The tax authorities’ approach
The question of whether a family foundation may engage in short-term letting activities has given rise to interpretative controversy amongst tax authorities. In the individual interpretation of the Director of the National Tax Information Service dated 19 December 2023, ref. no. 0111-KDIB1-3.4010.662.2023.2.AN, the authority concluded that letting property ‘on a daily basis’ does not fall within the definition of ‘letting’ under the Civil Code, to which the Family Foundation Act refers. The Director of the National Tax Information Service emphasised that short-term letting is characterised by a lower degree of formality – there is often no handover report, no regular payments, and utility billing issues remain outside the scope of the agreement. Furthermore, the authority noted that rental and lease agreements are customarily characterised by a higher degree of formality, such as the written form of the agreement, the use of security deposits, and the duration of the agreement usually covers longer periods with little variation in the parties using the property. The interpretation also indicated that short-term letting cannot be regarded as ‘other provision of property’ as referred to in the Act. Consequently, the Director of the National Tax Information Service (KIS) concluded that this type of activity falls outside the scope of permitted activities of a family foundation, and thus the income derived from it is subject to taxation at the 25% CIT rate.
The Director of the National Tax Information Service also presented a similar position in an individual interpretation dated 19 August 2024, ref. no. 0111-KDIB1-1.4010.357.2024.1.BS.
Administrative courts in defence of taxpayers
In June 2024, the Provincial Administrative Court in Gdańsk (judgment of the Provincial Administrative Court in Gdańsk of 19 June 2024, ref. no. I SA/Gd 219/24) overturned the unfavourable interpretation of the Director of the National Tax Information Service, pointing out that the provisions of the Civil Code do not distinguish between leases based on their duration, and therefore short-term leases also fall within this definition. The court noted that short-term leases have not been comprehensively regulated under Polish law, and therefore such contracts are governed by the general provisions of the Civil Code. The court also challenged the additional formal criteria introduced by the authority, such as the requirement for a handover report, a written agreement or a security deposit, which are not required by law for the validity of a lease agreement.
The court emphasised that the Family Foundation Act permits not only letting and leasing, but also other forms of making property available, which allows for a broader view of the foundation’s activities. The lack of grounds for differentiating the tax consequences of short-term and long-term letting means that both types of letting should be treated uniformly.
In September 2024, the Minister of Finance, in response to parliamentary question No. 4538, confirmed that the Director of the National Tax Information Service (KIS) maintains a restrictive stance, but a single administrative court judgment does not establish an established line of case law.
In March 2025, the Provincial Administrative Court in Wrocław issued another ruling favourable to family foundations, also challenging the position of the Director of the National Tax Information Service (ruling of the Provincial Administrative Court in Wrocław of 26 March 2025, ref. no. I SA/Wr 807/24). The court held that the absence of specific regulations concerning short-term lettings in Polish law means that the general provisions of the Civil Code must apply, and thus also Article 659 of the Civil Code. The duration of the contract or the absence of certain formal elements does not alter the nature of the contract as a tenancy agreement. The court also noted that the foundation’s activities outside the scope specified in Article 5 of the Act on Family Foundations results in more severe tax consequences (application of the 25% CIT rate), but if the short-term let meets the criteria for a lease or other provision of property for use, it constitutes a permitted activity of a family foundation, which is exempt from CIT.
It is also worth mentioning the judgment of the Provincial Administrative Court in Gliwice of 2 April 2025, ref. no. I SA/Gl 1191/24, which overturned the aforementioned individual interpretation of 19 August 2024, ref. no. 0111-KDIB1-1.4010.357.2024.1.BS.
What next?
The current trend in the case law of administrative courts offers hope for a change in the tax authorities’ approach. Although both rulings are not yet final, their consistent reasoning may mark the beginning of the development of a uniform, favourable line of case law. However, the final position on this matter will be taken by the Supreme Administrative Court, and we must still await its ruling.
It is worth noting the detailed analysis of the relationship between the additional criteria imposed by the DKIS and the provisions of the Civil Code concerning tenancy, which confirm that elements such as the written form of the contract (required only for leases exceeding one year), the handover report, the security deposit or the periodicity of payments are not essential for the validity of the lease agreement and should not affect the classification of short-term letting as an activity permitted for a family foundation.
Furthermore, the authority’s requirement for the stability of the entity using the property (tenant stability) also finds no basis in the applicable regulations. In one interpretation, dated 20 June 2024, ref. no. 0111-KDIB1-2.4010.226.2024.2.ANK, concerning the letting of premises for a period of 6 months, the authority agreed that such a tenancy falls within the scope of permitted activities of a family foundation.
Implications for practice
Until a consistent line of case law has developed or the Director of the National Tax Information Service changes his position, family foundations considering short-term leases should exercise caution. It is advisable to analyse the planned activity in terms of tax risks on a case-by-case basis, and in case of doubt – to apply for an individual interpretation, which, as current practice shows, may end up before an administrative court anyway. Despite positive signals from the courts, the dispute over the taxation of short-term leases by family foundations is still ongoing.
Frequently asked questions
Can a family foundation legally conduct short-term rental of real estate?
Yes, according to the case law of administrative courts, short-term rental falls within the definition of lease from the Civil Code and constitutes a permitted activity of foundations. Courts recognize that the absence of separate legal regulations means the application of general provisions, which allows for the use of CIT tax exemption. The tax authority still presents a restrictive position, which generates interpretative risk.
Does the lack of a written contract or handover protocol prevent the classification of rental as exempt activity?
No, administrative courts have challenged the requirement to have these elements as a condition for the validity of a lease agreement. The provisions of the Civil Code do not require written form of the contract or a protocol for the validity of the lease relationship itself. Therefore, the lack of these documents should not affect the qualification of short-term rental as permitted activity for foundations.
What are the tax consequences of conducting short-term rental by a family foundation?
If the activity is deemed to exceed the permitted catalog, the income is subject to taxation at a CIT rate of 25%. However, favorable court judgments indicate that short-term rental is a form of making property available, which allows for the application of subjective CIT exemption. Key is the recognition of this activity as compliant with the family foundation act.
Is the permanence of the tenant a legal requirement for the validity of a lease agreement in a foundation?
No, the requirement of permanence of the entity using the real estate has no basis in the applicable legal provisions. The tax authority sometimes imposes it, but courts recognize that the variability of entities using the real estate does not change the nature of the lease agreement. Therefore, even short-term rentals can be recognized as permitted business activity of foundations.
What steps should a family foundation planning short-term rental take?
Foundations should exercise caution and analyze the planned activity in terms of tax risks arising from the restrictive position of authorities. In case of doubts, it is recommended to apply for an individual interpretation, which may be necessary in case of inspection or dispute. The final line of case law will be determined by the Supreme Administrative Court.
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The practice includes ongoing advice on administrative and tax law. He has extensive experience in handling judicial, administrative, tax and judicial-administrative proceedings concerning both individual clients and business entities, including that gained through many years of providing services to local government units and other units of the public finance sector.
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