Remuneration of a member of the management board of a company in Poland based on appointment or employment contract

From this article, you will learn:

• How the Polish tax authorities perceive serving as a management board member without remuneration?
• What the taxation and contributions of management board members' remuneration look like?
• What are the effects of paying remuneration to shareholders of a limited liability company for recurring services?

A member of the management board or supervisory board of a Polish capital company performs his duties on the basis of the act of appointment by resolution of the relevant body of the company. Importantly, the regulations do not provide for an obligation to pay remuneration in this respect. Therefore, serving as a management board member may be paid or unpaid.

However, we would like to point out that the tax authorities may decide that when a member of the management board performs his/her function free of charge, the company generates taxable income from receiving free benefits. 

In the case of members of the management board of a limited liability company, remuneration may be paid on the basis of a resolution of the shareholders or on the basis of an agreement.

How to settle the remuneration of a management board member paid on the basis of a resolution of the Shareholders' Meeting?

For personal income tax purposes, income obtained from being appointed as a member of the management board or supervisory board in a limited liability company or a joint-stock company is treated as income from activities performed personally. The remuneration for the appointment, paid on the basis of a resolution of the competent authority, is taxed according to general principles, i.e. 12% or 32% PIT rate – depending on the amount of income achieved. 

Attention! For revenues exceeding PLN 200 obtained by a member of the management board, the tax rate is 12% and is calculated on the revenue (without reducing the costs of obtaining the revenue). 

Serving as a member of the management board on the basis of the appointment letter is not the basis for paying social security contributions. However, from 1 January 2022, the benefit paid in this respect constitutes the basis for calculating health insurance contributions in the amount of 9% of the assessment basis.

What is the taxation and contribution rate for the remuneration of a management board member employed under an employment contract?

If a management board member is employed in a company, the remuneration paid under an employment contract will constitute income from the employment relationship. The tax base for income from an employment relationship is reduced by the standard costs of obtaining income, which amount to PLN 250 or PLN 300 per month. The amount of tax-deductible costs depends on the distance of the employee's place of residence from the place of work. 

A member of the management board who remains in an employment relationship with the company will be covered – in accordance with general principles – with mandatory social security and health insurance contributions.

Remuneration paid to partners for recurring services

It often happens that a member of the management board of a limited liability company is also its partner.

Pursuant to the provisions of the Commercial Companies Code, a partner of a limited liability company may be obliged to provide repeated non-monetary benefits to the company. The company agreement should specify the type and scope of such benefits. The company may pay a shareholder remuneration for the provision of recurring non-cash benefits. 

Such remuneration, paid to a partner, is classified under PIT as income from other sources and is taxed according to the tax scale. However, it is questionable whether this type of remuneration constitutes the basis for calculating social security and health insurance contributions, because the position of the Social Insurance Institution in this respect is not uniform, and there is a visible tightening of Social Insurance Institution’s approach to this type of benefits. For example, in an individual interpretation of 6 September 2023 (reference number DI/100000/43/757/2023), Social Insurance Institution found that the activities performed by partners of a limited liability company constitute services typical of civil law contractual relationships, therefore they should be covered by mandatory social insurance.

If you are interested in advice on selecting the most appropriate form of remuneration for members of governing bodies in Polish companies, please contact us.