When an Offshore Foundation Makes Sense for a Polish Entrepreneur
Meet Tomasz—a fifty-two-year-old founder of a pharmaceutical wholesale network spanning Poland, the Czech Republic, Slovakia, and Hungary. The family business, built over fifteen years, now generates roughly eight million złoty in annual profit, distributed as dividends to partners. Tomasz has just received an acquisition offer from a Western corporation: twenty million euros. After the transaction, he plans to gradually withdraw from active business operations. His daughter is studying in Switzerland and contemplating a career in Geneva.
At a meeting with a family office in London, Tomasz heard about the Maltese private foundation: “European Union, stable jurisdiction, flexible taxation, can be treated as a trust with zero tax rate—ideal for managing capital after an exit.” Tomasz comes to my office with a question: “Should I establish a Maltese foundation to manage my capital?”
The answer, as usual in tax law, is: it depends. In Tomasz’s case, however—unlike most Polish entrepreneurs—a Maltese foundation might actually make sense. But not for the reasons the financial adviser presented. And, above all, not as a first option.
Malta: A Foundation with Legal Personality and Dual Tax Regime
The Maltese private foundation is a fascinating institution, technically sophisticated from a legislative standpoint. Like all private foundations—whether Maltese, Liechtenstein, or Panamanian—it serves primarily as a tool for asset isolation, a kind of “orphaning” of assets in a way that preserves control while divesting ownership. The founder transfers assets to the foundation, which becomes their legal owner. From that moment, these assets no longer belong to the founder—they cannot be seized by his creditors following a poor investment decision in another venture, they won’t be parceled out through inheritance proceedings and statutory-share requirements, they won’t enter the estate divided in divorce. The assets are isolated, “orphaned,” but thereby protected from claims directed against the founder as an individual.
At the same time, the founder doesn’t lose control—he retains far broader supervisory powers than a trust settlor. He can oversee the foundation’s administration, demand copies of documents and financial reports, intervene in key decisions regarding asset management, and even—if the foundation’s charter so provides—retain the right to change beneficiaries or investment strategy. This is a fundamental advantage of foundations over traditional common-law trusts, where the settlor typically relinquishes any control over transferred assets definitively.
The minimum requirements are symbolic—eleven hundred and sixty-five euros initial contribution, notarial registration, mandatory licensing by the Malta Financial Services Authority for administrators (unless they’re already licensed trustees). Beneficiaries can be named in the notarial deed or in a separate document, providing some level of confidentiality—though significantly less than before, since beneficial-ownership registers are also mandatory in Malta under E.U. directives.
The greatest attraction of the Maltese foundation is the dual option for choosing a tax regime. The foundation can be taxed as a company (thirty-five-per-cent rate, but with a peculiar tax-refund system reducing the effective tax rate to just over five per cent) or—following an irrevocable election—as a trust, where, under certain conditions, complete tax transparency can be achieved: zero tax in Malta if all income derives from foreign sources, all beneficiaries are non-Maltese residents, and the founder is also not a Maltese resident.
The World Geography of Foundations: From Liechtenstein to the Caribbean
But Malta is just one of many possibilities. Before Tomasz decides on any foreign structure, he should understand the full landscape of international private foundations. Foundations are institutions originating from the Continental civil-law tradition, but in recent decades they’ve been adopted and adapted by common-law jurisdictions, creating a fascinating mosaic of options.
Liechtenstein remains the archetype and gold standard of private foundations. The Liechtenstein foundation (Stiftung) is the prototype from which all other jurisdictions model themselves. Liechtenstein offers full legal personality for foundations, asset independence, strong privacy protection, flexibility regarding founder and beneficiary rights. Due to membership in the European Economic Area, Liechtenstein foundations are recognized throughout the European Union. It’s the jurisdiction most frequently chosen by the wealthiest European families for long-term intergenerational wealth management. However, Liechtenstein is also the most expensive solution, and problematic for various reasons worth reserving for a personal conversation.
Panama as an offshore alternative. The Panamanian Private Interest Foundation, established under a law from nineteen ninety-five, is directly modeled on Liechtenstein but designed for Latin American and international clients seeking greater privacy and lower costs. The Panamanian foundation cannot regularly conduct commercial activities but can own companies, real estate, and financial assets. It offers strong confidentiality, asset protection, and favorable taxation for non-Panamanian assets. Panama is one of the most popular offshore jurisdictions for asset-protection structures, right after Liechtenstein. But here appears the first significant warning signal for Tomasz: Panama is not a member of the European Union, appears on various watchlists of international organizations, and Polish tax regulations treat it with deep suspicion.
