Although the entry into force of restrictive changes has been temporarily blocked, this should not be interpreted by CFOs and succession advisers as a signal to halt remedial actions. On the contrary, the vetoed draft constitutes a clear roadmap of the tax authorities’ intentions.
Scope and direction of the planned changes to the taxation of family foundations
The draft amendment aimed to significantly narrow the range of tax preferences available to family foundations. One of its key objectives was to bring them within regimes that had so far applied to classic holding structures, including regulations on controlled foreign companies (CFC) and the tax on unrealised gains (exit tax).
CFC regime and exit tax: a foundation under special scrutiny
The planned amendment sought an unprecedented inclusion of family foundations in tightening mechanisms previously reserved for traditional holding structures and operating entities. Two areas proved particularly controversial:
- Controlled Foreign Companies (CFC):
The draft provided for taxing the foundation on the income of its foreign subsidiaries, regardless of whether such income had been distributed. In practice, a foundation investing, for example, in shares of technology companies in the United States or Western Europe could have been taxed more harshly than an individual investor, undermining the very rationale of the foundation as a vehicle for capital protection. - Tax on unrealised gains (exit tax):
Extending this levy to family foundations created a risk of taxing events of a purely restructuring nature. The transfer of asset management or a change of tax residence could have triggered a tax obligation on a “paper” gain, despite the absence of any actual disposal of assets.
This approach carried a serious risk of distorting the intent of the existing regulations. In many cases, a foundation investing abroad in a transparent and economically justified manner could have been taxed more severely than in situations where analogous investments were made directly. The draft failed to distinguish between artificial structures and those based on genuine business activity and economic substance.
Real estate: the end of the era of broad tax-free leasing?
One of the most sensitive elements of the amendment was the attempt to drastically limit the CIT exemption for income derived from real estate. The tax authorities intended to restrict the preference exclusively to passive residential leasing. This meant that all forms of active management, short-term rentals, employee accommodation, or complex commercial leasing structures (office/retail), were to be excluded from the current relief and taxed at rates of up to 25% CIT. Although these provisions did not enter into force, a clear trend can already be observed in tax audits: authorities increasingly challenge the “passive” nature of real estate income earned by foundations.
The 36-month barrier: flexibility versus suspicion of optimisation (lock-up)
The package of changes was complemented by a mechanism imposing a minimum holding period of 36 months for assets acquired from related parties. While intended to curb rapid asset transfers, this solution would have significantly reduced flexibility in planning and reorganising family capital structures.
Current rules and existing areas of tax risk
Blocking the amendment formally means that the existing rules for taxing family foundations remain in force. In practice, however, this does not equate to tax certainty. The current regulations leave wide room for interpretation, and many key issues have not yet been conclusively resolved either through tax rulings or case law.
Particular doubts arise around the boundary between passive asset management and business activity. This is especially relevant in the real estate sector, where the lack of precise definitions leads to divergent assessments of similar operating models. Short-term rentals, accommodation services, or indirect use of real estate by foundation subsidiaries remain areas of heightened risk.
Equally important today is how the purpose of the foundation and its decision-making processes are documented. Tax authorities increasingly analyse not only the tax effects but also the economic and succession context of a foundation’s activities. This is entirely understandable given the purpose for which the family foundation was introduced into the Polish legal system. Consequently, the absence of a coherent narrative, overly laconic resolutions, or inconsistencies between the foundation’s charter and its actual practice may be used against the taxpayer, even where there is formal compliance with the law.
Conclusions for management boards and founders: a dangerous lack of interpretative comfort
Remaining under the current regulations does not mean safety. We are operating in a state of “suspension,” where the absence of precise definitions of a foundation’s business activity is exploited by the authorities through individual interpretations.
What should management boards and founders do now?
- “Passivity” audit: Verify whether income from real estate leasing and property rights does not bear the characteristics of operating activity as understood by the tax authorities.
- Review of purpose-related documentation: Tax authorities are increasingly applying the General Anti-Avoidance Rule (GAAR). The foundation’s charter and management resolutions must clearly reflect succession and asset-protection objectives, not merely tax considerations.
- Verification of foreign structures: Even without new CFC regulations, holding companies in low-tax jurisdictions requires the foundation to demonstrate genuine economic presence (so-called substance).
The President’s veto has bought time, but it has not granted immunity. The current moment is the best opportunity to “tighten” structures before another legislative proposal, potentially even more restrictive, finds its way onto the parliamentary agenda.
