Legislative Ambush of Family Foundations. Critical Analysis of the Draft Amendment to the CIT Act of 29 August 2025
âNo man’s life, liberty or property are safe while the Legislature is in sessionâ. This oft-misattributed maxim – commonly credited to Mark Twain but in fact authored by Gideon J. Tucker, a nineteenth-century jurist of the New York Supreme Court – remains uncannily relevant amid the tumult of contemporary legislative practice. Pronounced in 1866 during the disorderly lawmaking in Albany, Tuckerâs aphorism echoes the abiding hazards of capricious legislative interventions, a phenomenon with an unfortunately extensive pedigree in Polish legislative tradition. What follows is not a piece of dystopian legal fiction but a sober assessment of the recent draft amendment to the Polish Corporate Income Tax Act (CIT) as regards family foundations.
This âlegislative ambushâ – to invoke the apt phrase from comparative tax literature – manifests as the calculated deployment of surprise as an instrument of fiscal policy, whereby the State intentionally deprives its subjects of the possibility for rational adaptation to altered legal norms. The proposed Article 2 of the amendment exemplifies this danger, extending the application of new legal regimes to property gratuitously transferred to or acquired by a family foundation from a related entity after August 31, 2025. Significantly, the legislative project itself was published a mere forty-eight hours prio – on August 29, 2025. Such temporality invites incisive scrutiny through the lens of the fundamental doctrine of lex retro non agit.
Doctrinal and Constitutional Flaws: Lex Retro Non Agit
Although one might concede the intention to eliminate unwarranted systemic tax preferences – the current regime does indeed produce anomalies incompatible with core principles of fiscal order – the method of implementation provokes serious reservations, both constitutional and pragmatic. The paradox is that the family foundation, originally conceived as a mechanism of intergenerational wealth succession, has in practice been transformed into a vehicle for aggressive tax optimization. Rather than fortifying the legitimate purposes of succession, the original rules fomented constructions largely alien to such aims. The proponent’s response – namely, the introduction of quasi-retroactive provisions – constitutes a legislative extremity more likely to endanger legal stability than ameliorate existing dysfunctions.
Taxpayers who made investment decisions predicated upon statutory provisions – regardless of the moral valence assigned to their exploitation of statutory loopholes – now confront a fait accompli. What the drafter describes as âtighteningâ in fact operates as a trap for those who entrusted the letter of the law. Such legislative practice undermines the foundational principle of legal certainty and is liable to unleash a deluge of litigation, the outcome of which remains distinctly uncertain.
Concealed Retroactivity as a Fiscal Instrument
The architecture of the draft is particularly sophisticated in its ostensible conformity. Formally, the statute enters into force on January 1, 2026, evincing the semblance of a standard vacatio legis period. Yet, Article 2 imports a crucial caveat: the new, adverse provisions apply to assets introduced into family foundations as early as August 31, 2025.
Accordingly, any individual who, after Sunday, August 31, 2025, contributes assets to a family foundation and subsequently alienates those assets within thirty-six months forfeits entitlement to tax exemption – even though the adverse provisions were not yet in force at the time of the contribution. This scenario is paradigmatic of concealed retroactivity masquerading as prospective legal effect.
The forty-eight-hour interval between the publication of the draft (Friday, August 29) and the operative date for affected transactions (Sunday, August 31) is so drastically abbreviated that it precludes any rational defensive maneuver. Legal and notarial offices are shuttered, advisors are inaccessible, and the mechanics of meaningful response – whether by accelerating transactions before the deadline or suspending them in anticipation of legal developments – are rendered illusory.
Thus, while the law maintains a formal semblance of prospectivity – applying to future events – the practical impossibility of adaptation renders its character materially retroactive. This is a classic legislative ambush: surprise weaponized as a fiscal policy tool.
Alternatives: Models of Transitional Provisions
Comparative analysis affords three alternative models of transitional regulation, each of which would reconcile the imperative of lawful certainty with fiscal efficacy.
Classical Prospectivity with Expectation Protection
The first proposal adheres to a classical approach to tax intertemporality:
âArticle 2: (1) The provision of Article 6(8)(2), as amended, shall apply to property contributed from the day following the lawâs entry into force. (2) Property subject to a preliminary or binding agreement executed prior to promulgation shall remain subject to prior lawâ.
