The Collector’s Loophole
When Poland’s family foundations sell art, the taxman may have nothing to say about it – unless he does.
Robert Nogacki
Consider a man with five collector vehicles – four vintage cars and a motorcycle – and five watches. Not a dealer – a collector, which is to say a person for whom acquisition is less a transaction than a form of devotion. He has spent years assembling the set: a particular Porsche 356 because of its provenance, a particular Patek Philippe because it was the reference his father wore. The collection is the man’s autobiography rendered in steel and sapphire crystal, and he would like it to survive him.
In Poland, since May 2023, there has been a legal vehicle designed precisely for this kind of wish. The fundacja rodzinna – the family foundation – is a creature of relatively recent statute, modelled loosely on the civil-law Stiftung and functionally analogous to the Anglo-American trust. Its stated purpose, as defined in Article 2(1) of the Family Foundation Act, is to accumulate assets, manage them in the interest of beneficiaries, and provide benefits to those beneficiaries. It is, in the Polish legislator’s somewhat bureaucratic phrasing, a legal person established for the purpose of “gathering property.” In practice, it is a fortress for family wealth – one that happens to raise a surprisingly knotty question about value-added tax.
The question is this: When a family foundation occasionally sells a piece from its collection – a car, a watch, a painting – does that sale attract VAT? The answer, it turns out, depends on whether the foundation is acting as a trader or merely as a prudent steward of inherited assets. The distinction sounds simple. It is not.
The Polish tax authority – the Director of National Tax Information, known by its acronym KIS – took the position, in a binding ruling issued on May 16, 2024, that the answer was yes. Every sale of a collectible by a family foundation, the Director reasoned, constituted economic activity within the meaning of the VAT Act. The foundation’s activities, the ruling declared, “exceed the scope of ordinary management of private assets” and “fall within the definition of commercial activity.” It did not matter that the foundation had no intention of becoming a regular seller. It did not matter that the collection had been assembled as an expression of passion, not commerce. The mere possibility of future sales – no more than one every two years, and only in the event of financial necessity or an exceptionally favorable offer – was enough to make the foundation a taxable person.
There was, however, a wrinkle in the Director’s reasoning that a careful reader would have noticed immediately. Having declared that the sale of collectibles constituted taxable activity, the Director simultaneously denied the foundation the right to deduct input VAT on the costs of maintaining the collection – garaging, insuring, servicing, transporting the cars to shows. The logic was that these expenses were not connected to taxable transactions. But this produced an elegant absurdity: the tax authority was saying, in effect, that selling the cars was a taxable commercial activity, but maintaining the cars in saleable condition was not connected to that commercial activity. The foundation was to be taxed on the output but denied deductions on the input. Even by the standards of VAT jurisprudence – a field not known for its internal harmony – this was a striking contradiction.
The foundation challenged the ruling in court, and on November 13, 2024, the Regional Administrative Court in Gdańsk – the Wojewódzki Sąd Administracyjny, or WSA – overturned it.
The court’s reasoning was both lucid and, in its quiet way, ambitious. It began from the statutory architecture of the Family Foundation Act. A family foundation, the court observed, is created to accumulate property, manage it for the benefit of beneficiaries, and distribute benefits. These are its defining purposes – the reason for its existence. When a foundation performs these functions, it is not acting as a manufacturer, a trader, or a service provider. It is not, in the language of Article 15(2) of the VAT Act, engaged in “economic activity.” It is doing what it was built to do.
The court’s reasoning follows the structural logic of a landmark 2007 resolution of the Supreme Administrative Court – one that Polish tax lawyers will recognize immediately – though the judgment does not cite it expressly. In that case, I FPS 3/07, a seven-judge panel had addressed the question of whether a private individual selling building plots carved from a family farm was a VAT taxpayer. The Supreme Administrative Court held that the answer was no. The sine qua non of VAT liability, the panel wrote, is a finding that the seller is acting as a manufacturer, trader, service provider, natural-resource extractor, farmer, or freelance professional. Neither formal registration as a VAT taxpayer nor the frequency of transactions can, by itself, establish that a person is acting in that capacity. What matters is the character of the specific transaction – and the disposal of private property, however profitable, is not trade.
The Gdańsk court applied this reasoning to the family foundation with a structural elegance that deserves attention. A family foundation, the court said, occupies a position in the VAT system that is analogous to a private individual’s management of personal assets – with the difference that the management is performed by a legal entity rather than a natural person. The foundation in question was a registered VAT taxpayer, yes – but only because it leased commercial real estate, an activity that plainly constitutes economic activity. The leasing and the collection were two entirely separate spheres. One was business. The other was stewardship.
The Director of KIS did not appeal. The judgment became final on December 28, 2024, and on April 29, 2025, the Director issued a new binding ruling – this time confirming the foundation’s position in full.
