering a voluntary opt-in?
It is worth answering those questions honestly today.
Questions? Contact us
[1] According to data up to 16 January 2025, the National Revenue Administration (KAS) issued 77 opinions regarding reasonable suspicions of tax avoidance by foundations
[2] Judgment of 2 September 2025, Case I SA/Gd 425/25
[3] Judgment of 26 March 2025, Case I SA/Wr 807/24
[4] Judgment of 5 August 2025, Case I SA/Bd 315/25
[5] Act of 17 October 2025
