In Polish 

Liability of board members of a limited liability company in Poland

The members of the management board of a limited liability company may be liable for the obligations of the company under article 299 of the Code of Commercial Companies. This liability is subsidiary. This means that a board member can be held liable for it in a situation where enforcement against the company proves ineffective. For the liability of a member of the management board for the company’s debts, it is important whether the person was sitting on the company’s board at the time the liability existed. In this context, an interesting, from the legal point of view, dispute arose before the Voivodship Administrative Court in Gdańsk. A member of the management board of a limited liability company indicated in the proceedings that in 2017 he had resigned from his position in the body. In view of this, he defended that he could be held liable for the company’s 2018 liabilities. The authority, on the other hand, referred to the data appearing in the National Court Register.

Factual state

In the case, the company had not paid its 2018 tax liabilities in full. The head of the tax authority could not obtain the outstanding receivables from the company, and therefore found the former member of the management board liable for the tax obligations. The authority pointed out that he had performed his function as a member of the management board in the company at the time and was therefore liable for the outstanding receivables. The former member of the management board filed an appeal against this ruling. He indicated that he had not held any position on the company’s board of directors since 2017, as he had resigned from his position. Furthermore, he argued that he only appears in the National Court Register because the company’s chairman of the board of directors did not submit an appropriate request for his removal from the register. The authority, on the other hand, continued, during the proceedings, to maintain that, according to the data disclosed in the register, he had sat on the company’s body unchanged since 2016 and, contrary to what he claims, he also served on the company’s board of directors at the time of the 2018 tax payment deadline. Additionally, the tax authority pointed out that the former member of the management board, after his resignation, continued to perform active activities for the company, including, inter alia: concluding contracts on its behalf, signing powers of attorney. In view of this, the authority stated that these activities were not performed by him as an employee, but as a member of the management board, as the aforementioned activities belonged to the competence of the management body. The former member of the management board brought an action in this case.

Court decision

The dispute was dealt with by the WSA in Gdańsk. The court indicated that the performance of the function of a member of the management board is based on the will of the person who performs it. In view of the fact that the person sitting on the body may resign from it at any time. The court pointed out that the authorities must, in each and every such case, determine whether the resignation actually occurred. Accordingly, in this case, it was necessary to examine whether the activities performed by the applicant fell within the scope of the duties of a member of the board. The court in the case pointed out that the appointment and term of office of members of the management board is an internal sphere of the company’s business. On the other hand, the entry in the Natrional Court Register of a member of the board of directors and changes thereto are declaratory in nature. Therefore, the entry in specific circumstances can be overturned. The court ultimately overturned the authority’s decision in the case.

For Polish

Why a limited liability company?

The limited liability company is the most popular form of conducting business in Poland. This is hardly surprising. This business form allows for the limitation of the entrepreneur’s financial liability (the partner is not liable with his/her private assets), can be established with a low financial outlay (the minimum share capital is merely PLN 5,000) and enjoys greater prestige – such a business is perceived more professionally than a sole proprietorship. There is also the advantage of being able to set up a company online, although this has certain limitations.

By far the biggest advantage of a limited liability company is the limitation of liability of its partners. As a result, a partner does not have to worry about financial failure, because in the event of bankruptcy, as a rule, he or she is not liable with his or her own personal assets. Exceptions to this apply to partners who are also members of the management board and who fail to comply with the requirements set out in the Commercial Companies Code .

The limited liability company as a separate taxpayer

However, all these advantages do not change the fact that a limited liability company is not tax transparent. What does this mean? A limited liability company generates a certain income and pays income tax on it. The money then does not yet belong to the partner, but to the company. In order to enjoy the profit, the partner must first distribute the profit from the company, e.g. in the form of dividends, which, however, also requires tax to be paid, this time not by the company, but by the partner. In a way, this results in double taxation of profit. First on the level of the company, and then on that of the partner. As a rule, the company pays CIT at 19% or 9% (if it has the status of a small taxpayer). The 9% rate does not apply to proft from shares in the profits of legal persons (a situation where, for example, a limited liability company is a partner in another limited liability company). The partner then pays income tax on the distribution of profit from the company to himself (e.g. when he does so in the form of dividends, he pays a 19% flat-rate income tax).

