I. Introduction
The Polish Family Foundation Act of 2023 introduced a novel legal vehicle designed principally to facilitate intergenerational wealth preservation and succession planning. Unlike its continental European counterparts—most notably the Austrian Privatstiftung and the Liechtenstein foundation—the Polish fundacja rodzinna occupies an intermediate position on the spectrum of permissible economic engagement. The legislature neither granted these entities unrestricted commercial capacity nor imposed an absolute prohibition on business activities. Instead, Article 5 of the Act establishes an ostensibly exhaustive enumeration of permitted economic activities, deviation from which triggers adverse tax consequences rather than civil invalidity.
This regulatory architecture presents significant interpretive challenges. The statutory language employs terminology more consonant with tax law than private law doctrine, while the sole express sanction for non-compliance resides in the Corporate Income Tax Act rather than in any provision affecting the validity of juridical acts. This Article undertakes a comprehensive doctrinal analysis of the permissible scope of economic activity for Polish family foundations, examining the legal character of Article 5’s restrictions, the appropriate definition of “economic activity” applicable thereto, and the practical implications for foundation governance and transactional practice.
II. The Legal Character of Article 5: A Taxonomy of Possible Interpretations
A. The Question of Sanction
The efficacy of any legal prohibition depends fundamentally upon the sanctions attendant to its violation. Article 5 of the Family Foundation Act presents a curious lacuna in this regard: the provision declares that a family foundation “may conduct economic activity… only within the scope” enumerated therein, yet it prescribes no civil consequence for transgression. The sole statutory ramification appears in Article 24r(1) of the Corporate Income Tax Act, which subjects income derived from non-permitted activities to taxation at twenty-five percent rather than the general exemption otherwise applicable to family foundations.
This legislative silence admits of at least three coherent interpretive frameworks, each carrying distinct implications for transactional practice and foundation governance.
B. The Ultra Vires Doctrine: Restricted Legal Capacity
One might theoretically contend that Article 5 delimits the legal capacity of family foundations, rendering juridical acts exceeding its scope void ab initio. Such an interpretation would align the family foundation with certain other Polish legal entities—notably housing communities (wspólnoty mieszkaniowe) and housing cooperatives (spółdzielnie mieszkaniowe)—for which courts have recognized a doctrine of special legal capacity.
This construction, however, encounters formidable objections. As a matter of textual interpretation, Article 5 prohibits the “conduct of economic activity,” not the “performance of individual juridical acts.” The distinction is material: a single transaction, absent the elements of continuity and organization requisite to economic activity, cannot logically constitute a violation of the provision. Moreover, the restricted capacity doctrine developed for housing communities rests upon distinctive policy considerations—principally, the protection of passive members involuntarily bound to these entities by virtue of property ownership—that find no analogue in the family foundation context.
From a functional perspective, imposing invalidity would visit upon innocent third parties the consequences of the foundation’s regulatory non-compliance. A contracting party, unable to ascertain whether a given transaction constitutes part of an impermissible pattern of economic activity, would bear the risk of condictio indebiti claims and the inapplicability of good-faith acquisition protections. Such an allocation of risk appears neither efficient nor equitable.
C. Internal Governance Norm: The Organizational Dimension
A second interpretive possibility would locate Article 5’s operative force exclusively within the foundation’s internal governance structure. On this view, the provision establishes a duty of compliance binding upon the management board, breach of which may ground removal from office, personal liability for damages under Article 75 of the Act, or even dissolution of the foundation under Article 87(2). Yet this internal dimension would not extend to external relations: transactions concluded with third parties would remain valid and enforceable regardless of their classification under Article 5.
This construction preserves transactional security while maintaining meaningful constraints on foundation management. It finds support in the general principle that limitations directed solely at one party to a contract cannot, without more, vitiate the agreement itself. Nevertheless, as developed below, even this intermediate position may overstate the private-law significance of Article 5.