Austria as a European alternative. The Austrian Privatstiftung, established by a law from nineteen ninety-three, offers a similar solution in the heart of Europe. It requires a minimum contribution of seventy thousand euros, provides broad freedom to the founder, and is widely used by Austrian families to control holding structures. More than three thousand private foundations operate in Austria, and many of the country’s wealthiest families control the largest national enterprises through precisely these vehicles. However, the Austrian Privatstiftung is subject to Austrian corporate tax at a rate significantly higher than that applied by Liechtenstein or effectively collected by Malta.
Jersey and Guernsey: common law meets foundation. The Channel Islands, traditionally associated with trusts, have in the past fifteen years introduced their own foundation legislation—Jersey in two thousand nine, Guernsey in two thousand twelve. These common-law foundations combine elements of trusts and companies: they have legal personality, are managed by a council, have no shareholders, and can serve both charitable and non-charitable purposes. Jersey and Guernsey offer modern legal frameworks, flexibility, professional services, and—crucially—a long tradition of cooperation with international wealth structures. Since the legislation was introduced, hundreds of Jersey and Guernsey foundations have been created, used both in family planning and as “orphaned” entities in structures serving asset isolation. For Tomasz, Jersey or Guernsey could be attractive as jurisdictions enjoying better reputations than classic tax havens, with a long history of professional wealth-management services. However, this is not an inexpensive solution.
Dubai (D.I.F.C.) and Abu Dhabi (A.D.G.M.): new stars of the Middle East. Both Emirati financial centers recently introduced modern legal frameworks for foundations, modeled on international best practices. They’re gaining popularity among Middle Eastern and global families for asset protection, succession planning, and international structures. The United Arab Emirates offers political stability, no income tax, developed financial infrastructure, and a growing network of tax treaties. For a Polish entrepreneur, this might sound exotic, but in practice the D.I.F.C. and A.D.G.M. are becoming serious players in international wealth planning, especially for people planning lives between Europe and Asia.
The Caribbean: diversity and varying quality. Many Caribbean jurisdictions—St. Kitts, Antigua, the Bahamas—have enacted their own foundation laws modeled on Liechtenstein and Panama. But their use varies significantly depending on jurisdiction, banking relationships, and reputation. Some are treated as credible financial centers (like the Caymans or Bahamas), others more as classic tax havens with limited access to the international banking system.
The Problem: The Polish Perspective and C.F.C. Regulations
But Tomasz doesn’t manage an international empire. He’s considering a Maltese foundation mainly for one reason: he wants to save on taxes in Poland. And here the problem begins.
From the perspective of the Polish tax system, a Maltese foundation will most likely be a controlled foreign entity within the meaning of Article 30f of the Personal Income Tax Act. The definition of a foreign entity in this provision expressly includes “a foundation, trust, or other entity or legal relationship of a fiduciary nature” not having its seat, management, or registration in Polish territory, in which a Polish resident holds certain rights or exercises actual control—including as founder (settlor) or beneficiary.
Tomasz, as founder and beneficiary of a Maltese foundation, will meet the definition of a person controlling a foreign entity. The question is: Will this Maltese foundation be a controlled foreign entity subject to C.F.C. taxation in Poland?
C.F.C. regulations provide several alternative bases for recognizing a foreign entity as controlled. First: seat in a country on the tax-haven list. Malta does not appear on that list. Second: seat in a country with which Poland has no tax-information-exchange agreement. Poland has had such an agreement with Malta for decades. Malta passes these two tests without difficulty.
The third basis is the most important and most complex: the combined fulfillment of the control test, the low-taxation test, and the passive-income test. The control test is obvious—Tomasz, as founder and beneficiary, holds more than fifty per cent of the rights to participate in the foundation’s profits. The passive-income test is also met—if the foundation receives only dividends from subsidiary companies, a hundred per cent of its income constitutes passive income listed in the statutory catalogue.
The low-taxation test requires that the tax actually paid be lower by at least twenty-five per cent than Poland’s nineteen-per-cent corporate-income tax. If the Maltese foundation chooses taxation as a trust and achieves a zero rate, the test is automatically met. If it chooses taxation as a company—the test will be met: the tax is then nominally thirty-five per cent but effectively little more than five per cent. (Such miracles occur only in Malta, allowing it to boast a high C.I.T. rate on international forums while simultaneously encouraging foreign entrepreneurs to invest by effectively not collecting this tax.)