In order to optimise taxation, partners decide on various ways of withdrawing profit from the limited liability company.

Ways of distributing profit from a limited liability company.

1) Dividend

The most classic way of distributing profits. It consists in the partner of the limited liability company adopting a resolution on the distribution of profit and allocating it to the payment of dividends. In addition, the company’s financial statements must be approved before the dividend is paid. Dividends are subject to 19% flat-rate income tax. This is the safest, although not always the most optimal, way to pay money out of the company. It is also possible to make dividend advances during the tax year. However, the advance payment requires additional conditions to be met and is subject to lower limits. The important point is that neither the dividend nor the advances are tax deductible for the company (so the company pays CIT on the larger amount). However, dividends are not subject to health and social security contributions.

2) Remuneration for serving as a board member

Another way to remunerate a shareholder may be to grant remuneration for serving as a board member. Of course, this requires that the shareholder is also acting as a member of the board of directors. The granting of remuneration to a member of the management board requires a resolution of the shareholders. This solution already has an advantage over dividends in that the board member’s remuneration can be included in the company’s deductible costs. This in turn reduces the amount on which the company pays CIT. The remuneration is subject to a health contribution (9% of revenue), but is not subject to social security contributions.

The remuneration of a member of the management board is taxed under the tax scale – at a rate of 12% up to the amount of PLN 120,000 per annum, and 32% after exceeding this threshold. A tax-free amount of PLN 30,000 also applies.

3) Employment contract

Partners often also choose to enter into an employment contract with the company. Such an agreement has similar tax and contribution consequences as remuneration for serving as a board member. Here, too, it is taxed under the tax scale – at a rate of 12% up to PLN 120,000 per annum, and 32% after that threshold is exceeded. A tax-free amount of PLN 30,000 applies. The company may recognise this remuneration as a tax expense.

However, there is a difference in terms of contributions with respect to this remuneration. Remuneration for employment is subject to social security contributions. Therefore, this option is most often chosen by partners who simultaneously carry out sole proprietorship and for whom there is a concurrence of social insurance titles. In principle, such a procedure makes it possible to pay social insurance contributions only on the basis of an employment contract concluded with the company (often covering the minimum wage, so as to reduce the contribution base as much as possible). However, it should be borne in mind that entering into an employment contract with a company in which one is a partner is always fraught with risk depending on the number of shares held and one’s possible function on the company’s board. We recommend contacting an expert in this regard.

4) B2B agreement with the company

A partner running a sole proprietorship at the same time may decide to provide services to the company against payment. The remuneration paid to the partner-servicer will be deductible for the company. On the part of the partner, the remuneration will be taxed in accordance with the form of taxation of his business activity (i.e. under the general rules, lump-sum or flat-rate taxation). Depending on the type of services, VAT may also come into play (and on the other hand, the possibility to deduct input VAT by the partnership). Revenue from services rendered generally affects the entrepreneur’s health contribution, although the details depend on the form of taxation chosen. In addition, the entrepreneur pays social security contributions on a general basis.

This solution, too, is not without risk, especially if the partner also serves on the company’s board. An example of ineffective tax optimisation in this respect are the so-called managerial contracts, which are fashionable among entrepreneurs and involve the provision of management services to the company, concluded as part of business activity, which are subject to tax calculated in accordance with the general rules, i.e. according to a scale, regardless of the chosen form of taxation. Before providing any services to a company in which you are a partner, it is best to consult a specialist. The tax authorities are very thorough in analysing this solution from the point of view of avoiding taxation of dividends, and often question the services provided as ostensible or overlapping with activities within the framework of the company’s management. The terms and conditions of the services themselves (i.e. primarily the partner’s remuneration) should be set at market level, as they constitute transactions between related parties.