D. A Purely Tax-Law Provision
The most persuasive interpretation, now commanding substantial support in both doctrine and emerging jurisprudence, treats Article 5 as an exclusively tax-law provision devoid of private-law consequence. Several considerations militate in favor of this construction.
First, the legislative architecture itself suggests that taxation constitutes the sole intended sanction. The Corporate Income Tax Act expressly cross-references Article 5, providing that income from activities exceeding its scope forfeits the otherwise applicable exemption. Had the legislature intended civil consequences, one would expect either explicit provision therefor or, at minimum, the employment of terminology conventional to private-law prohibition.
Second, the vocabulary of Article 5—”disposal of property,” “making property available,” “participation in companies”—resonates with the economic-substance orientation characteristic of tax legislation rather than the formal juridical categories of private law. This terminological choice signals legislative intent to create a tax-law norm operating according to tax-law logic.
Third, the tax rate itself undermines any inference of categorical prohibition. A twenty-five percent levy, while significant, hardly constitutes the confiscatory sanction one would expect were the underlying activity deemed fundamentally incompatible with the foundation’s legal character. The rate suggests instead a legislative judgment that exceeding the enumerated scope is permissible but should not enjoy preferential tax treatment—a matter of fiscal policy rather than foundational capacity.
The implications of this interpretation are substantial. The family foundation possesses full legal capacity to engage in any lawful economic activity; Article 5 merely determines which activities qualify for tax-exempt treatment. The management board, in deciding whether to undertake a particular transaction, must weigh the applicable tax burden against anticipated returns—a business judgment rather than a question of legal authority. Correlatively, the registry court lacks competence to scrutinize foundation statutes for Article 5 compliance, as the provision creates no norm of private law cognizable in registration proceedings.
III. The Definition of Economic Activity: A Critical Threshold Question
A. The Competing Definitional Frameworks
Before any analysis of Article 5’s enumerated categories can proceed, one must first establish what constitutes “economic activity” for purposes of the provision. Polish law offers multiple definitions of this concept, and their divergence is far from academic.
Article 3 of the Entrepreneurs’ Law defines economic activity as “organized gainful activity conducted in one’s own name on a continuous basis.” This definition requires the conjunctive satisfaction of four elements: (i) a profit motive; (ii) organizational structure; (iii) continuity of operations; and (iv) conduct in one’s own name and for one’s own account.
Article 3(9) of the Tax Ordinance, by contrast, offers a considerably more expansive formulation, encompassing any gainful activity conducted in one’s own name, “even if other statutes do not classify such activity as economic activity.” This definition dispenses with the requirements of organization and continuity, potentially sweeping isolated transactions within its ambit.
B. The Proper Reference: Entrepreneurs’ Law
Article 5 expressly invokes “economic activity within the meaning of Article 3 of the [Entrepreneurs’ Law].” This textual directive should, in principle, resolve the definitional question. Yet administrative practice has frequently—and, one must conclude, erroneously—applied the broader Tax Ordinance definition, thereby subjecting isolated transactions to scrutiny under Article 5 without inquiry into whether they form part of organized, continuous activity.
This approach constitutes a significant interpretive error. When the legislature explicitly designates a definitional source, departure therefrom requires compelling justification. None appears available here. To the contrary, the legislative choice to invoke the Entrepreneurs’ Law definition—rather than the Tax Ordinance formulation that might have been expected in a tax-adjacent provision—suggests deliberate intent to confine Article 5’s operation to genuine economic activity rather than isolated transactions.
The practical consequences are substantial. A family foundation that sells a single asset, enters into one lease agreement, or extends an isolated loan does not thereby engage in economic activity within the meaning of Article 5, regardless of the transaction’s classification under the enumerated categories. Only when such transactions acquire the character of organized, continuous, profit-motivated enterprise does Article 5’s framework become engaged.
C. Exclusions from Economic Activity
The Entrepreneurs’ Law excludes certain activities from its definition of economic activity. Most significantly for present purposes, Article 6 exempts agricultural production—including cultivation, animal husbandry, horticulture, and inland fisheries—from the statute’s scope. Activities falling within these exclusions cannot, by definition, constitute economic activity within the meaning of Article 5, and accordingly lie entirely outside its regulatory framework.
