Start 2022 after the entry into force of the so-called Polish Deal health insurance obligations based on Article 66(1)(35a) Act dated 27 August 2004 health care services financed by public funds have become subject to persons appointed under the appointment act, and therefore also to members of the board of directors who receive remuneration for this.
At the same time, the amount of the health contribution from 2022 is no longer subject to income tax deduction as was the case until the end 2021 This has led to a significant increase in the level of real taxation of the remuneration of members of the board of directors appointed to carry out this function and has not been as favourable as it has been to the end 2021
Legislative 2022 However, it introduced further changes in tax rules and early July 2022 has, among other things, reduced the rate of income tax on individuals in the first tax threshold of the tax scale (not exceeding 120,000 PLN) to 12%, and so on 5 percentage points. Given that the remuneration of board members appointed to perform this function has not been subject to the so-called middle class allowance, which has been at the same time since July 2022 was liquidated, this change significantly reduced the actual taxation of remuneration for board members.
However, is it possible to pay the remuneration of board members appointed to perform this function without deducting the health contribution in 2022?
As a general rule, members of the board are already subject to compulsory health insurance and there is no doubt that the remuneration due for 2022 and paid this year will be charged with a health contribution. However, the provisions now provide the possibility under certain conditions to avoid the payment of remuneration paid in 2022
In view of the above, it should be concluded that the remuneration of a member of the Management Board for 2021 paid in 2022 will be taxed on a tax scale and will not be subject to compulsory health insurance, i.e. if income does not exceed 120,000 PLN and the application of the tax-free amount and the cost of obtaining income, the effective tax rate will be 8.7%.
Where remuneration is paid to a member of the Management Board for a year 2021 In 2022 for the taxation of personal income tax, the current rules will apply and the tax scale will be applied: 12% (income to 120,000 PLN) and 32% (revenue exceeding 120,000 PLN), the income tax payer will be able to benefit from the tax-free amount which currently amounts to 30,000 PLN and will be able to apply the basic revenue costs, which are maximum per year 3,000 PLN.
The application of the tax rules currently in force to the revenue currently paid results from the content Article 12(1) and Article 11(1) Income tax laws on natural persons (hereinafter referred to as cf.
u.p.d.o.f.) which determine the subject matter of taxation and the moment when the income comes from the relationship of appointment, which is the time of receipt or disposal of the taxable person in the calendar year of money and cash value.
After second in the case indicated above, the provisions in force in the 2021 (from when the remuneration is due).
This position was presented by the Social Insurance Institution, including in the letter dated 7 April 2022 Headquarters of the Social Insurance Institution DI/100000/43/381/2022, where it indicated that ‘Where a person appointed to serve before 1 January 2022 receive 2022 remuneration due for an earlier period (i.e.
before 2022) that remuneration should not be taken into account in the calculation of the contribution to health insurance as it is due for the period during which there was no entitlement to health insurance for that person.
Accordingly, on remuneration due for the period up to 31 December 2021, a paid in 2022 for a person appointed under the appointment act, the contribution to health insurance should not be charged and paid.’ In addition, this position is set out in the Guide “Polish Deal What is changing in the rules on the settlement of health insurance contributions from 1 January 2022”, where indicated ‘If, as a person appointed to serve before 1 January 2022 - you will receive in January 2022 remuneration due for December or earlier 2021 the remuneration of this payer will not be included in the basis of the contribution to health insurance.
It is due for a period during which there was no insurance title.’ 22-23.
In view of the above, it should be concluded that the remuneration of a member of the Management Board for 2021 paid in 2022 will be taxed on a tax scale and will not be subject to compulsory health insurance, i.e. if income does not exceed 120,000 PLN and the application of the tax-free amount and the cost of obtaining income, the effective tax rate will be 8.7%.
In order to pay the remuneration of a member of the Management Board for 2021, it will be necessary to adopt an appropriate resolution by the Shareholders' Assembly.
Note, however, that according to Article 12(1) u.p.d.o.f.
remuneration paid to a member of the Management Board in 2022 for performing a function in 2021 will belong to the same source of income as the remuneration paid in 2022 for performing a function in 2021, Therefore, if 2022 the remuneration of the member of the management board has already been paid, and this revenue should be considered together when determining whether the tax threshold will be exceeded 120,000 PLN specified under Article 27 u.p.d.o.f.
and whether the higher PIT rate will also apply – 32%.
It should also be pointed out that the time limits for drawing up and approving the financial statements of, among others, companies from O.O. have been extended, so often only at the end of June 2022 companies learned the final financial results for 2021, which is an additional argument for the adoption of a resolution of shareholders granting remuneration to a member of the Management Board for 2021 Now.
When paying remuneration for acting as a member of the Management Board, it should be noted that the amount of this remuneration should be justified in the activities carried out by a member of the Management Board, that the provisions of the articles of association should also be taken into account or that there are no restrictions in this respect. The unforeseeable payment of such remuneration may result in the tax authorities recognising that the remuneration paid to a member of the board will not constitute the cost of obtaining income for the company with the o.o., so it is worth consulting the tax advisor before making such payment.
Author: Kamil Kwiatek, Legal assistant. Russell Bedford Poland Branch in Katowice