This model would instantiate the tempus regit actum principle in its pure form, affording protection to legitimate expectations for parties whose obligations were secured under the former legal regime.
Transitional Period with Execution Clause
A second proposal introduces limited-term protection for obligations in process:
âArticle 2: Where, prior to August 31, 2025, a family foundation has concluded an agreement or incurred a binding obligation to acquire property, Article 6(8)(2) shall not apply, provided the property is contributed by March 31, 2026â.
This compromise reconciles the urgent effectiveness of new regulations with the need to protect ongoing transactions.
Progressive Implementation with Choice Mechanism
The third alternative fuses staged implementation with an elective element:
âArticle 2: (1) Article 6(8)(2) shall apply to property contributed after December 31, 2025. (2) For property contributed between September 1 and December 31, 2025, the provision shall apply only where the propertyâs value exceeds PLN 10 millionâ.
This model supports a stricter approach to large-scale transactions, which pose enhanced risks of aggressive tax planning.
Synthesis: Navigating Stability and Flexibility
Each alternative represents an effort to balance the efficiency of the fiscal apparatus with the certainty of law. Paradoxically, temporary extension of exemptions may, in the longer term, reinforce the legitimacy of the tax system through the cultivation of trust in legislative rationality.
Notably, irrespective of the chosen model of transition, the system retains a defensive mechanism in the general anti-avoidance clause. The presence of such a clause makes concerns over abuse of transitional periods substantially unfounded. The legislature thus retains sufficient tools to address manifest avoidance without resorting to devices that erode the fundamental principles of the rule of law.
The embrace of a âwise self-restraintâ model does not signal weakness in fiscal architecture. Rather, it betokens legislative maturity and the capacity to calibrate competing interests in a constitutionally compliant manner.
Grandfathering Clauses: Omission of International Standards
Fundamental structural deficiency of the draft lies in the total absence of mechanisms to protect vested rights, namely so-called grandfathering clauses, which constitute an entrenched standard in the legislative practice of advanced tax jurisdictions.
Protective clauses are not mere technical embellishments; they issue from a deeper legal principleâthe protection of legitimate expectations. In the context of tax reform, they act as bridges between the ancien rĂŠgime and new order, moderating the regulatory shock and facilitating rational adaptation to reform.
The draft categorically disregards the legal positions of four principal stakeholder groups:
- Primo: Family foundations bound by long-term lease or tenancy agreements. These entities, having relied on the extant legal paradigm, have entered obligations spanning a decade (lease) or longer (tenancy). Abrupt change in tax fundamentals confronts them with a dilemma: continuation entails economic loss, whereas abrogation may expose them to outsized civil liabilities.
- Secundo: Investors who, in allocating considerable capital to projects predicated on short-term rental, calculated their investments pursuant to the prevailing tax architecture. Modernization of rental assets – often requiring expenditures in the millions – was rational under settled tax law. The de facto retroactive change transmogrifies prudent investment into a financial trap.
- Tertio: Foundations holding interests in tax-transparent – often international – entities. Divesting from such investments necessitates elaborate procedures and negotiations, frequently engendering substantial capital losses. Absence of a transitional period forces these actors into involuntary asset liquidation under adverse market conditions.
- Quarto: Holding and investment structures, meticulously constructed in accordance with the law and predicated on the inapplicability of controlled foreign corporation rules to family foundations. For these entities, the revision entails not merely increased fiscal burden, but the total loss of economic justification for continued existence.
Further Violations of Legislative Drafting Principles
From the standpoint of legislative drafting technique, the proposed Article 6(8)(1)(b) of the CIT Act is markedly unconvincing:
âThe exemption referred to in Article 1(25) does not apply to income derived by a family foundation from lease, tenancy, or similar agreements concerning (âŚ): (b) a residential building, a mixed-use building insofar as dedicated to residential purposes, a residential unit or part thereof, unless leased directly by the family foundation exclusively for residential purposes, provided that: <> the exemption does not extend to income from the provision of accommodation services (PKWiU 55), <> the burden of proof that the building or unit is leased directly and exclusively for residential purposes falls upon the family foundationâ.