IV. The Enumerated Categories: A Detailed Examination
A. Disposal of Assets
Article 5(1)(1) permits the disposal of assets, provided such assets were not acquired “solely for the purpose of subsequent disposal.” This formulation establishes a general license for asset disposition while carving out an exception for purely speculative acquisition.
The term “assets” (mienie) carries broad meaning under Polish law, encompassing all manner of property rights: ownership interests in tangible property, receivables, shares and partnership interests, intellectual property rights, and beneficial positions not technically constituting subjective rights—including possession, trade secrets, and expectancies. Virtual currencies, though their juridical classification remains contested, possess economic value and are capable of alienation; they should accordingly qualify as assets for purposes of this provision.
The exception for assets acquired “solely” for resale requires careful parsing. Three elements define its scope. First, the acquisition must precede disposition by a relatively brief interval, evidencing absence of genuine intent to utilize the asset in foundation operations. Second, speculative or tax-optimization purpose must have existed at the time of acquisition; subsequent change of circumstances prompting disposition does not trigger the exception. Third—and most critically—the purpose must be “solely” speculative; identification of any additional rational objective for the acquisition, however subsidiary, removes the transaction from the exception’s scope.
B. Making Assets Available for Use
Article 5(1)(2) authorizes lease, tenancy, and “making assets available for use on another basis.” The concluding phrase extends the provision beyond the named contracts to encompass all arrangements—whether gratuitous or onerous, obligational or proprietary—by which one party obtains the right to use another’s assets. This includes, inter alia, usufruct, easements, license agreements for intellectual property, and equipment leasing arrangements.
Administrative authorities initially questioned whether short-term rentals—such as vacation apartment bookings—fell within the scope of “lease” for purposes of this provision. This restrictive interpretation lacked any foundation in civil law, which recognizes no minimum duration requirement for lease contracts, and has been properly rejected in subsequent jurisprudence. A family foundation may lease property for any period, from years to hours, without forfeiting tax-exempt treatment.
The provision does not, however, extend to composite services transcending mere provision of property for use. Hotel operations combining accommodation with dining, wellness, and entertainment services constitute an integrated hospitality offering rather than simple lease. A foundation wishing to participate in the hospitality sector must do so through a subsidiary entity; the foundation itself may own the underlying real property and lease it to the operating company.
A significant statutory exception applies to the lease or usufruct of an enterprise (przedsiębiorstwo) to related parties. Article 6(8) of the Corporate Income Tax Act excludes income from such arrangements from the general exemption, subjecting it to standard taxation. This provision targets potential base-erosion strategies while leaving formally compliant structures available.
C. Participation in Companies and Investment Funds
Article 5(1)(3) permits joining and participating in commercial companies, investment funds, cooperatives, and “entities of similar character” having their seat domestically or abroad. This provision accommodates the paradigmatic use case for family foundations: serving as a holding vehicle for interests in operating businesses.
“Joining” (przystępowanie) encompasses formation of new entities as a founding member, acquisition of interests in existing entities, and subscription for newly issued shares in capital increases. “Participation” (uczestnictwo) embraces the exercise of membership rights, receipt of distributions, and disposition of interests. The breadth of this authorization reflects legislative recognition that family foundations will typically hold diversified portfolios of business interests.
The reference to foreign entities “of similar character” invites comparative analysis. The relevant similarity is structural and functional—the existence of membership interests conferring defined rights and obligations—rather than fiscal. An entity’s tax treatment in its jurisdiction of organization is immaterial to its classification under Article 5(1)(3).
The civil-law partnership (spółka cywilna) presents a distinctive case. As this arrangement lacks legal personality and does not constitute a commercial company under Polish law, joining a civil-law partnership does not itself fall within Article 5(1)(3). However, the foundation’s activities as a partner—conducted jointly with fellow partners rather than through an intermediary legal person—must be evaluated under the other provisions of Article 5. If such activities fall within an enumerated category, the foundation’s participation in the civil-law partnership remains tax-advantaged.
