A family foundation is an institution gaining increasing popularity in Poland as a tool for wealth succession and securing the long-term interests of a family. The Act of 26 January 2023 on Family Foundations introduced a legal framework that allows founders to transfer and manage assets with future generations in mind. One of the tools that can be used as part of a family foundation’s operations is lending.
Let’s take a closer look at the possibilities and limitations related to loans granted or obtained by a family foundation.
Are there restrictions on a family foundation granting loans?
The Family Foundation Act does not prohibit the granting of loans. However, such activities must align with the purpose of the foundation as outlined in its articles of association/statute (especially as per Article 5 of the Act, which specifies permitted business activities).
Loans can be granted to related parties (e.g. companies in which the foundation holds shares), beneficiaries, or even the founder. However, in the case of loans to beneficiaries or the founder, there are important tax implications to consider.
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Poland has become an increasingly attractive destination for foreign professionals, entrepreneurs, and high-net-worth individuals (HNWIs). One of the key incentives is the favorable tax treatment that certain categories of foreigners can benefit from.
This article outlines the main aspects of personal income tax in Poland, especially from the perspective of foreign nationals.
Personal Income Tax (PIT) Rates in Poland
Poland applies a progressive tax rate on personal income for residents:
- 12% on income up to PLN 120,000 per year
- 32% on the excess over PLN 120,000
There is also a tax-free allowance of PLN 30,000. This means that income below this threshold is not subject to PIT.
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Poland is becoming an increasingly attractive destination for professionals, entrepreneurs, and remote workers from around the world. One of the reasons is a growing list of tax incentives designed to support individuals relocating to Poland.
This article outlines key tax benefits, such as the lump-sum tax on foreign income and the returnee relief, and answers frequently asked questions to help you make informed decisions.
Lump-Sum Tax on Foreign Income
The lump-sum tax on foreign income is a preferential tax regime introduced for individuals transferring their tax residency to Poland.
It allows eligible taxpayers to pay a flat annual tax on their foreign-sourced income instead of being taxed under standard progressive Polish tax rates.
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Since 2022, a special tax preference (Lump sum Tax on Foreign Income) has been available in the Polish tax system for individuals transferring their tax residence to Poland.
This is regulated under Article 30j of the Personal Income Tax Act (PIT) and introduces a lump sum tax on foreign income as a tool to attract wealthy individuals from abroad. This solution is similar to those in Italy (“impatriati”) and Spain (“Beckham regime”).
Legal Basis and Purpose of the Regulation
According to Article 30j, paragraph 1 of the PIT Act:
From individuals who have transferred their place of residence to the territory of the Republic of Poland, income tax on foreign income, obtained outside the territory of the Republic of Poland, may be levied in the form of a lump-sum at the amount of PLN 200,000 annually.
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Since May 22, 2023, a new law on family foundations (Journal of Laws 2023, item 326) has been in force in Poland, introducing a completely new institution into the national legal system – the family foundation.
This long-awaited solution, inspired by the experiences of many European countries, such as Austria, Germany, and Liechtenstein, aims to facilitate wealth succession and protect family assets. What is a family foundation, what benefits does it offer, and what obligations does it impose on the founder and beneficiaries? We explain below.
What is a Family Foundation?
A family foundation is a legal entity established to manage assets and distribute them to specific beneficiaries, most often members of the founder’s family.
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