The taxation of family foundations will not be adversely changed in 2025.

Despite fears, no unfavourable regulations were introduced for 2025 while the vehicle remains a go-to solution for succession and wealth management.

 

Unnecessary fears of tax changes – no new law

Many family foundations breathed a sigh of relief towards the end of 2024. The Finance Ministry’s suggestions of adverse changes in the family foundation tax framework have fortunately not become reality. For any adverse tax changes to become effective in 2025, the underlying legislation had to be officially published by the end of November 2024. But the preliminary and rather vague announcements made by a deputy minister in late August 2024 in the form of a simple press release never turned into any formal action. Neither has there been any official legislative proposal to change the way family foundations are taxed.

Hopefully, FM will not send any more of such disconcerting messages as last August and family foundations will be able to continue to rely on the original framework with stability and peace of mind. After all, the family foundation emerged not as a tax optimisation vehicle but as a succession and wealth management tool. And it continues to be of use as such.

But what about the tax authorities’ approach? 

Having said that, some potential founders may have become concerned when the Head of National Revenue Administration recently denied issuing an assurance opinion in case no. DKP1.8082.7.2023, as we could learn a few days ago from various on-line legal media.

You may rest assured in this regard, too. The above unfavourable outcome can be said to concern a very specific case where there was a departure from the main purpose of family foundation as such, which is long-term asset management. A problem arises when a family foundation structure, rather than serving its original purpose, which is wealth protection, is sought to be used for a quick asset sale with proceeds to be transferred to the beneficiaries. Such a scenario can indeed be seen as a prohibited tax scheme. But founders setting up family foundations with succession and stable wealth management in mind should not fear tax avoidance accusations.

 

Here is a refresher on the major advantages of a family foundation, showing why they should not be given up on the back of unconfirmed news of tax changes.

Family foundation advantages

 

  1. Wealth management and succession planning  – family foundations enable effective wealth management throughout generations, e.g. by protecting assets from family disputes, without the risk of wealth splitting.
  2. Flexibility – flexible charter design rules give the founder control over defining a governance framework for the foundation, including distributions to beneficiaries. This allows founders to adjust the structure to suit their particular family needs.
  3. Favourable taxation – the structure offers tax-effective asset management by reducing certain tax burdens.

 

Does the family foundation vehicle continue to be a safe solution?

It seems the lawmakers refrained from changing tax legislation on family foundations. Instead, the Finance Ministry is seeking to ensure the existing law is interpreted in a way that would prevent using the structure for artificial arrangements designed for tax avoidance only. This is good news for those who, rather than counting on quick tax gains, look for a safe investment vehicle and a flexible succession planning and wealth management option.

To learn why a family foundation is still a worthwhile choice, visit our Companies Blog at https://sendero.pl/kto-powinien-sie-zainteresowac-zalozeniem-fundacji-rodzinnej