D. Trading in Financial Instruments
Article 5(1)(4) authorizes the acquisition and disposal of securities, derivative instruments, and “rights of similar character.” The scope extends to the full range of financial instruments as defined in the Financial Instruments Trading Act: shares, bonds, depositary receipts, investment certificates, options, futures, and swaps.
Notably, this provision contains no exception for instruments acquired solely for subsequent disposal—the limitation applicable to general asset disposition under Article 5(1)(1). The omission appears deliberate: portfolio investment, including active trading strategies, constitutes a core function of wealth-preservation vehicles, and the legislature evidently saw no reason to discourage such activity through heightened taxation.
Virtual currencies, notwithstanding their frequent characterization as investment assets, do not constitute securities or derivative instruments and lack the structural relationship to underlying assets characteristic of “rights of similar character.” Their disposition accordingly falls under the general asset-disposal provision of Article 5(1)(1) rather than the financial instruments provision.
E. Extension of Credit
Article 5(1)(5) permits loan extension, but only to specified borrowers: capital companies in which the foundation holds shares, partnerships in which the foundation participates as a partner, and foundation beneficiaries. The enumeration is exhaustive; loans to unrelated parties—and, conspicuously, loans to cooperatives of which the foundation is a member—fall outside the tax-advantaged scope.
The provision imposes no minimum ownership threshold; a foundation holding a single share may extend tax-advantaged credit to the issuing company. However, indirect holdings do not satisfy the requirement: a loan to a “grandchild” company—owned by a subsidiary in which the foundation holds interests—exceeds the permitted scope.
Interest-free loans, lacking the profit motive essential to economic activity under the Entrepreneurs’ Law definition, fall outside Article 5’s regulatory framework entirely. A foundation may extend gratuitous financing to any party without tax consequence, subject only to potential transfer-pricing considerations in related-party contexts.
F. Foreign Currency Transactions
Article 5(1)(6) permits foreign currency transactions, but only those undertaken “for the purpose of making payments related to the foundation’s activities.” Currency conversion incident to cross-border distributions, investment transactions, or operational expenses satisfies this purpose requirement. Speculative currency trading—positioning to profit from exchange-rate movements—does not.
This limitation, however, may prove less restrictive than it initially appears. Foreign currency constitutes “assets” within the meaning of Article 5(1)(1). Currency acquired otherwise than solely for subsequent disposal may accordingly be sold under that provision, even if the appreciation-motivated holding period exceeds what the “payment purpose” requirement of Article 5(1)(6) would permit.
G. Agricultural and Forestry Activity
Article 5(1)(7) addresses non-industrial processing of agricultural products where at least fifty percent of inputs derive from the foundation’s own cultivation or husbandry. Article 5(1)(8) separately authorizes forest management (gospodarka leśna). Both provisions, per Article 5(2), may be conducted only in connection with an agricultural operation conducted by the foundation.
These provisions, while textually significant, carry limited practical import. Agricultural activity—cultivation, animal husbandry, and related production—does not constitute economic activity within the meaning of the Entrepreneurs’ Law, which expressly excludes such activity from its scope. The exclusion flows through to Article 5 via that provision’s definitional incorporation: activity that does not constitute “economic activity” within the meaning of the Entrepreneurs’ Law cannot violate Article 5’s limitation to specified forms of economic activity.
The processing provision of Article 5(1)(7) thus serves a clarifying function: even processing activities—which might otherwise constitute non-agricultural economic activity—qualify for tax-advantaged treatment when conducted in conjunction with foundation agricultural operations and utilizing predominantly own-produced inputs. The forest-management provision operates similarly, though the Forestry Act independently excludes forestry activity from the Entrepreneurs’ Law’s scope.