Conclusion: Tomasz’s Maltese foundation managing funds from the sale of a business in Poland will be a controlled foreign entity subject to C.F.C. regulations.
Consequences: Automatic Taxation in Poland
What does this mean practically? That Tomasz will be required each year to report the Maltese foundation’s income in his Polish tax return and pay nineteen-per-cent tax on it in Poland—regardless of whether the foundation paid him any dividend. Taxation occurs automatically, annually, as long as the foundation meets the C.F.C. criteria.
So where’s the tax savings? It vanishes.
The Exception: Genuine Economic Activity—But What Kind?
There is, however, a crucial exception. Article 30f, paragraph eighteen, states that C.F.C. provisions do not apply if the controlled foreign entity, subject to taxation on all its income in an E.U. member state or a state belonging to the European Economic Area, conducts substantial genuine economic activity in that state.
The provision then describes in detail the criteria for assessing this genuine activity: whether the registration is connected with the existence of an enterprise actually conducting activity—premises, qualified personnel, equipment; whether the structure functions independently of economic reasons; whether there’s proportionality between the scope of activity and the possessed premises, personnel, equipment; whether concluded agreements comply with economic reality and have justification; whether the foundation independently performs its basic functions using its own resources, including on-site management personnel.
Additionally, paragraph twenty, letter A, requires that the genuine activity be substantial—taking into account the ratio of income from conducted genuine activity to total income.
Here we reach the crux of the problem. For Tomasz, who has sold an operational pharmaceutical business in Central Europe and now manages investment capital of twenty million euros—what Maltese economic functions would the Maltese foundation actually perform?
If Tomasz were actually conducting operational activities from Malta—establishing a Maltese logistics center serving pharmaceutical distribution in the Mediterranean basin, employing a Maltese compliance team for medical products, conducting genuine expansion projects into North African markets from Malta—then we could speak of genuine economic activity in Malta. But this requires real investments: office, team, operations, costs of tens of thousands of euros annually.
And then the Maltese foundation begins to make sense not as a tax-optimization tool but as a genuine operational structure for international activity.
The Key Question: Why Not a Polish Family Foundation?
For Tomasz, who is and remains a Polish tax resident, the first and most obvious solution should therefore be a Polish family foundation. Introduced by the Family Foundation Act of January 26, 2023, and operating since May 22, 2023, the Polish family foundation is a modern tool for managing family wealth and succession planning.
The key advantage of the Polish family foundation is the possibility of conducting so-called permitted activity, which—as long as no benefit payments are made to beneficiaries—generates no tax obligation whatsoever.
Permitted activity encompasses everything Tomasz needs for managing capital after selling the business: participation in capital companies (holding and managing shares), acquiring and selling securities and derivatives (building and managing an investment portfolio), leasing property (real-estate investments), granting loans to portfolio companies. The foundation can sell assets—provided they were not acquired solely for resale—allowing portfolio restructuring without automatic taxation of each transaction.
As long as the foundation doesn’t pay benefits to beneficiaries, its income from permitted activity is not subject to taxation. The foundation can, for years—even decades—accumulate capital, reinvest profits from stock and bond portfolios, conduct transactions on financial markets, all without current taxation. Tax appears only at the moment of benefit payment to a beneficiary—then fifteen per cent is applied to the payment amount.
For Tomasz, the scenario is simple: after selling the business for twenty million euros, the funds go to a Polish family foundation. The foundation invests the capital in a diversified portfolio—shares of international companies, corporate and treasury bonds, private-equity funds, commercial real estate. The portfolio generates, say, one million euros annually in income from dividends, interest, and capital gains. As long as the foundation doesn’t pay benefits to Tomasz or his daughter, that million euros is not subject to any taxation. Capital grows, is reinvested according to asset-management strategy, and tax appears only when the family actually needs funds to spend—then payment follows with a fifteen-per-cent charge.
For Tomasz, remaining in Poland and managing capital after selling the business, the Polish family foundation offers everything he needs: professional family-wealth management, clear succession rules (the daughter can be both beneficiary and foundation-council member), protection from future creditor claims against beneficiaries, flexibility in shaping individual family members’ rights, stable and predictable taxation in Poland.
