The Polish Family Foundation (Fundacja Rodzinna) – a powerful tax and asset protection vehicle for investors and business owners

Selling shares in a company, generating substantial commercial rental income, or reinvesting dividends – and having the full proceeds go straight back into funding your next project, without immediately paying 19% personal or corporate income tax on them.

Many business owners view the Polish Family Foundation (Fundacja Rodzinna) only as a succession tool for passing a family business down to the next generation. That is a significant oversimplification. In practice, the Family Foundation has emerged as one of the most effective legal tax and investment vehicles available under Polish law.

So why isn’t every entrepreneur using it yet, and what tax traps must you avoid?

How does “zero CIT” work during capital accumulation?

A Polish Family Foundation is a separate legal entity designed to protect wealth and grow capital for designated beneficiaries. Its main attraction is a deferred tax structure.

What does this mean in practice?

– 0% CIT on income from permitted activities – income generated through activities permitted by the Family Foundation Act (such as receiving dividends, selling shares or renting commercial real estate) is exempt from Corporate Income Tax (CIT) at the time it is earned,

– no “Belka tax” or solidarity levy at the time of sale – when an individual sells shares, the gain is taxed at 19% PIT, plus a 4% solidarity levy on income above PLN 1 million a year. When the same sale is carried out by a Family Foundation, the profit is not taxed at the foundation level and stays inside the structure to be reinvested,

– 0% PIT for close family (the “zero group”) – when the foundation pays benefits to beneficiaries from the founder’s closest circle of relatives (spouse, descendants, ascendants, siblings and certain other close relatives), those beneficiaries are exempt from Personal Income Tax (PIT). The foundation itself pays 15% CIT at the moment of payout.

In other words, the tax is not eliminated – it is deferred and, in the zero-group scenario, reduced to a single 15% charge at the point of payout.

You might wonder:

“Does this sound too good to be true? Won’t the Polish tax authorities (Krajowa Administracja Skarbowa) treat this as an aggressive tax optimisation scheme?”

Tax authorities do scrutinise family foundations closely. Contributing assets improperly, or failing to demonstrate a genuine economic justification beyond merely reducing taxes, can trigger a detailed tax audit. The line between legitimate tax planning and non-compliant tax avoidance requires precise legal navigation.

What can a Family Foundation do within the CIT exemption?

The Family Foundation Act defines the scope of permitted business activities. As long as the foundation operates within these statutory boundaries, it enjoys the CIT exemption. Permitted activities include:

– Asset disposal – selling property, stocks or shares,

– Real estate leasing – renting or leasing properties,

– Corporate participation – taking part in commercial companies and receiving dividend income,

– Lending – granting loans within the limits set out in the Act.

The 25% penalty tax trap

What happens if your foundation exceeds the scope of permitted activities?

This is one of the most common and costly mistakes, especially when a foundation is set up using generic online templates. If a Family Foundation engages in prohibited activity, such as active trading or providing operational services, the income from that activity is taxed at a penalty rate of 25% CIT. Errors in the statute can also put the PIT exemption for beneficiaries at risk.

The legal framework is still evolving, and further changes to the rules on asset contributions and taxation cannot be ruled out.

A poorly drafted statute can also cause paralysis after the founder’s death, leading to prolonged disputes among beneficiaries that freeze assets. Will your foundation’s statute withstand future legislative changes and family disagreements?

A few practical points before you start: a Family Foundation requires a minimum initial fund of PLN 100,000, it comes with reporting obligations, and the tax consequences of contributing assets must be analysed before any transfer is made.

Establishing a Polish Family Foundation is a long-term investment rather than a mere expense. For the right structure it can pay off quickly, for example at the first dividend reinvestment or share sale, but it demands legal and tax precision.

How we can help?

At Burzynski & Associates, we provide end-to-end support in structuring and operating Polish Family Foundations:

– Tax audits and strategic planning – we analyse your asset portfolio and corporate structures to improve tax efficiency in a compliant, low-risk manner.

– Custom-tailored foundation statutes – we draft bespoke statutes that protect the founder’s intent, strengthen the protection of family assets against hostile claims, and clearly define payout mechanics for beneficiaries.

– Tax authority compliance – we make sure every asset contribution and transaction fits within the permitted activities, to minimise exposure to the 25% penalty CIT.

– Full registration and ongoing support – we handle everything from the initial notarial deed and registration with the Regional Court in Piotrków Trybunalski to ongoing legal maintenance.

This article is provided for general informational purposes only and does not constitute legal, tax or other professional advice, nor a commercial offer. Reading it does not create a lawyer–client relationship. The rules and rates described reflect the legal position as at the date of publication and may change. The tax and legal consequences of establishing and operating a Family Foundation depend on the specific facts of each case, so please obtain individual advice before taking any action. Burzynski & Associates accepts no liability for decisions taken solely on the basis of this article.