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?
Polish Family Foundation — What It Is
A Polish family foundation (fundacja rodzinna) is just like any other foundation, with one key difference: beneficiaries can only be family members and related persons (specified in the bylaws). Registration: Regional Court in Piotrków Trybunalski. Minimum founding capital: 100,000 PLN. Corporate tax (CIT): 15% on distributions (in general) — but that’s a topic for another article.
Today, we focus on how much a beneficiary pays in personal income tax when receiving a distribution from the foundation.
Group Zero — Full PIT Exemption (0%)
Group zero = closest relatives. The law defines it precisely:
- Spouse (or ex-spouse, if designated under the bylaws)
- Lineal descendants — children, grandchildren, great-grandchildren (unlimited generations)
- Lineal ascendants — parents, grandparents
- Siblings — brothers, sisters
- Step-child and step-parent — family members by marriage.
Distributions to group zero: 0% PIT. Period. You don’t pay, don’t declare, don’t report taxable income.
Example: Michael establishes a family foundation. He contributes real estate worth 500,000 PLN. Every year, the foundation pays his wife Anna 20,000 PLN for living expenses. Anna pays: 0 PLN in personal income tax. Full exemption.
Group One — 10% PIT
Group one includes relatives with more distant family ties:
- In-laws (parents-in-law, siblings-in-law)
- Aunts and uncles (siblings of parents)
- Cousins (children of aunts and uncles)
- Adopted family members
- Other family members listed in the bylaws, unless the law specifies a higher rate.
Distributions to group one: 10% PIT on the amount received.
Example: Michael’s adult son has a wife, Patricia. Patricia is not biologically related to Michael, but he wants to support her. If Michael adds Patricia to the foundation bylaws as a „group one” beneficiary, then each 10,000 PLN distribution to her will be taxed: Patricia pays 1,000 PLN tax (10%).
Group Two — 15% PIT
Group two includes more distant persons:
- Unrelated individuals (if not family members)
- Other persons listed in the bylaws who don’t fall into group zero or group one.
Distributions: 15% PIT.
What About That 25%?
25% PIT is a penalty tax — not a „beneficiary group,” but a sanction for violating foundation rules.
It applies to foundations that:
- Operate outside the statutory purpose (Art. 5 lists ~20 qualifying purposes: material support, education, science, culture, etc.)
- Change their charitable activities
- Violate the law’s requirements.
This rate does not apply to beneficiaries — it applies to the foundation itself and its officers.
How Does It Work in Practice?
The foundation makes a distribution (e.g., 50,000 PLN):
| Recipient | Group | Tax | Net to beneficiary |
| Spouse | Zero | 0% | 50,000 |
| Adult child | Zero | 0% | 50,000 |
| Cousin | One | 10% | 45,000 |
| Unrelated person (if in bylaws) | Two | 15% | 42,500 |
The foundation does not withhold this tax. The beneficiary should report it — either to the tax authority or in their annual PIT return.
Does the Beneficiary Have to Declare It?
It depends:
- Group zero: statutory exemption — no declaration required
- Group one and two: foundation income — typically declared in the annual PIT return and subject to tax.
In practice — ask a tax accountant for the beneficiary, but the principle: if you receive money from the foundation and you’re not in group zero, you account for taxes.
Why Does This Matter When Planning a Foundation?
When establishing a family foundation, you need to know:
- Who will really benefit from it — if you mainly want to support your spouse and children, tax costs are minimal (group zero).
- Whether you want to support people outside the immediate family — then you must budget for 10-15% PIT for those individuals.
- What charitable purpose you include in the bylaws — this determines whether the foundation pays 15% CIT or 25% (penalty).
- Total tax cost — foundation CIT + beneficiary PIT = the full financial picture.
Conclusion
A Polish family foundation is a tool to support family — with taxation in mind. Group zero (spouse, children, parents, siblings) receives distributions tax-free. More distant relatives pay 10-15%. If you want to minimize tax burden, a narrow group of group-zero beneficiaries is the path. But if you plan broader family support, every percentage point counts.
Before establishing a foundation — consult a tax advisor. It’s not a problem, but math matters.
Michał Gawlak
attorney-at-law
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Sources:
• Family Foundation Act of January 26, 2023 (Articles 1-30)
• Personal Income Tax Act (Art. 21)
• Transitional provisions and interpretations by the Ministry of Finance (2023-2026).
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Polish Family Foundation and Real Estate Transfer Tax (PCC): When Do We Pay and When Is It Waived?
When establishing a family foundation in Poland, a natural question arises: do we need to pay a real estate transfer tax (podatek od czynności cywilnoprawnych, or PCC)? The answer depends on the structure of the transaction and the nature of the assets being transferred to the foundation.
In this article, we explain when PCC applies, how to leverage tax exemptions, and how to structure your transactions to minimize tax costs [Read more…]
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