Assets of a Polish family foundation

According to the Polish family foundation regulations, a foundation is a legal entity established to accumulate property, manage it in the interests of beneficiaries, and fulfill benefits to beneficiaries. The assets of a family foundation are therefore a key issue.

This article will take a closer look at the assets (property) of a family foundation and the founding (initial) fund.

The founding (initial) fund a family foundation in Poland

According to the provisions of the Law, a family foundation shall have an initial fund. It may not be less than PLN 100,000. Its value is specified in the statute. Property to cover the founding fund of a family foundation is contributed to the foundation by the founder.

Importantly, unless the law provides otherwise, a family foundation may not return to the founder the property that the founder contributed to cover the founding fund (neither in whole nor in part).

Contribution of property to a Polish family foundation at the stage of its operation

Property can be contributed to the foundation:

• at the stage of its formation by paying property to cover the founding fund,
• at the stage of operation of the family foundation. 

Contribution of property at the stage of operation of a family foundation can be done by any entity, be it the founder or other persons – including those not related to him, including legal entities. 

The law stipulates that property can be contributed to an existing foundation by donation or inheritance (so a family foundation can receive an inheritance).

What can be contributed to a Polish family foundation

The Law on Family Foundations is terminologically inconsistent and uses the terms property and assets of a family foundation interchangeably. It seems reasonable, for the purposes of the topic under review, to consider as appropriate the definition of property indicated in the Civil Code, according to which property is property and other property rights. 

In addition to cash, the property rights (property) that can be formally contributed to a family foundation are:

• property rights – ownership of real estate (i.e., premises, buildings, land), ownership of movable property (e.g., automobiles, electronic equipment, jewelry, works of art), perpetual usufruct,
• participation rights in commercial companies (stocks, shares, rights of a partner in a partnership),
• participation rights in collective investment institutions (e.g., investment certificates),
• securities (e.g., stocks, bonds, bills of exchange, checks),
• receivables (e.g., property claims, loans, cash receivables),
• farm,
• enterprise.

Property contributed to a family foundation, however, cannot be personal rights of a non-property nature or non-transferable rights (e.g., usufruct and personal easements).

Determination of the value of property contributed to a foundation

According to the Law, the value of property contributed to a family foundation or the property of a family foundation means the market value of the components of the contributed property in a form other than cash, determined as of the date of the contribution of the property, in accordance with the rules set forth in the Law on Corporate Income Tax of February 15, 1992.

If the property contributed to the family foundation is in the form of foreign currency – this value shall be converted into zlotys according to the average exchange rate of this currency announced by the National Bank of Poland on the last business day preceding the date of contribution of property.

Donation to a family foundation

One of the ways to contribute property to a family foundation in Poland is to make a donation.

When entering into a donation agreement for a family foundation, attention should be paid to the proper representation of the family foundation. According to the regulations:

• while the family foundation remains in organization (during the period from the filing of the declaration on the establishment of the family foundation to its entry in the register of family foundations) – the family foundation is represented by the founder,
• after registration in the register of family foundations – the foundation is represented by the foundation’s board of directors, under the terms of the statute.

Note that: 

• If a donation is made to the foundation by a person who holds a position on the board of directors of the family foundation – the family foundation should be represented by the board of directors. If a supervisory board has not been established, the family foundation shall be represented by an attorney to be elected by the assembly of beneficiaries.
• If a member of the board of directors of the family foundation is also the sole beneficiary of the family foundation, there is no need for the assembly of beneficiaries to appoint a proxy, but the donation agreement in such a situation must be concluded in the form of a notarial deed.

According to Article 890 of the Polish Civil Code, a donation agreement should be in the form of a notarized deed. However, a donation agreement concluded without the form of a notarial deed, becomes valid if the promised benefit has been fulfilled.

If the donor is married (and remains with his or her spouse in the regime of matrimonial community of property) it is necessary to obtain the spouse’s consent to the donation of property to the family foundation. The spouse’s consent should be expressed in the same form in which the legal act should be performed. 

