Taxation of executive director’s fees – recent position of tax authorities

Sylwia Matuszek

A local company has a non-resident as one of its executive directors (members of management board). The person’s remuneration is paid by a foreign company of which he is an employee, and is recharged to the local company.

Sounds familiar? See what kind of compliance obligations are owed by the local company!

Worth noting!

The local company should:

withhold 20% personal income tax from the director’s remuneration, and

prepare information return on form IFT-1 or IFT-1R.

Importantly, these requirements apply even though the local company actually did not pay the money to its foreign director’s hands directly.

The current approach of tax authorities is that, in such cases, the local Polish company should act as the withholding agent with respect to remuneration paid to its directors (board members), even if it did not pay it to them directly.

Notably, the charge to tax in such cases rises when the cost of the remuneration is settled as between the associated companies.

Withholding tax is payable on the remuneration itself and on any extra non-monetary benefits, such as accommodation in Poland for the duration of directorship.

The above approach can be seen in various private tax rulings, including:

v  ruling dated 30 January 2024, ref. 0115-KDIT1.4011.809.2023.1.MK,

v  ruling dated 19 December 2022, ref. 0112-KDIL2-1.4011.754.2022.1.KF.

How can we help?

We will review tax compliance requirements applicable when paying remuneration to foreign executive directors and prepare safe tax treatment schemes for such remuneration and related benefits. If necessary, we will also draw up an application for a tax ruling on