Polish Law Foundations as a tax free wealth transfer route to tax havens

Polish Law Foundations

Executive summary

A properly structured Polish Law foundation might offer you some benefits arising from establishing an offshore foundation combined with a very low profile unachievable for offshore structures. In contrast with most foundations, PLF can directly conduct business activities and it is possible to manage income of a PLF in such a way that will be effectively tax free.

Not only PLF is an extremely rare case when one can form an “onshore” entity which can conduct business in a tax free manner, but also proper contractual arrangements between your PLF and an offshore trust and a foundation can assure you that all the income earned by the Polish foundation shall be transferred to the said entity without incurring any tax obligations.

Thus, it is possible to set up a Polish Law foundation as a controlling entity of a holding, a beneficial owner of your business ventures and as a tax free wealth transfer route to a de iure unrelated offshore entity.

Problems with offshore structures

Private foundations and offshore trusts offer a perfect opportunity for asset protection, inheritance planning and management of holdings. However, there are no more “uncooperative” jurisdictions, therefore it is not sufficient to register and maintain such entities. In order to perform their functions properly they should become a “shadow” head of a holding, not disclosed as a controlling entity in any documents which can be easily accessed by any third parties.

Such an aim was easy to achieve in twentieth century, when the main source of data concerning capital structure consisted of public commercial registers. Thus, in most cases using of bearer shares and nominee shareholders was sufficient to protect data concerning ownership of a holding. However, things have changed since tightening of banking procedures after September 11th.

At present each financial institution is obliged to look not for a mere owner of a business structure, but for a beneficial owner, that is an individual who enjoys the benefits of owning this structure, regardless of whose name is in the title. In theory, such data are protected by bank secrecy laws, but in practice the necessity of collecting and maintaining data concerning beneficial owners of bank accounts is the main source of breaches of confidentiality duties even in banks established in countries where bank secrecy seems to be very strict. Not only illegally acquired data from banks in Switzerland, Lichtenstein and offshore jurisdictions are commonly used to nab so-called “tax evaders”, but also in most of European countries third parties can implement certain strategies to access such data in accordance with the letter of law, even with the beneficial owner was not involved in any illegal activities.

A closer look on Polish Law Foundation

There are few advantages of using a PLF as a holding entity.

First of all, Polish Law foundations are commonly accepted as beneficial owners of their assets, because Polish Law foundations cannot be established for a benefit of an individual, but to pursue socially or economically useful objectives that are consonant with the basic interests of the Republic of Poland; in particular, such objectives as health protection, advancement of the economy and science, education, literacy, culture, art, social services, environmental protection, and protection of historical landmarks.

However, please note that statues of the Foundation might stipulate that objects of the foundation shall be achieved by, inter alia, donations to other entities with similar statutory aims. Such entities might include private foundations, trusts or even commercial law companies.

Secondly, Polish Law foundations are enough transparent not to be considered as suspicious entities (in most cases, opening an account for an offshore foundation in any European Bank is the best way to create a significant disturbance in the compliance department of such a bank). They have to keep and audit their financial statements. The personal data of members of the management board and the founder are revealed in the commercial register and accessible to third parties.

Nevertheless, the founder exercises great flexibility in shaping the internal structure of a foundation. His will determines its statute, which specifies purposes, principles, forms and scope of activity, composition and organizational structure of governing board, and the procedure for appointing members of that body, as well as the responsibilities and powers of that body and its members.

Moreover, founder may refrain from personally composing the statute of a foundation and authorize another person or a legal entity to do so instead. Power to compose and change statute of a foundation, including power to reshape principles, forms and scope of activities, and nominating members of managing bodies might be also delegated to an offshore entity.

Detailed information

Foundations may be established by individuals regardless of their citizenship and domicile, or by legal entities with offices in Poland or abroad.

The declaration of intent to establish a foundation should be presented in the form of a notarial deed. This requirement is waived if the establishment of a foundation is prescribed in a testament.

The declaration of intent to establish a foundation should indicate the purpose of the foundation and the nature of the assets earmarked for accomplishing that purpose.

The assets may be money, securities, and the movable property and real estate donated to the foundation.

The foundation may engage in economic [profit- making] activity to the extent serving to accomplish its purposes.


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