5) Recurring non-monetary provisions of partners

The last mentioned method of payment from the company to the partners is based on Article 176 of the Code of Commercial Companies, which gained popularity shortly after the introduction of the so-called “Polski Ład” tax novelisation. According to the cited provision, the articles of association of the company may impose an obligation on the partner to provide additional recurring services to the company. These obligations should be indicated in the agreement, and their introduction requires the consent of the parnter himself. Examples of such services may be the provision of tools or materials to the company, the provision of equipment or the provision of certain services. The service must be recurring, i.e. it must be provided by the partner on a regular basis and, moreover, in return for payment (which is the whole point of this solution).

The partner’s income from recurring non-monetary provisions is taxed according to the tax scale. This remuneration is not subject to social insurance or – unlike remuneration for acting as a member of the management board – to health contributions. A tax-free amount of PLN 30,000 applies. The company may include this remuneration in its tax costs. It is worth noting that if renumaration won’t exceed 120 000 PLN, it will be taxed lower (12%) than dividend (19%).

The biggest advantage of this solution – not being subject to both health and social insurance contributions – is at the same time its biggest risk. Unfortunately, there are currently more and more frequent interpretations by the Social Insurance Institution indicating alleged abuses in the use of the institution of recurring non-monetary provisions and qualifying them as the provision of services subject to social contributions. The type of provision should be analysed before deciding to use it, and it is best to consult a professional.

Summary

The above outlines the most common ways in which partners attempt to optimise their income for tax and contributions. As can be seen, there is a whole range of methods by which to plan for the exit of profits. Each involves a certain degree of risk, but also a certain degree of benefit. The dividend, although being the ‘default’ form of distribution, requires the company to show a profit and is subject to a ‘fixed’ rate of taxation. However, the alternatives, which offer a greater tax advantage and do not require the company to show a profit or the formalities of approving financial statements, force the taxpayer to be more cautious so as not to be accused of attempting to circumvent tax rules or making unmarketable transactions between related parties. The most favourable result is often a combination of several of the above-mentioned methods, which, however, requires even greater diligence in the event of an audit by the tax authorities. In order to limit the risk and develop the best strategy in a given case, we recommend contacting the team of specialists at ATL LAW Anna Błaszak, who will analyse the company’s situation and propose the most effective solution.

As early as 1 January 2025, the minimum wage in Poland will increase to PLN 4666 gross. This is an increase of PLN 366 compared to the minimum wage in 2024. Thus, the minimum hourly rate will also increase, which from 1 January 2025 will amount to PLN 30.50 gross, i.e. it will increase by PLN 2.40. Importantly, in 2025, no additional changes to the minimum wage are expected during the year, which means that this amount will apply throughout the year.

How much will employees “take-home” pay be?

In 2025, assuming a full-time job, the gross minimum salary will be PLN 4666, but standard contributions must be deducted from this amount. If there are no changes, PLN 455.40 will have to be paid for pension contributions, PLN 69.99 for disability insurance and PLN 114.32 for sickness insurance. There is also a health contribution of PLN 362.37 and an advance payment for PIT, which will amount to PLN 153 without relief.

After deducting these compulsory costs, the employee’s account will receive PLN 3510.92. This is the minimum amount that every full-time employee will receive, regardless of industry or position.

Costs for the employer

Assuming a gross amount of PLN 4666, the cost to the employer will be PLN 5621.59. This is almost £450 more than in 2024!

Some industries may face the challenge of adjusting to higher labour costs. Businesses will need to find ways to optimise expenses, which may translate into a reduction in employment or the need to introduce automatisation.

Summary

An increase in the minimum wage always generates heated discussions about its impact on the labour market and the economy. On the one hand, it supports the lowest paid workers, on the other hand, it creates challenges for entrepreneurs, especially those in low-profitability industries. As always, the real impact of this change will depend on many factors.

