Private foundation as a way to effectively manage assets
Many entrepreneurs are looking for ways to secure their money and acquired goods in the event of a crisis. There is a growing awareness that effective management of the company's assets is a fundamental element of every company's strategy. The solution that enables the protection of entrepreneur's assets is, among others, the construction of a private foundation, which is becoming more and more popular in Poland and around the world.
What is a private foundation?
There is no statutory definition of a private foundation, but the doctrine considers that it should be understood as a legal person "whose purpose is to manage the assets transferred by the founder in the manner defined by him and to dispose of those assets in accordance with the principles defined by the founder for the beneficiaries of the foundation".
In accordance with Article 1 of the Law on Foundations of 6 April 1984. "a foundation may be established for the implementation of socially or economically useful objectives consistent with the basic interests of the Republic of Poland, in particular such as: health protection, development of the economy and science, education and upbringing, culture and art, social care and welfare, environmental protection and care of historical monuments". Therefore, there are no restrictions in terms of subject matter, and therefore the foundation may be established by both natural and legal persons. The above construction was used to create a new institution - a private foundation. The reason for introducing such a solution was the desire to protect entrepreneurs' assets.
An appropriate construction of a private foundation does not contradict the statutory regulation of action for "socially or economically useful" purposes. When a foundation does not use public money, does not apply for the status of a public benefit organisation and does not raise funds through public collections, it can quite freely dispose of the funds transferred to it.
Disposing of the founder's resources
Therefore, a private foundation may transfer the collected funds to other entities. In this respect, it is limited only by the provisions of the Law on Foundations. It is significant that the Act does not contain any prohibitions which would prevent the transfer of funds for the benefit of the entrepreneur (founder), his employees, members of the company's management board or close persons. The form of the transfer is not specified either - it is possible to grant loans, credits and other forms of transfer of funds.
It should be remembered, however, that all actions taken should be consistent with the adopted statutory objectives. Each transfer must be duly justified. Such transactions are under particular "fire" of the state authorities, which carefully examine the legitimacy of any cash flow. If they discover any irregularities, they will apply appropriate measures and even sanctions. An exemplary consequence may be, for example, to apply to the court for the repeal of a resolution of the Board of the Foundation which is grossly inconsistent with its purpose or with the provisions of the statute or the provisions of the law.
Private foundation and tax benefits
The establishment of a private foundation brings large tax benefits to its managers. Pursuant to the Act of 15 February 1992 on corporate income tax, in certain situations it is possible to exempt foundations from part of the income tax. A private foundation may exercise this right if its statutory objective is scientific, scientific and technical activity, education, environmental protection, health protection and social assistance. The Foundation does not have to pay inheritance and donation tax if it receives money, movable property or property rights.
In other European countries, private foundations can count on even greater amenities. In Liechtenstein, for example, there is a uniform income tax rate for foundations of CHF 1 000 per year. An interesting construction was also introduced in Austrian law. It provides that dividends distributed by an Austrian company to a private foundation which holds shares in that company are exempt from income tax at the level of that company. If we set up a private foundation outside Europe, we can count on even greater profits. For example, persons establishing a foundation in Panama will not be included in the acts of the authorities, will not be obliged to submit annual reports or financial statements, and will not be subject to taxation.
Private foundation in Poland or abroad?
In fact, Polish entrepreneurs in establishing a private foundation are not bound by the construction of a Polish private foundation. Such entities can be established anywhere in the world. The rules of operation of a private foundation in all legal systems are very similar, although in some countries this entity can count on much higher profits and freedom of activity than in Poland. For example, Liechtenstein, where capital can be placed in a country other than the seat of the foundation, and foundations that do not benefit from business activities have the possibility to benefit from lower taxation due to their status as private wealth structure entity (PVS), offers positive solutions. If, on the other hand, entrepreneurs are interested in a formal transfer of funds outside the borders of Europe, a foundation in the Bahamas may be an interesting proposal. There, entrepreneurs can count on exceptional confidentiality and discretion - in principle, the foundation is only found in registers in which very residual data, such as the name and address of the official seat, are disclosed.
Is it easy to establish a private foundation?
Establishment of a private foundation is connected with many formalities. Selfemployed entrepreneurs can easily get lost in the maze of complicated procedures and regulations. It should be remembered to choose the solution that will be the best for a given entrepreneur and type of business activity. Only then will it be possible to effectively and sustainably safeguard both the interests of the entrepreneur and, most importantly, his assets.