The Polish Family Foundation as a Tax Planning Instrument in Light of Controlled Foreign Corporation Rules
Introduction
In an era marked by the ascendancy of fiscal transparency and the global imperative to combat base erosion and profit shifting, the Polish family foundation (fundacja rodzinna) has emerged as a particularly compelling vehicle for succession planning—and, no less significantly, for tax planning. A relatively recent addition to the Polish legal framework, this institution has attracted considerable attention not only from tax law scholars but, more notably, from practitioners seeking efficacious solutions for their clients.
This Article examines one of the most intriguing dimensions of the family foundation’s operation: its relationship with the controlled foreign corporation (CFC) regime. This inquiry assumes particular salience in the context of an increasingly globalized economy, where cross-border holding structures have become the norm rather than the exception.
I. The Legal Architecture of the Exemption: Foundational Considerations
The key to understanding the tax planning mechanism afforded by the family foundation in the CFC context lies in a careful analysis of the legal architecture underlying the subject-matter exemption set forth in Article 6(1)(25) of the Corporate Income Tax Act (ustawa o podatku dochodowym od osób prawnych). This provision, deceptively straightforward in its construction, affords taxpayers planning opportunities of a magnitude previously unavailable within the Polish legal system.
The subject-matter exemption applicable to family foundations is both comprehensive and holistic in character. It extends beyond mere exemption from corporate income tax liability to encompass, crucially, release from a range of ancillary compliance obligations, including the maintenance of a CFC register and the documentation of economic events relating to such entities. This breadth renders the family foundation an exceptionally attractive instrument from the perspective of international tax planning.
The Director of the National Tax Information (Dyrektor Krajowej Informacji Skarbowej), in a series of individual tax rulings issued over recent months, has consistently affirmed a broad interpretation of the exemption’s scope. The ruling of August 8, 2024 (Ref. No. 0111-KDIB1-2.4010.308.2024.2.AW) serves, in this regard, as something of a vade mecum for practitioners, unequivocally confirming that the family foundation falls outside the ambit of CFC regulation.
This interpretive approach continues to find confirmation in more recent rulings. The ruling of April 24, 2025 (Ref. No. 0111-KDIB1-2.4010.151.2025.2.AK), for instance, expressly stated that the family foundation is, as a general matter, exempt from corporate income tax. While the legislature has established certain exceptions to this general rule, these exceptions do not extend to the CFC provisions.
II. Beneficiaries Under the Protective Umbrella
A particularly noteworthy aspect of this legal construction concerns the position of family foundation beneficiaries. Under the conventional CFC taxation model, control over a foreign entity—whether direct or indirect—triggers the relevant tax obligation. The family foundation introduces a disruptive element into this framework, severing the chain of control in a manner that tax authorities have recognized as legally effective.
The individual tax ruling of August 8, 2024, illuminates the practical consequences of this structure. A beneficiary who, prior to the establishment of the foundation, was subject to the CFC regime by virtue of control over a foreign company is, upon contribution of the relevant shares to the foundation, released from this burden. The mechanism operates with surgical precision: the foundation, as a distinct legal entity, becomes the sole owner of the shares, while the beneficiary, though retaining entitlement to distributions from the foundation, loses the attribute of control within the meaning of the CFC provisions.
III. A Study in Planning Possibilities
An examination of the practical applications of the family foundation in the CFC context reveals a spectrum of possibilities extending well beyond the mere elimination of fiscal burdens. The contribution of shares in foreign holding companies to a foundation enables the creation of a structure in which income generated by such companies may be accumulated without current Polish taxation.
Moreover, the family foundation facilitates the tax-neutral liquidation of foreign structures that have outlived their commercial purpose. Under the conventional model, the liquidation of a controlled foreign company frequently entails the recognition of taxable income in Poland. The family foundation elegantly circumvents this difficulty—as an entity exempt from corporate income tax, it may effect a liquidation without adverse tax consequences.
The succession dimension likewise merits attention. A family foundation controlling foreign assets ensures continuity of family wealth management across generations while simultaneously eliminating tax risks associated with the inheritance of shares in foreign entities.
IV. Clouds on the Horizon: The Prospect of Legislative Change
The efficacy of the family foundation as a planning tool in the CFC context has not escaped the attention of the Ministry of Finance. Toward the end of August 2024, initial signals emerged regarding proposed legislative amendments that would bring family foundations within the scope of CFC regulation. These proposals, though remaining at the conceptual stage, have provoked considerable controversy within the legal and business communities.
Critics of the proposed changes advance the fundamental argument that such regulation would be inconsistent with the very essence of the family foundation as an institution designed for the protection of family wealth and succession planning. The imposition of CFC-related obligations would undermine the economic rationale for establishing foundations, rendering them effectively useless for a substantial proportion of prospective founders.
Unofficial reports suggest that the intensity of the expert community’s response has prompted the government to reconsider the proposed changes. Public consultations revealed the scale of opposition to the contemplated modifications, potentially indicating a diminished likelihood of their implementation in the originally envisaged form.
Notwithstanding the Ministry of Finance’s numerous announcements throughout 2024, no changes to the taxation of family foundations entered into force on January 1, 2025. At present, the Council of Ministers’ legislative work schedule includes a draft bill (No. UD116) with a projected adoption date in the second quarter of 2025. The draft is expected to encompass “provisions tightening the regulations on family foundation taxation” and the extension of the solidarity levy (danina solidarnościowa) to foundation distributions.
Crucially, however, any such amendments would likely not take effect before January 2026. Furthermore, the announcements do not indicate that the legislative changes would address the particular advantages offered by family foundations in relation to controlled foreign corporation rules.
V. Conclusion
In its current legal form, the family foundation represents a solution unique within the European landscape, combining elements of family wealth protection with opportunities for efficient tax planning. The exclusion from CFC taxation, confirmed by numerous tax authority rulings, renders the foundation an instrument of remarkable efficacy in international tax planning.
At the same time, the dynamic nature of the global regulatory environment counsels prudence in long-term planning. International pressure for enhanced tax transparency and the elimination of aggressive tax optimization may, in due course, lead to modification of the existing framework. Nevertheless, in light of the current legal position and the stance of the tax authorities, the family foundation remains one of the most effective tools for managing international family wealth available to Polish taxpayers.
Paradoxically, the very debate concerning the extension of CFC rules to family foundations may serve to consolidate their position within the Polish legal system. An appreciation of the consequences that such a change would carry for the attractiveness of the institution as a whole may incline the legislature to preserve the status quo, at least in the medium term.
In view of these considerations, the family foundation presents itself not merely as an instrument of tax optimization but, more fundamentally, as an expression of the maturity of the Polish legal system—one that recognizes the need to establish a framework for effective family wealth management in a globalized world. The exclusion from CFC taxation represents, in this context, not so much a gap in the system as a deliberate legislative choice aimed at enhancing Poland’s competitiveness as a jurisdiction for international wealth management.
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 “AI Decoding Satoshi Nakamoto. Artificial Intelligence on the Trail of Bitcoin’s Creator” and co-author of the award-winning book “Bezpieczeństwo współczesnej firmy” (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 “International Tax Planning Law Firm of the Year in Poland.” He specializes in strategic legal consulting, tax planning, and crisis management for business.