The implications of the Gdańsk ruling extend well beyond vintage automobiles and horology. The court’s reasoning is not specific to cars and watches; it is specific to the function of a family foundation. Any asset held for the statutory purpose of accumulation and intergenerational transfer – paintings, sculpture, antique furniture, rare coins, fine wine, historical musical instruments – would, under the same analysis, fall outside the scope of VAT when sold incidentally by a family foundation acting in its statutory capacity.
These are not merely checklist items. They are, in aggregate, the line that separates a foundation that happens to sell a painting from a gallery that calls itself a foundation.
There is, however, a darker reading of this ruling – one that the court did not address, because the question was not before it, but that any responsible practitioner must confront.
Polish personal income-tax law contains an unremarkable provision – Article 10(1)(8)(d) of the PIT Act – that exempts the sale of movable property from income tax if the sale occurs more than six months after the end of the month in which the property was acquired. The provision exists for prosaic reasons: it would be absurd to tax every private sale of a used bicycle or a second-hand sofa. But for collectibles – where capital appreciation over six months can be substantial – the exemption is a gift of considerable value.
Now combine this with the Gdańsk ruling. Imagine a person who acquires a work of art as a private investment. After six months, the personal income-tax exemption kicks in; the gain is tax-free. The person then contributes the work to a family foundation. The foundation holds the work as part of its collection, manages it in the interest of beneficiaries, and eventually – incidentally, in extraordinary circumstances – sells it. Under the Gdańsk analysis, the sale attracts no VAT. The proceeds are used to fund benefits for beneficiaries, taxed at a flat fifteen per cent.
The arithmetic is suggestive. The entire chain – acquisition, appreciation, disposition – bypasses both income tax on the capital gain (zero per cent instead of nineteen) and VAT on the sale (zero per cent instead of twenty-three). The only tax in the structure is the fifteen per cent on the benefit payment. Compare this with a straightforward commercial sale, where the combined PIT and VAT burden can approach forty per cent, and the differential is not subtle. It is a chasm.
But when these elements are assembled into a single transactional chain – when the purpose of each step is to feed into the next, and the purpose of the whole is to minimize tax – the structure begins to look less like the exercise of statutory rights and more like something that Polish tax law has a name for: an aggressive tax scheme.
Three provisions converge to create the risk. First, the stacking of exemptions from different tax statutes within a single structure is a classic hallmark of a reportable tax arrangement under Poland’s mandatory disclosure regime. Second, the General Anti-Avoidance Rule – Article 119a of the Tax Ordinance – applies regardless of the amount of tax benefit involved. A structure in which a person acquires art solely to contribute it to a foundation may be treated as an artificial arrangement whose principal purpose is to obtain a tax advantage contrary to the object and purpose of the statute. Third, Article 5(5) of the VAT Act permits tax authorities to deny the VAT exclusion if the foundation was used as a vehicle solely to avoid VAT, without economic substance beyond the tax effect.
The line, in other words, is not where the statute ends. It is where the purpose of the structure begins. The Gdańsk ruling protects family foundations that genuinely accumulate and manage collections in the interest of their beneficiaries. It does not protect structures in which the foundation is merely a link in a tax-optimization chain for the art trade. The boundary runs where the goal of preserving family wealth gives way to the practice of tax engineering – and the difference between the two is not always visible from the outside.
For those planning to contribute collections of significant value, a binding tax ruling from the Director of KIS is advisable. In light of the Gdańsk judgment and the ruling issued in its wake, such a request should be favorably received – provided the facts are genuinely comparable.
Robert Nogacki – licensed legal counsel (radca prawny, WA-9026), Founder of Kancelaria Prawna Skarbiec.
There are lawyers who practice law. And there are those who deal with problems for which the law has no ready answer. For over twenty years, Kancelaria Skarbiec has worked at the intersection of tax law, corporate structures, and the deeply human reluctance to give the state more than the state is owed. We advise entrepreneurs from over a dozen countries – from those on the Forbes list to those whose bank account was just seized by the tax authority and who do not know what to do tomorrow morning.
One of the most frequently cited experts on tax law in Polish media – he writes for Rzeczpospolita, Dziennik Gazeta Prawna, and Parkiet not because it looks good on a résumé, but because certain things cannot be explained in a court filing and someone needs to say them out loud. Author of AI Decoding Satoshi Nakamoto: Artificial Intelligence on the Trail of Bitcoin’s Creator. Co-author of the award-winning book Bezpieczeństwo współczesnej firmy (Security of a Modern Company).
Kancelaria Skarbiec holds top positions in the tax law firm rankings of Dziennik Gazeta Prawna. Four-time winner of the European Medal, recipient of the title International Tax Planning Law Firm of the Year in Poland.
He specializes in tax disputes with fiscal authorities, international tax planning, crypto-asset regulation, and asset protection. Since 2006, he has led the WGI case – one of the longest-running criminal proceedings in the history of the Polish financial market – because there are things you do not leave half-done, even if they take two decades. He believes the law is too serious to be treated only seriously – and that the best legal advice is the kind that ensures the client never has to stand before a court.