A family foundation may accordingly operate an agricultural enterprise—cultivating crops, raising livestock, producing and selling agricultural commodities—without limitation under Article 5. The practical barrier to such activity lies not in foundation law but in agricultural land transfer restrictions: absent applicable exemptions, acquisition of agricultural parcels exceeding one hectare requires administrative approval from the National Support Centre for Agriculture (KOWR).
V. Structural Implications for Foundation Planning
A. Asset Allocation Considerations
The foregoing analysis yields practical guidance for foundation structuring. Assets generating returns through lease, dividend, or interest income may appropriately reside directly within the foundation. Operating businesses—generating income through the sale of goods or services to third parties—should be conducted through subsidiary entities whose interests the foundation holds.
This structural allocation reflects the foundation’s essential character as a wealth-preservation rather than wealth-generation vehicle. The legislature contemplated foundations as stewards of accumulated capital, not as entrepreneurs competing in commercial markets. While the tax-only sanction for non-compliance permits deliberate deviation from this model where commercially justified, such deviation should represent a considered exception rather than standard practice.
B. Documentation and Governance
Foundation management should document the business rationale for significant transactions, particularly those approaching the boundaries of Article 5’s enumerated categories. While the management board’s authority to act is not contingent upon Article 5 compliance—given the provision’s purely tax-law character—a record of deliberation demonstrates the discharge of fiduciary duties and may prove valuable in potential disputes with tax authorities.
For transactions presenting material uncertainty regarding Article 5 classification, advance ruling requests to the tax authorities merit consideration. While not legally binding upon courts, favorable rulings provide practical protection against retrospective reclassification and attendant tax assessment.
C. Consequences of Non-Compliance
Exceeding Article 5’s scope does not invalidate completed transactions, expose contracting counterparties to risk, or automatically establish management-board liability. The consequence is taxation at twenty-five percent rather than exemption—a significant but manageable cost that may, in appropriate circumstances, represent acceptable consideration for transaction benefits.
Management-board liability arises only where the decision to incur the tax cost, evaluated holistically, breaches fiduciary duties to the foundation and its beneficiaries. A considered judgment that a particular transaction’s benefits justify the attendant tax burden does not, without more, constitute such breach. Conversely, systematic disregard of tax efficiency without corresponding benefit might ground claims of mismanagement.
VI. Conclusion
Article 5 of the Polish Family Foundation Act establishes a framework fundamentally different from that initially suggested by its prohibitory language. The provision does not restrict the family foundation’s legal capacity, does not render non-compliant transactions void or voidable, and does not expose third parties to risks arising from the foundation’s regulatory classification. It operates, rather, as a tax-law provision determining which activities qualify for preferential treatment and which bear standard taxation.
This characterization carries significant implications. Family foundations possess full juridical capacity to engage in any lawful activity; the management board’s task is to optimize after-tax returns rather than to police legal boundaries. Registry courts lack authority to evaluate statutes against Article 5 standards, and notaries need not investigate transaction compliance as a condition of documentation.
The proper application of Article 5 requires, as a threshold matter, identification of genuine economic activity under the Entrepreneurs’ Law definition. Isolated transactions—lacking the organization, continuity, and systematic profit-orientation essential to that definition—fall entirely outside the provision’s scope. Only organized, continuous, gainful activity conducted in the foundation’s own name engages Article 5’s regulatory framework.
For activities properly characterized as economic, the enumerated categories provide substantial operational latitude. Asset management, investment holding, financial-instrument trading, and agricultural production all find express authorization. Lending, while limited in permissible borrower class, accommodates typical intra-group financing arrangements. The prudent foundation planner will structure operations to maximize coverage under these categories while locating non-qualifying activities in subsidiary entities.
The Polish family foundation thus emerges as a flexible vehicle capable of accommodating diverse wealth-preservation strategies. Its regulatory constraints, properly understood, establish tax-planning parameters rather than operational prohibitions—a nuance that meaningfully expands the institution’s practical utility for sophisticated succession planning.
