Back Back to publications
2024-08-23

Do Spouses Who Are Founders of a Family Foundation Qualify for PIT Exemption?

Law Personal Income Tax Tax advisory

In an individual ruling issued on June 25, 2024 (0112-KDIL2-1.4011.114.2024.3.JK), the Director of the National Tax Information Service (KIS) confirmed that spouses who jointly establish a Family Foundation and contribute assets to it are fully exempt from personal income tax (PIT) on benefits paid from the Foundation to them.

Background of the Issue

Prior to June 25, 2024, the Director of KIS held the view that benefits paid to spouses who were founders of a Family Foundation were not entirely exempt from PIT. This interpretation resulted in a partial obligation to pay the tax. According to the previous interpretation, assets donated to the Family Foundation by persons in the so-called “group zero” (i.e., close family members) were considered as contributed by the founding person, provided that the closest family members of the founder were not also founders of the same Family Foundation.

As a result, any distribution from the Family Foundation to either of the spouses was subject to a 15% corporate income tax (CIT) on the value of the payments, plus an additional 10% PIT.

Change in Interpretation and PIT Exemption

Following a complaint against the unfavorable interpretation, the Director of KIS reversed its stance. In the new ruling, issued on June 25, 2024, the Director confirmed the full PIT exemption on the benefits paid to the spouses who are founders of the Family Foundation. Additionally, this exemption extends to their descendants and ancestors.

The Director clarified that a taxpayer who is a founder of a Family Foundation and is also a close relative of another founder can sum the proportion of the value of the assets contributed to the Foundation by themselves and the other founder to apply the PIT exemption.

For spouses who jointly established the Family Foundation and contributed assets, this interpretation is beneficial. Distributions from the Family Foundation will no longer trigger a PIT obligation for the spouses receiving the benefits. Both spouses will be able to benefit from the full PIT exemption on the payments they receive. Consequently, the tax burden on distributions from the Family Foundation will remain at the level of 15% CIT.

Summary

The ruling from the Director of KIS on June 25, 2024, provides new clarity regarding the tax situation of spouses who are founders of a Family Foundation. However, it is important to remember that each factual situation requires individual analysis, and the interpretation in this area is not yet firmly established. Therefore, it is recommended to consult with tax advisors at ATA Tax for personalized guidance on your Family Foundation tax issues.

For more information on the tax challenges facing Family Foundations, you can read another article available on our website titled: Family Foundations in Poland – What Tax Benefits and Challenges Await Entrepreneurs?

Interested in the subject?
Other publications on this subject
Taxation of Cash Loans – VAT or PCC?
It is a well-established belief in business practice that cash loans are subject to VAT. Many people assume that if a transaction is subject to VAT, it is automatically not subject to the tax on civil-law transactions (PCC). However, is this always the case? Not necessarily – the key issue here is whether the transaction…
Read more
2025-04-04
Upcoming CBC-P Reporting Deadline: Increased Information Obligations
Upcoming CBC-P Reporting Deadline: Increased Information Obligations The CBC-P notification must be submitted to the Head of the National Revenue Administration (Szef KAS) within three months of the end of the financial year. For entities whose financial year aligns with the calendar year, the deadline is March 31, 2025. The obligation to submit the CBC-P…
Read more
2025-03-14
Introduction of the Equalization Tax Act
Introduction of the Equalization Tax Act As of early 2025, the Act of November 6, 2024, on the Equalization Tax for Constituent Entities of International and Domestic Groups (hereinafter: “Equalization Tax Act”) has come into force. This legislation is a response to Council Directive (EU) 2022/2523 on the global minimum tax. The primary objective of…
Read more
2025-01-24
All publications