If you have any questions or concerns regarding the minimum wage or other aspects of employment law, we encourage you to contact our law firm. You can count on comprehensive service and full commitment at every stage of your case.

The proposal for a four-day workweek is gaining attention in many countries around the world. The idea has both many supporters and staunch opponents. Nevertheless, more and more companies are beginning to see the potential benefits of a shorter workweek. Among other things, there is talk of increased employee productivity and better work-life balance – in line with the concept of work-life balance. As the topic grows in popularity, the question arises, is the four-day work week model likely to become the new standard in the labor market? This change undoubtedly requires careful thought, analysis, consultation and adaptation to the current specifics of the employment sector. Is the four-day workweek the future that awaits us all sooner or later?

Possible options

According to the latest media reports, the Ministry of Family, Labor and Social Policy has taken steps toward reducing working hours. Two options for reducing working hours are currently under consideration: introducing a four-day work week or limiting the weekly working time to 35 hours.

The first option, working four days a week, allows for an additional day off. However, it is unclear what challenges workers will face. Will they have to work four days of 10 hours a day, or will the standard eight-hour workdays simply be compressed into four days? It is also possible that other variants will be introduced, such as three days of 9-hour work and one day of 8-hour work. It is not yet fully known which variant will be adopted, but each solution involves adjustments on the part of both employees and employers. Such a model can significantly improve work-life balance, however, it will require employees to be more efficient in less time.

The second option involves reducing the workweek to 35 hours and spreading those hours over five days, with the result that an employee is expected to work 7 hours a day, rather than the current 8. This approach appears to be less radical than the introduction of a four-day workweek, also offers some benefits and may be more easily accepted by employers.

Both options are primarily aimed at increasing productivity and improving the quality of life of employees, but their introduction will not be an easy task. The choice between these models will depend on a number of factors, including careful analysis of the labor market, the specifics of the industries, and, perhaps most importantly, the expectations of employers and employees. Public consultations will be necessary to assess which model better meets the needs of the Polish labor market. On the one hand, it will be the employers who will have to take into account their organizational capabilities, as well as the potential costs associated with implementing the new system. On the other hand, employees will have to adapt to the new conditions, which will require them to change their habits and develop a new approach to their professional duties. The final decision should therefore be the result of a comprehensive process, taking into account both economic and social aspects, and the development of compromise and readiness of both parties to adapt.

Summary

We will probably still have to wait for changes in the area of shortening the work week – there is no indication that the Labor Code regulations will be amended in the near future, but the declaration of the Ministry of Family, Labor and Social Policy that the changes will take place during the current term of the ruling party allows us to hope that by 2027 we may witness groundbreaking changes in the labor market. Is the four-day workweek the future that awaits us all? All indications are that the answer may come soon.

Does the reason for termination without notice have to be precise? The latest ruling of the Supreme Court

Any decision to terminate a contract without notice can have serious consequences, both for the employer and the employee. However, the latest ruling of the Supreme Court (II PSK 103/23) is a step towards an interpretation favorable to employers.

Factual justification

The District Court for Warsaw-Praga-North dismissed R. G.’s claim, and the Warsaw-Praga Regional Court subsequently upheld the lower court’s judgment. Despite this, the employee’s attorney decided to file a cassation complaint with the Supreme Court, claiming that there had been a gross violation of labor laws. The whole situation was initiated by the decision of the employer, i.e. T. Ltd., which decided to terminate the employee’s contract without notice, justifying it by a serious breach of official duties. The employee disagreed with the decision and took the case to court, claiming compensation for wrongful termination.

What did the Supreme Court rule?

The Supreme Court ruled that the cassation complaint could not be accepted for review, even though there was a qualified violation of labor laws. However, as indicated in the justification, the prerequisite for accepting a cassation complaint for examination is not an obvious violation of a specific provision of substantive or procedural law, but a situation in which the violation resulted in a manifestly incorrect ruling. In the present case, according to the court, this was not the case.