So why consider foreign structures at all?
Scenario Two: Tomasz Moves to Monaco
Let’s consider, however, another scenario. Suppose that after selling the business Tomasz has no intention of continuing intensive operational activity. He wants to manage capital, travel, spend time with family. His daughter is in Geneva, his son is planning studies in Barcelona. Tomasz is thinking about moving to Monaco—a principality without income tax, an hour’s flight to Geneva, two hours to Barcelona, stability, security, an international environment.
Tomasz will spend the second half of his life managing passive investments from a country where personal income is not taxed at all. He’s not afraid of exit tax because his wealth is currently in cash, which exit tax doesn’t cover. Theoretically, he could continue managing a Polish family foundation from Monaco, but he fears the instability of the Polish tax system. He worries that the tax preferences for family foundations could disappear overnight, just as the taxation rules for limited joint-stock partnerships and closed-end investment funds for non-public assets changed overnight.
And in this scenario, a Maltese foundation suddenly takes on completely different significance.
If Tomasz becomes a Monaco resident—thus ceasing to be a Polish tax resident—C.F.C. regulations cease to concern him. Article 30f applies exclusively to taxpayers who are Polish tax residents. Monaco has no personal income tax. A Maltese foundation as an E.U. structure offers legal stability, professional administration, access to the E.U. treaty system.
The foundation can manage twenty million euros of capital, invest in stocks, bonds, private-equity funds, real estate. It can choose taxation as a trust—under certain conditions, zero rate in Malta if income derives from foreign sources and beneficiaries are not Maltese residents. Tomasz, as a Monaco resident receiving payments from the Maltese foundation, pays no tax in Monaco. Malta doesn’t collect withholding tax on payments to non-residents. Effective tax rate: zero.
Is this legal? Yes, provided Tomasz actually becomes a Monaco resident—lives there for the required time, owns an apartment, has his center of life interests in Monaco. This isn’t about fictitious tax residency for tax-avoidance purposes but about a genuine change of residence and life.
The Maltese foundation in this scenario serves as a professional wealth manager for an individual who is a resident of a zero-tax jurisdiction. The foundation has legal personality, so it can directly contract with investment banks, funds, portfolio managers. It can use the E.U. treaty network to minimize withholding taxes on received dividends and interest. It can utilize participation exemption for income from equity interests. It can create segregated cells for different asset classes or different family members.
Malta as an Element of Exit and Emigration Strategy
And here we arrive at the crucial conclusion: a Maltese foundation makes sense for a Polish entrepreneur not as a tool for reducing taxes on a Polish business conducted by a Polish resident but as an element of a comprehensive strategy combining an exit transaction with personal tax emigration.
The typical sequence looks like this: the entrepreneur sells an operational business, obtaining significant capital requiring professional management; simultaneously, he decides to change residence for life reasons—family abroad, conclusion of active business career, desire to live in an international environment; he transfers tax residency to Monaco, Switzerland, the United Arab Emirates, or another jurisdiction friendly to wealth management; he establishes a Maltese foundation as a professional vehicle for managing capital from the E.U. level; the foundation benefits from E.U. regulations, treaties, banking system; as a non-Polish resident and non-Maltese resident, the entrepreneur achieves optimal tax efficiency.
In this scenario, Malta is not an artificial construction for tax avoidance but a rational choice of jurisdiction for managing international wealth by a person actually living outside Poland. The foundation has genuine Maltese administrators licensed by the M.F.S.A., a genuine Maltese office, genuine Maltese operating costs. But the beneficiary actually lives in Monaco, actually resides there, actually has his center of interests there.
Conclusion: Malta Only with Emigration
For Tomasz, the conclusion is simple. If he remains a Polish tax resident—a Maltese foundation makes no sense. C.F.C. regulations will eliminate all tax benefits, and additional costs and complications will only be burdensome. A Polish family foundation will be a far better solution.
But if Tomasz actually moves to Monaco—for life, family, personal reasons—then a Maltese foundation becomes an elegant and efficient tool for managing capital in an international context. Not as a way to circumvent Polish taxes but as a natural element of a new life as a resident of a zero-tax jurisdiction.
International wealth planning in two thousand twenty-five requires coherence of all puzzle elements: where you actually live, where you conduct business, where you manage capital, where your family lives. Malta can be part of this puzzle—but only when the entire construction has economic, life, and family sense extending far beyond mere tax issues.
