Family foundation is not a tax optimization vehicle
February 18, 2025
The Head of the National Revenue Administration (KAS) refused to issue a protective opinion regarding the tax consequences of donating shares to a family foundation and their resale 2 months after the donation (information on the refusal to issue a protective opinion dated December 19, 2024).
Tax benefits of a family foundation
The applicant indicated in the application that in the case of a direct sale of shares, they would have to pay 19% personal income tax (PIT) and 4% solidarity tax. On the other hand, if the shares are contributed to a family foundation, taxation would be deferred until the distribution of benefits from the foundation, amounting to 15% corporate income tax (CIT). The applicant argued that the primary economic purposes of these actions were efficient wealth succession, securing and protecting family interests, and undertaking new investment initiatives.
Refusal to issue a protective opinion by KAS
The Head of KAS refused to issue a protective opinion, stating that such a quick sale of shares through a family foundation could indicate that the purpose of the transaction was to achieve a tax benefit. According to the authority, since the share sale transaction was planned long before the establishment of the foundation, it cannot be considered as fulfilling the purpose of succession. Additionally, one of the conditions for artificiality under the Tax Ordinance was met, namely the symptom of an artificial arrangement in the form of unjustified division of operations and the involvement of intermediary entities without economic or business justification.
Family foundation and tax risk
Analysing the position of the Head of KAS, it is difficult to imagine that they would take a different stance based on the applicant’s arguments. It is clear that such a quick sale of shares after contributing them to a family foundation is likely aimed solely at achieving a tax benefit rather than other economic purposes. On the other hand, according to the Family Foundation Act, a family foundation is established for the purpose of accumulating assets, managing them in the interest of beneficiaries, and fulfilling distributions to beneficiaries. Therefore, the sale of shares by the foundation, whether it occurs after a week or five years from the contribution, constitutes the fulfilment of its statutory purpose. As can be seen, the applicant had some room for argumentation. Nevertheless, it should be noted that there is a risk of the tax savings being challenged in the case of a quick sale of shares after their contribution to the foundation.
Tags family foundation, fundacja rodzinna, podatkowe korzyści, tax benefits