The court pointed out that there is no doubt that in accordance with Article 30 § 4 of the Labor Code, in the event of termination of an employment contract without notice, the employer is obliged to indicate the reason justifying such a decision. Such a regulation is intended to enable the employee to defend himself against the employer’s substantively unjustified action. Thus, when it comes to the termination of an employment contract without notice, there should be no room for ambiguity: the employee has the right to know exactly why the employer is parting with him.

According to the Supreme Court, however, a lack of precision does not always mean a violation of the law, since an employer’s vague indication of the reason does not violate Article 30 § 4 of the Labor Code if, under the circumstances of the case, taking into account the information otherwise provided to the employee by the employer, it constitutes a sufficient specification of the reason.

Summary

A recent Supreme Court ruling from April 2024 confirms that clarity is key in termination cases. The employer should indicate to the employee in a precise and understandable way the reasons for termination without notice. If you have any questions or concerns in the field of labor law, we encourage you to contact our law firm. You can count on comprehensive service and full commitment at every stage of the case.

In August 2023, regulations on the posting of drivers in road transport came into force, which were supposed to bring the standards of the Polish transport market, in line with EU conditions through the implementation of Directive (EU) 2020/1057 of the European Parliament and the Council of July 15, 2020. While these regulations were supposed to strengthen control over third-country carriers, the reality is different. Carriers from outside the EU, with the exception of Switzerland, are required by the introduced regulations to inform the State Labor Inspectorate about the posting of drivers on Polish territory. A year after their introduction, the question remains: do the regulations really work, or is it just a facade that changes little?

Notification to the Labour Inspectorate (PIP) – a formality or a real control?

Third-country road carriers that post their drivers to Poland must meet a number of requirements for their operations to comply with Polish law. Among other things, the introduced regulations stipulate that the driver must be equipped with the appropriate documents confirming his posting. Each time before transporting a driver by road on Polish territory, the carrier must issue a confirmation of the driver’s posting. This document is drawn up on a form, which is specified in the Regulation of the Minister of Infrastructure of August 7, 2023. When performing transport on the territory of Poland, a driver posted from a third country must have in the vehicle:

1. a paper confirmation of the posting, according to the applicable form.

2. evidence of the road transport performed, such as waybills, relevant international transport permits or driving forms.

3. tachograph records in accordance with the AETR Agreement (European Agreement concerning the work of crews of vehicles engaged in international road transport).

The driver is obliged to show these documents at the request of the inspectors of the Road Transport Inspectorate during a roadside inspection.

Blind control – missing key tools

Doubts are raised primarily by Article 23 of the aforementioned law, which defines the scope of roadside control of the posting of drivers on Polish territory from a third country by Road Transport Inspectors. In theory, this control includes verification of the data contained in the documents presented by the driver, as mentioned above, but in practice the inspectors can only verify whether the driver has all the required documents, not whether they are correct. Thus, it can be concluded that, on the basis of the current legislation, the control of posted drivers on Polish territory from a third country cannot be performed correctly. It would be enough if the legislator gave the Road Transport Inspectorate inspectors access to the information provided to the State Labor Inspectorate, as is the case with the control of Member States by means of the Electronic System for Information Exchange in the Internal Market (IMI) in the “Transport” module – but for this a change in the legislation is needed.

Law change needed

The current legislation needs to be changed to allow the Road Transport Inspectors to carry out a real inspection. And although the Ministry of Infrastructure is said to be aware of the problem, changes in the regulations will not happen overnight. The introduction of a new IT system that would enable effective control involves costs and the need for a detailed analysis. And as we know, when costs and EU regulations are involved, there is no hope for quick changes.

