On 13 August 2026, a draft Act amending the Personal Income Tax Act and the Corporate Income Tax Act (the “CIT Act”) was published on the website of the Government Legislation Centre. In part, the draft replicates provisions contained in legislation passed by the Sejm last year but subsequently vetoed by the President. Some of the proposed amendments are new, however, and several are unexpected.

Purpose of the amendments

The draft legislation changes the rules governing the taxation of family foundations. According to the Ministry’s statements, the Ministry of Finance intends to restrict the use of family foundations as a means of circumventing legislation and avoiding income tax.

In the explanatory memorandum, the Ministry of Finance states that it has identified instances in which family foundations have been used instrumentally to defer taxation, secure a complete tax exemption or reduce the amount of tax payable. According to the Ministry, the preferential tax treatment currently afforded to family foundations requires amendment to ensure that the institution serves the purpose for which it was originally introduced into the Polish legal system: to provide a mechanism enabling the secure succession of family wealth and businesses.

Key amendments

The principal amendment concerns the rate of tax charged on benefits provided to beneficiaries, which is to increase from the current rate of 15% to 19%. This will reduce the tax attractiveness of family foundations, as distributions made by a foundation will be taxed at the same rate as, for example, capital gains derived by individuals.

The draft also revives the proposal for a so-called lock-up period, under which income derived by a family foundation from the disposal of assets acquired during the 36 months preceding their disposal would be subject to tax. A transitional provision stipulates that this rule will apply to assets acquired by a foundation after 31 December 2026. Founders considering contributing assets to a foundation should therefore act promptly, particularly where the transfer requires additional formalities, such as registration or obtaining the consent of a competent authority.

Interestingly, the draft legislation provides for the possibility of a foundation returning to its founder assets contributed to it by 31 December 2026. Subject to certain conditions, such a return will be tax-neutral if completed by the end of 2027. This may allow families to adapt their asset-holding structures to the new legislation.

Closing tax loopholes

The draft legislation also includes a number of more limited measures that will reduce the tax efficiency of individual transactions or entire structures involving family foundations.

First, the previously announced exclusion of income from short-term lettings from the family foundation tax exemption is to be implemented. Family foundations will also become subject to controlled foreign company (CFC) taxation and exit tax, which will undoubtedly reduce the efficiency of international structures involving foundations.

The definition of hidden profits is also to be amended. It will cover a broader range of loans, including loans that have been waived, become time-barred or been written off as irrecoverable.

Among the numerous measures that are unfavourable to taxpayers, the draft also contains one that taxpayers have been anticipating. Descendants of a founder’s siblings will also be eligible for the personal income tax exemption applicable to benefits paid to beneficiaries. This will make the establishment of a family foundation by siblings more tax-efficient. Until now, siblings have frequently been advised to establish separate family foundations because, where a single foundation was established, the founders’ children were not entitled to the full benefit of the exemption.

Summary

If the legislation is enacted in its proposed form, existing family foundation structures will need to be reviewed, as some may cease to be tax-efficient. It is worth considering appropriate restructuring measures at this stage, since in certain cases it may be advisable to complete a reorganisation before the end of 2026.

It remains uncertain, however, whether the legislation will enter into force at all and, if so, in what form. The President may once again decide to veto it, particularly in view of his pre-election commitment to oppose tax increases — an effect that the proposed amendments would produce in practice.

Jabłoński Koźmiński & Partners advises on the legal and tax aspects of establishing and operating family foundations, as well as on business succession. Should you have any questions regarding these matters, please do not hesitate to contact us.