The Ministry of Finance has announced that it plans to curb tax avoidance using family foundations. The regulations are to be tightened. Experts, however, are critical of the ministry's proposal.
The proposed changes are not tightening or clarifying. These are fundamental, drastic changes that overturn the basic principles of taxation of family foundations.
– says Piotr Taras, attorney and partner at BTTP, with whom Business Insider spoke.
Family foundations used for tax optimization. Ministry of Finance prepares change, experts dissatisfied
BI also spoke with Anita Pardej, legal counsel and manager for Family Businesses at Mariański Group, who believes that the changes proposed by government are harmful. The reform, he adds, hits not the entities that carry out optimization, but all other family businesses that decided to establish a foundation.
Paweł Turek, attorney and partner at BTTP, in turn attacks the government, which he accuses of lacking understanding of the fundamental assumptions of family institutions around the world. – [Obecna ustawa – red.] It rewards those who look long-term and want to leave their assets in Poland. The functioning of foreign foundations is facilitated by legal certainty, unfortunately, as we can see, this is a concept foreign to the Ministry of Finance, regardless of the political option that manages it – comments Piotr Taras.
In turn, Paweł Tomczykowski, managing partner at the Tomczykowski Tomczykowska law firm, claims that we should wait to assess the changes until a draft amendment to the regulations is published. In his opinion, the current act only requires corrections, not a change to the entire model of family foundations. Tomczykowski remains optimistic about the ministry's announcements that “the rules of the game will not change.”
Serious Problem with Family Foundations. The Biggest Tax Fraud in Recent Years
A family foundation is an entity responsible for managing the assets of a family business. It allows for securing the assets of groups of people indicated by the founder. A family foundation does not pay tax on the income it receives. Corporate Income Tax in the amount of 15 percent is collected only when the funds are transferred to the beneficiaries.
– There have already been opinions that almost half of the foundations established were established solely for the purpose of tax avoidance. We also have reports from the National Revenue Administration that some foundations are used for very aggressive tax optimization – explained Deputy Minister of Finance Jarosław Neneman.
Family foundations are the biggest government-created tax scam in recent years. They give a huge tax advantage to the super-wealthy and wealthy. On the WSE, there are cases where shares are parked in the Russian Federation just before sale to avoid taxation.
– commented finance blogger Trystero.