Summary

The current regulations on the posting of drivers have serious loopholes that cast a shadow over the effectiveness of inspections. The regulations leave much to be desired. Without the ability of Road Transport Inspection Inspectors to verify notifications, it makes it impossible to reliably control third-country carriers. For the time being, the system needs decisive reforms so that it ceases to be a mere formality and begins to really work to protect the transport market.

On June 20, 2024, the Court of Justice of the European Union (CJEU) considered a preliminary ruling request from the District Court of The Hague (rechtbank Den Haag) in a case (C-540/22) on the compatibility of Dutch legislation with the freedom to provide services in the EU. The case concerned the need for an additional residence permit for Ukrainian citizens posted from one EU country to another when their stay in the country of posting exceeds 90 days.

Exceeding 90 days for Ukrainian citizens

A Slovak employer posted Ukrainian employees to work in the Netherlands, where their stay exceeded 90 days in a 180-day period. Dutch regulations require third-country nationals, including Ukrainians, to obtain a residence permit after such a period. This permit specifies the conditions, length of stay and cost of obtaining it. As a result, the court in The Hague asked the CJEU whether such requirements comply with EU rules on freedom to provide services.

The main issues in dispute:

Obligation to obtain a residence permit: the posting company challenged the requirement to obtain an additional permit after exceeding 90 days of residence in the Netherlands.

Permit duration: the Dutch permits were only valid for the duration of the Slovak permits, making them shorter than the duration of the delegation.

Application fees: the cost of obtaining permits was five times higher than that of certificates of legal residence for EU citizens, which was presented by a posting company as an excessive burden.

The request for a preliminary ruling sought to determine whether EU rules, including Articles 56 and 57 of the Treaty on the Functioning of the EU (TFEU), preclude national legislation that requires third-country national workers posted for more than 90 days in a 180-day period to hold individual residence permits, the validity of which depends on the residence permit of the posting country and cannot exceed two years, and the obtaining of which involves fees.

Limitations on the validity of permits

Dutch regulations stipulate that the duration of the residence permit of posted workers must not exceed the validity of their permits in the home country. The Secretary of State, in extending the duration of the posted workers, issued residence permits of the same length as the Slovak permits. The applicants argued that such restrictions are disproportionate in the context of the freedom to provide services, which is guaranteed by Article 56 TFEU. However, the CJEU held that such regulations can be justified if they are aimed at preventing illegal residence and entry, as well as protecting public order. This means that workers posted for more than 90 days cannot automatically enjoy the right to access the labor market in the country of posting.

Costs of obtaining permits

In terms of the amount of fees, the CJEU said the amounts were comparable to the cost of obtaining a regular work permit for third-country nationals. However, the posting company pointed out that these fees were five times higher than those for EU citizens, which impeded the free provision of services. The Court noted that such fees may be a restriction on the freedom to provide services, but at the same time EU law does not prohibit them as long as they are not disproportionate.

CJEU ruling

The Court ruled that Articles 56 and 57 TFEU do not preclude national legislation that requires workers posted for more than 90 days to obtain a residence permit, provided the conditions are not disproportionate. Permits may be limited to the validity of documents from the posting country, and may require fees comparable to those for work permits for third-country nationals.

Practical conclusions:

The CJEU’s judgment shows that the Dutch regulations regarding the obligation for Ukrainian nationals to obtain an additional residence permit are in line with the EU’s freedom to provide services. Nevertheless, each posting should be evaluated on a case-by-case basis, taking into account the applicability of exceptions to this obligation. If you need assistance with issues related to the posting of citizens of Ukraine or other countries, we invite you to review the law firm’s offer and contact us.

 Did you fail to file your tax return on time? Or did you hide the true extent of your business activities from the tax authorities? Have you forgotten to pay your taxes on time? Unfortunately, for various reasons, such as forgetfulness, lack of knowledge or simple error, tax obligations are often not fulfilled on time or in accordance with the applicable regulations. In such situations, there is a fear that the taxpayer will be penalised. Fortunately, there is no need to worry – it is possible to avoid punishment through the institution of active regret, i.e. the voluntary reporting of the commission of a crime or tax offence.

