One of the primary reasons for establishing a family foundation is tax savings. In this article, we explain how a Polish family foundation protects your assets from inheritance tax and gift taxes — and whether it truly works as you might imagine.
Family Foundation and Taxes
Inheritance tax in Poland ranges from 3% to 20%, depending on the degree of kinship. For spouses and descendants, it is 3%, but for more distant relatives it can be 16-20%. For non-relatives, it is as high as 20%. This is a significant burden on large estates.
A family foundation works differently.
Assets transferred to a foundation are not subject to inheritance tax when passed to the next generation. Instead, beneficiaries receive periodic distributions from the foundation, which may — in some cases — be less tax-burdened than direct inheritance.
Key differences:
- Direct inheritance: 3-20% inheritance tax on the entire value, paid once
• Family foundation: assets in the foundation are not part of a taxable estate; beneficiaries receive distributions without inheritance tax (though other taxes may apply, e.g., corporate income tax if the foundation generates income)
Worth noting: transferring assets to a foundation is technically a gift, which in Poland can be tax-free for close relatives under certain conditions. It’s the perfect combination — you give without gift tax, and then your family benefits without inheritance tax.
Is it always worth it? Not for everyone. If your assets are modest (up to a few million PLN), the cost of establishing and managing a foundation may exceed tax savings. But for larger estates — especially those with international assets — a family foundation is a tool well worth considering.
Tax planning requires a personalized approach. Every family has different needs, goals, and asset structures. If you’re interested in learning more about family foundations as an estate planning tool, we encourage you to read our other articles or contact an advisor.
Michał Gawlak
attorney-at-law
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Polish Family Foundation and Personal Income Tax: Zero-Tax for the Inner Circle, Real Costs for Others
Setting up a Polish family foundation is not just about asset protection or succession planning. It’s also a carefully calculated tax game.
The Family Foundation Act of January 26, 2023 divides beneficiaries into groups — and this classification determines everything. Group zero (spouse, children, parents) pays 0% PIT. Everyone else pays 10%, 15%, or even 25%.
How does it work in practice? [Czytaj dalej…]
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