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The intention behind introducing the family foundation into Polish tax law was primarily to protect family assets against fragmentation, and to facilitate succession in family businesses. To this end, the Polish Corporate Income Tax (CIT) Act introduced a rule under which a family foundation is exempt from corporate income tax with respect to the business activities it is permitted to conduct.
The scope of such activities has been exhaustively defined in the Family Foundation Act, in which family foundations are generally permitted to conduct activities consisting of leasing, tenancy, or making assets available for use under another legal basis. It therefore appears that short-term rental activities (e.g. for students or employees) would fall within the tax-free scope of business activities conducted by a family foundation.
Unfortunately, the Polish tax authorities frequently challenge this position. According to the tax authorities, a short-term rental differs in nature from a traditional lease relationship, as it involves short rental periods, settlements are not always made on a recurring basis, and the legal relationship itself is often less formalised than a standard lease arrangement (for example, due to the absence of handover protocols).
Although this position does not follow directly from the wording of the Family Foundation Act, it is widely endorsed by the Polish tax authorities. This is confirmed, among others, by tax rulings issued by the Director of the National Tax Information.
Nevertheless, this position is widely criticised by the administrative courts. The courts point out that neither the Family Foundation Act nor the CIT Act differentiates the tax consequences of entering into short-term and long-term lease agreements. In particular, the regulations do not provide for any criteria relating to the form of the agreement, its duration, or the requirement to establish a security deposit, which would need to be satisfied for the lease arrangement to remain tax-neutral for the family foundation as the lessor.
In conclusion, based on the literal wording of the CIT Act and the Family Foundation Act, it appears that short-term rental activities conducted by a family foundation should benefit from the CIT exemption. Nevertheless, this position is regularly challenged by the Polish tax authorities. At the same time, existing administrative court case law has so far been favourable to taxpayers. It should, however, be noted that the Polish Supreme Administrative Court has not yet ruled on this issue, and its judgment could potentially affect the currently favourable line of case law.
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