 

What is active regret?

Pursuant to Article 16 of the Fiscal Penal Code, a perpetrator who, after committing an offence, notifies a law enforcement agency of the offence and discloses the relevant circumstances of the offence, in particular the persons who participated in the commission of the offence, shall not be liable to punishment for the fiscal offence or the fiscal infringement. It is therefore possible to avoid penalties, but certain conditions must be met.

 

How can the institution be used?

The entrepreneur will not be entitled to use the institution of active regret if:

• the law enforcement authority already has clearly documented knowledge of the commission of a fiscal offence;
• the law enforcement authority has initiated official acts, in particular searches, checks or controls aimed at revealing a fiscal offence or a fiscal misdemeanour, unless these actions have not provided grounds for initiating proceedings for that offence;
• directed the execution of the disclosed criminal act;
• took advantage of another person’s dependence on him and instructed him to carry out the disclosed criminal act;
• organised a group or association with the aim of committing a fiscal offence
• induced another person to commit a tax offence or a tax offence.

 

Thus, an active repentance will only be effective if the entrepreneur admits to having committed a tax offence or a tax crime before the law enforcement agency independently documents the offence or crime or before the law enforcement agency initiates actions aimed at detecting the offence or crime. Therefore, despite the fact that there is no legal deadline for filing an active repentance, it is recommended that the entrepreneur take action as soon as possible.

In order to make use of this facility, a written notification must be submitted to the competent tax authority. In this letter, it is necessary to describe in detail the error committed, the circumstances in which it occurred and the corrective measures to be taken, i.e. the payment of the outstanding tax liabilities, together with the interest due. It is worth remembering that an active complaint can be submitted not only in writing, but also orally in the minutes of the tax office. An active regret can also be submitted electronically, e.g. via e-Fiscal Office.

It is important that the active regret is submitted by the person who has not fulfilled the obligation. For example, if the entrepreneur uses the services of an accountancy firm and the fault lies with the accountancy firm, the active regret must be submitted by the accountancy firm.

 

Conclusion

Active regret is an institution that can help taxpayers and protect them from serious consequences. It is essential that the active regret meets all the formal requirements. Although filing an active regret does not exempt you from the obligation to pay overdue taxes and interest, it does allow you to avoid additional penalties. If you have any doubts, you can also contact us remotely: https://atl-law.pl/prawo-podatkowe/

I already know that from 1 January 2025 entrepreneurs will pay higher social insurance contributions. At the end of August this year, the government adopted assumptions for the draft state budget for 2025, in which the projected average salary is PLN 8673. This amount will be used as the basis for calculating ZUS contributions for those engaged in business activity. How much will entrepreneurs have to pay soon?

 

ZUS contributions in 2025 – basis of calculation

 The amount of contributions to be paid by an entrepreneur is calculated on the basis of 60% of the average salary. In 2025, the contribution base will be PLN 5203.80 (60% of PLN 8673). Contributions are calculated on this basis for

• Pension insurance;
• Disability insurance;
• Sickness insurance (voluntary);
• Accident insurance;
• Labour Fund.

In total, social security contributions will amount to approximately PLN 1,773.96, not including the health insurance contribution, which is calculated separately depending on the chosen form of taxation. This is almost 2,000 PLN more than the cost of an entrepreneur in 2024.

The increase in social security contributions in 2025 is only a consequence of the increase in the average wage. For many entrepreneurs, especially those running a sole proprietorship, higher contributions can have a significant impact on the cost of running a business.

 

Small ZUS Plus – relief for the smallest entrepreneurs

It is worth recalling that entrepreneurs who have been in business for at least 60 calendar days in the previous calendar year and whose income in the year preceding the submission of the application did not exceed PLN 120,000.00 can take advantage of the Small ZUS Plus programme and thus pay lower social insurance contributions.

