Family foundations – time for clear rules of the game
The Family Foundation Act has now been in force long enough for us to talk not in terms of forecasts, but of concrete experience. The concept itself is straightforward: a family foundation is designed to accumulate assets, manage them in the interest of its beneficiaries and make distributions for their benefit, while the founder is required to specify the foundation’s detailed purpose in its Articles of Association.
From the outset, it has also been emphasised that this is a vehicle designed primarily to ensure the continuity of family businesses, protect assets against fragmentation and facilitate multi-generational succession planning – rather than serving as a one-off ‘wrapper’ for a transaction.
What can we expect?
First and foremost, further attempts to ‘fine-tune’ the legislation, particularly with regard to the use of foundations for aggressive tax planning. This is a natural trajectory: the more popular a vehicle becomes, the greater the pressure to tighten the rules and close any loopholes.
In practice, one scenario has emerged – and continues to emerge – that poses the greatest threat to foundations’ reputation: a foundation is set up specifically to facilitate a transaction, its key assets are sold almost immediately, and the proceeds are then swiftly distributed to beneficiaries – with no genuine long-term asset management. It is precisely these cases that are fuelling the debate on potential legislative changes, in this case regarding the introduction of a lock-up period before a subsequent disposal of assets.
Such an attempt has already been made. It is worth recalling that towards the end of 2025, the Sejm passed an amendment to the act which introduced a number of anti-avoidance mechanisms, including restrictions on the rapid disposal of assets and stricter tax treatment in cases of abuse.
Although the President vetoed the amendment, the underlying problem has not gone away. In practice, there have been – and continue to be – cases where a foundation was established solely in order to carry out an almost immediate sale of a business, with minimal or no tax liability whatsoever.
Not a revolution, but certainty and regulatory stability
By design, a family foundation should primarily be a long-term vehicle. From the perspective of family businesses, therefore, the greatest risk lies not in the debate on tightening the rules as such, but in the sense of uncertainty: will the rules of the game change midway through, and will they be applied consistently and predictably? In its pursuing of eliminating tax abuse, the legislature may fall into the trap of seeking to close every conceivable gap in the system, rather than prioritising legal certainty and stability.
Meanwhile, the authorities – the tax administration in particular – already have the appropriate tools at their disposal to combat abuse. The general anti-avoidance rule (GAAR) can, after all, be invoked wherever a tax benefit was the main purpose, or one of the main purposes, of an arrangement, the arrangement was artificial, and the tax benefit obtained was contrary to the object or purpose of the relevant tax legislation – which certainly applies to cases where a foundation is used instrumentally as a vehicle whose sole function is to optimise the tax settlements.
Lock-up period for asset disposals: what should the real objective be?
If the legislature revisits the idea of a lock-up period, it will be essential that the objective is precisely defined: to target abuse, rather than standard, commercially justified activities (such as a change of investor after a given period of time, a disposal of an asset for market-related reasons, or a restructuring of an investment portfolio).
A sound guiding principle for drafting any such regulation (and a benchmark for practice) is straightforward:
- The intent and commercial rationale should matter (why is the foundation selling? what statutory objective does the disposal serve?)
- What matters is whether the foundation genuinely operates as a succession vehicle, rather than as a one-off ‘wrapper’ for a transaction
- Equally important is what happens to the proceeds: whether they are reinvested or immediately distributed
The legislature should adopt the same approach when considering any further amendments aimed at tightening the tax system to combat abuse.
Speed of the registration procedure
Another important issue that cannot be overlooked is the excessively long waiting time for foundation registration.
At present, the register of family foundations is maintained by the Regional Court in Piotrków Trybunalski. While centralising registration at this single court streamlines responsibilities, it also creates a bottleneck, as the number of applications is growing rapidly.
In the context of succession planning – where time is often of the essence – a lengthy wait for registration can become a real obstacle to the efficient arrangement of family and business affairs.
Currently, registration timelines can already exceed 14 months and are getting longer, which contrasts sharply with the concept of efficient succession planning. Therefore, when amending the family foundation legislation, it would be worthwhile for the legislature to address this organisational yet highly significant constraint as well, rather than focusing solely on tightening the rules.
Family foundations: what the market really expects
A family foundation is a valuable instrument, provided it is used in accordance with its intended purpose: as a vehicle for preserving and growing wealth for future generations, rather than as a one-off tax wrapper.
What the market expects today is not further, frequent legislative changes, but stability and predictability of the law, as these are the very foundations of long-term planning.
If you are considering setting up a family foundation, it is essential to plan it with the long term in mind, addressing issues such as purpose, family governance, investment rules and distribution policy, so that the structure is robust not only from a tax perspective, but above all from a business and succession-planning standpoint.
You can find out more about family foundations in the Bank Pekao SA report.
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