Strona Kancelarii » Remuneration of Management Board Members of a Polish Limited Liability Company (sp. z o.o.) Based on Appointment

Management board members of a Polish limited liability company (spółka z ograniczoną odpowiedzialnością; “sp. z o.o.”) may be entitled to remuneration for performing their function on the basis of an appointment (powołanie).

This is one of the most popular methods of distributing funds from a sp. z o.o. to company owners who simultaneously perform managerial functions as members of the company’s corporate bodies.

In this article, we outline the formal and legal grounds for making payments based on an appointment and provide an overview of the applicable public-law charges arising therefrom.

1. Appointment and a resolution on remuneration based on appointment

In a limited liability company, the shareholders may, by way of a resolution, grant management board members remuneration in connection with their appointment to the management board. In practice, the amount of remuneration of management board members is most often determined by a resolution adopted at the shareholders’ meeting. This follows from Article 203¹ of the Polish Commercial Companies Code (Kodeks spółek handlowych).

In the resolution, the shareholders should specify not only the amount of remuneration due to the management board member, but also the rules for its payment—such as the frequency and payment dates. The shareholders enjoy autonomy in this respect and the amount and payment rules are discretionary, provided that they do not prejudice the company’s interests.

Moreover, the shareholders may grant management board members additional benefits, such as bonuses, awards, paid breaks from performing their function, financing of courses and training, and reimbursement of representation and image-related expenses.

Where the management board is composed of more than one person, the shareholders may grant remuneration to a specific management board member or to all of them—the shareholders have full discretion in this regard.

2. Taxation of remuneration based on appointment

The method of settling the tax due on remuneration paid to a management board member on the basis of appointment depends on whether the individual qualifies as a Polish tax resident.

For more information on how tax residency is determined, see our article “Tax Residency in Poland and Its Implications for Shareholders of a Polish Limited Liability Company (Residents vs. Non-Residents)” (https://kancelariakubiak.pl/en/tax-residency-in-poland-and-its-implications-for-shareholders-of-a-polish-limited-liability-company-%28residents-vs-non-residents%29).

Remuneration based on appointment received by individuals who reside in Poland and are Polish tax residents is taxed as income from activities performed personally (działalność wykonywana osobiście). Such income is subject to taxation under the progressive tax scale; depending on the amount of income earned in a given year, the applicable rate is 12% or 32%. The tax is withheld by the sp. z o.o., acting as the remitter/withholding agent, in the form of monthly advances.

In the case of non-residents, the revenues obtained on the basis of appointment are subject to a 20% flat-rate withholding tax. At this stage, it is necessary to carefully verify whether a double taxation treaty concluded by Poland with the taxpayer’s state of tax residence applies to a given non-resident management board member. A particular treaty may allow the application of a more beneficial level of taxation.

3. Social security and health insurance contributions (ZUS) in connection with appointment

Until recently, remuneration of a management board member received on the basis of appointment was subject solely to personal income tax, without the need to reduce the payment by other public-law charges.

This legal framework changed in 2022 and since then, individuals who receive remuneration for performing the function of a management board member in a sp. z o.o. are required to pay a health insurance contribution.

In certain cases, individuals who are covered by the social security system in an EU/EEA country, or in another country with which Poland has concluded a social security agreement, may be exempt from the obligation to pay the Polish health insurance contribution, provided that this is confirmed by an A1 certificate or another certificate applicable in the relationship with the relevant third country. This results from the principle that, in the area of social security, an individual should be subject to only one set of legislation.

From a practical perspective, a person who is aware that they earn income in different countries should carry out a detailed analysis to determine which social security system will apply.

If the only source of income is in Poland, or if the analysis shows that the person is subject to Polish social security legislation, the person should be registered for Polish health insurance and the company is obliged to withhold a 9% health insurance contribution from the remuneration.

Remuneration received on the basis of appointment to the management board does not, however, constitute a title to mandatory social security insurance contributions.

As can be seen from the above, remuneration for serving as a management board member may constitute a solid basis for distributing funds from a sp. z o.o.; however, each case should be analysed in detail in terms of tax and contribution (ZUS) obligations. Only an analysis of the specific facts will make it possible to avoid errors when paying any taxes and liabilities of this kind.

If you are looking for legal support in this issue, please contact us.

Attorney at law - Michał Kubiak

e-mail: biuro@kancelariakubiak.pl or

phone/Whatsapp +48724293339

724 293 339

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