This provision is fraught with basic technical errors impeding both application and interpretation. Chiefly, it conflates material norms (defining substantive scope of exemption) with procedural ones (allocating evidentiary burden) within a single editorial unit – a patent drafting violation. Distinct subject matters ought to be segregated into separate editorial units.
Further, the provision relies on a convoluted double negative – âdoes not apply⌠unlessâ – which demands multistep logical parsing by interpreters seeking to ascertain the true scope of the exemption. Such editorial technique, albeit not unprecedented, conflicts with the principles of clarity and communicability essential to tax law, where precision is paramount on account of the sovereign character of fiscal regulation.
Undefined terms exacerbate the uncertainty: âresidential purposesâ and âmixed-use buildingâ are both open to multiple interpretations. The lack of criteria for functional determination opens the door to arbitrary semantic contestation. Should intent, as memorialized in construction documentation, prevail? Will actual use be decisive? What percentage of usable area must be devoted to non-residential functions for a building to be âmixedâ? Does a change in use during the tax year retroactively alter annual classification? Likewise, âleased directlyâ remains indeterminate – does this preclude management companies, or only subletting?
Technical error is further compounded by the use of dashes for enumerations within subsection (b). According to legislative drafting principles, lists are introduced by colons and their elements designated by Arabic numerals with closing parenthesis or by letter with parenthesis. The use of dashes unduly complicates the structure of the already intricate provision.
Suggested Drafting Improvements
It appears preferable that Article 6(8)(1)(b) should be drafted as follows:
â(b) a residential building, a mixed-use building insofar as residential, a residential unit or part thereofâ;
concurrently introducing three additional subsections:
Section 8a:
â8a. The exemption referenced in section 8(1)(b) applies solely to rental income: 1. derived from leasing for residential purposes to natural persons not operating a business in the rented property; 2. under agreements lasting no less than six months; 3. directly by the family foundation without recourse to external property management servicesâ.
Section 8b:
â8b. The exemption referenced in section 8a does not encompass income from: 1. provision of accommodation services, especially those classified under PKWiU 55; 2. short-term rental, defined as rental periods shorter than six months; 3. rental to entities engaging in business where the property serves such enterpriseâ.
Section 8c:
â8c. The family foundation shall document compliance with section 8a by: 1. providing lease agreements containing a tenant declaration as to residential purpose; 2. maintaining rental agreement records including durations; 3. producing documentation evidencing direct property managementâ.
Concerns also attend the vague reference to âsimilar agreementsâ in Article 6(8)(3) – a paradigmatic example of a catch-all clause to be scrupulously avoided in tax contexts. Similarity is inherently gradational and context-dependent; what is analogous in one context may be disparate in another. In taxation, where legal qualification is both authoritative and financially momentous, such latitude of interpretation violates foundational legislative standards.
Conclusion
Paradoxically, the intended âtighteningâ of the tax system, by virtue of its structural flaws, may engender new ambiguities amenable to exploitation in litigation before tax authorities and administrative courts. The remedy, thus conceived, risks proving worse than the affliction, generating a cascade of novel complications rather than resolving underlying dynamism.
History teaches that nations placing a premium on stability and legal certainty fare optimally in the long run. Poland, aspiring to join the ranks of the worldâs most developed economies, must pay scrupulous attention to the quality of its enacted law and to the respect of economic actors’ legal interests.
Founder and Managing Partner of Skarbiec Law Firm, recognized by Dziennik Gazeta Prawna as one of the best tax advisory firms in Poland (2023, 2024). Legal advisor with 19 years of experience, serving Forbes-listed entrepreneurs and innovative start-ups. One of the most frequently quoted experts on commercial and tax law in the Polish media, regularly publishing in Rzeczpospolita, Gazeta Wyborcza, and Dziennik Gazeta Prawna. Author of the publication âAI Decoding Satoshi Nakamoto. Artificial Intelligence on the Trail of Bitcoin’s Creatorâ and co-author of the award-winning book âBezpieczeĹstwo wspĂłĹczesnej firmyâ (Security of a Modern Company). LinkedIn profile: 18 500 followers, 4 million views per year. Awards: 4-time winner of the European Medal, Golden Statuette of the Polish Business Leader, title of âInternational Tax Planning Law Firm of the Year in Poland.â He specializes in strategic legal consulting, tax planning, and crisis management for business.