Inventory of property of a family foundation in Poland

The preparation of an inventory of property is one of the required steps in the process of establishment of a family foundation in Poland. The inventory of property (assets) shall be prepared in writing.
The inventory of property shall indicate the property rights contributed by the founder or persons other than the founder to the family foundation, indicating the person contributing the property and specifying the type and value of each property contributed, in the amount determined according to the condition and prices at the time of their contribution and their tax value, shall be included in the inventory of property.
The inventory of property contributed to the foundation to cover the initial fund shall be prepared by the founder. 
It is the duty of the board of directors of a family foundation to keep the inventory of property up to date. The board is also responsible for keeping the inventory of property up to date. The inventory of property shall also include information on the current proportions of the value of property contributed to the family foundation by each founder or by the family foundation.

Contribution of property to the family foundation in Poland vs taxes

The contribution of property to a family foundation to cover the initial fund, as well as at the stage of its operation (in the form of a donation or inheritance) is not taxed (no PIT, CIT or PCC tax). 

As for personal income tax – for the purposes of this tax, the proportion of the value of the property contributed to the family foundation by each founder or by the family foundation is determined. This proportion shall be determined in the part in which the sum of the value of the property contributed to the family foundation attributable to that founder or family foundation remains to the value of the sum of the property contributed by all the founders and the family foundation. It is determined each time property is contributed to a family foundation.

Importantly, property contributed to a family foundation by donation or inheritance by:

• the founder or his spouse, descendants, ascendants or siblings – shall be deemed to have been contributed by the founder,
• other persons – are considered to be contributed by the family foundation.

If property is contributed to a family foundation by a joint descendant, ascendant or sibling of more than one founder, the property is considered to have been contributed by all such founders in equal shares.

The aforementioned rules are relevant in the context of personal income taxation of benefits made by the foundation to its beneficiaries. 

As a rule, benefits received from the foundation by the founder and his immediate family (the founder’s spouse, his ascendants, descendants, siblings, stepchildren, stepfather and stepmother) are subject to exemption from personal income tax. In general, it can be pointed out that tax exemption is granted to beneficiaries of foundations to the extent that they are related to a given founder. If a given beneficiary is not related to the founder, then he or she is not entitled to exemption from personal income tax to the extent of benefits that are derived from property contributed by that founder. Therefore, it is necessary to determine the proportion of the value of the property contributed to the family foundation by each founder or by the family foundation

It can be pointed out that:

• persons belonging to tax group “0” (the spouse of the founder, his ascendants, descendants, siblings, stepchildren, stepfather and stepmother) are exempt from paying personal income tax,
• persons in tax groups I and II (son-in-law, daughter-in-law, parents-in-law, siblings, siblings of parents, descendants and spouses of stepchildren, spouses of siblings, siblings of spouses, spouses of siblings of spouses, spouses of other descendants) – must pay personal income tax at 10%,
• others – are required to pay personal income tax at the rate of 15%.

Financial statements of the family foundation

A family foundation is subject to the Accounting Law. Accordingly, a family foundation has, among other things, the obligation to prepare, approve and file financial statements. 
The financial statements must be submitted in paper form to the District Court in Piotrków Trybunalski. It is also necessary to accompany the report with information on a special application RFR-Z30 with an attachment RFR-ZN. By the same date, the following must also be submitted to the court: the report on the audit of the financial statements (if the financial statements were audited), as well as a copy of the resolution on approval of the annual financial statements and distribution of profit or coverage of loss. Consideration and approval of the financial statements is carried out by a resolution of the assembly of beneficiaries.
The resolution on the report must be adopted in time so that it can be submitted to the court by 15 days after the adoption of the financial statements, but no later than June 30.

Loss for the fiscal year

According to the law, if the foundation’s financial statement approved for a given year show that for a given fiscal year the value of the family foundation’s assets is less than the value of its liabilities – the profit for that fiscal year is allocated to cover future losses of the family foundation.

Are you planning to establish a family foundation in Poland? Do you have doubts about the assets of a Polish family foundation? Lawyer in Poland will help you

If you are planning to establish a family foundation in Poland, would like to structure your business and are wondering whether a family foundation is a good solution for you or maybe you have doubts about the assets of a family foundation – contact us. 

We will answer all your questions, help you decide if a family foundation is the solution for you, and, if necessary, guide you through the process of creating a family foundation or further structuring activities.