 

Summary

The year 2025 will bring higher social security contributions for entrepreneurs as a result of an increase in the projected average wage to PLN 8673. For many sole traders, this means that they will have to prepare for a higher financial burden. It is important that entrepreneurs are aware of these changes and adjust their budgets for next year accordingly to avoid unpleasant surprises.

If you have any questions or concerns, we encourage you to contact our law firm. You can count on our full service and commitment at every stage of your case.

Every entrepreneur sooner or later asks himself what expenses he can count as deductible. This topic is quite controversial and inexperienced entrepreneurs often do not know how to deal with this problem and how not to make any mistakes. When an entrepreneur reaches for his or her wallet to pay for coffee and biscuits for employees or for a company event, the question naturally arises: can these expenses be charged as a business expense? The answer, as is often the case in tax law, is “it depends.” Keep in mind that not every purchase will always be treated by the tax authorities as a business-justified expense. So is it worth the risk and where does the line between cost and whim lie?

 

What are deductible costs?

Referring to the regulations, we may determine that, in accordance with Article 22 of the PIT Act, tax-deductible costs are expenses incurred in order to achieve revenue or to preserve or secure a source of revenue. The legislator is also tempted to indicate expenses which do not constitute tax deductible costs – this group includes, among others, the following:

• Purchase of land – the cost is not the purchase of land (only when selling land);
• The value of one’s own labour – the cost is not the work done by the owner or his family;
• Depreciation of an expensive car – the cost is not the depreciation of the value of the car over PLN150,000 (or PLN225,000 for an electric car);
• Donations – an expense is not donations made, except for food for charity;
• Fines and penalties – the cost is not the fines or penalties imposed.

Sounds simple in theory – after all, the legislature has made it clear what is a deductible expense and what is not – right? Well, somethimes it’s not that easy. Recognising an expense as a deductible expense requires proper justification and, in the case of groceries, the matter is not so obvious.

 

Purchase of groceries as a business expense – when is it possible?

The purchase of groceries can be recognised as a deductible expense, but only in certain situations. The key point here is how these products are used in the business.

If a business provides food products such as water, tea, coffee, etc. for its employees during working hours, this may be considered a deductible expense.  This is due, among other things, to health and safety regulations, which indicate that it is the employer’s duty to provide all employees with drinkable water or other beverages during working hours, and since this is an obligation, the expenses related to this should be tax deductible.

Unfortunately – expenditure on food products may be deemed to be representation, i.e. an expense that does not constitute a tax deductible cost. If the purchased products are aimed at improving the company’s image (e.g. a sumptuous treat at a meeting), then, as practice indicates, the tax office may question their inclusion as costs.

The indicated position has also been highlighted on several occasions by the Director of National Tax Information. For example, in a letter from this year he indicated that: “The recognition of a given expense as a tax deductible cost is possible only if it is evident beyond any doubt from properly and reliably documented events that it is a purposeful and reasonably justified expense…Among the expenses not recognised as tax deductible costs, the legislator has listed….representation costs, in particular those incurred for catering services, the purchase of food and beverages, including alcoholic beverages…The notion of representation does not include, however, those activities which are undertaken in relation to the employees’ own employees…the provision of foodstuffs reduces interruptions for the preparation of meals, which allows the employees to focus on the performance of their tasks. Eating together fosters integration, the exchange of ideas and the creation of new solutions. It improves relationships within the company. The provision of snacks makes employees feel valued and that they are an important part of the company. This strengthens their attachment to the company. The benefits aim to raise working standards and improve the atmosphere in the office. As a result, their productivity and efficiency increase. Employees are more motivated and work faster and better. Providing employees with groceries is now a common practice in the labour market, which encourages them to take up and continue working for an employer…The applicant is entitled to include as a deductible expense the expenses for the purchase of groceries indicated in the application (various snacks and non-alcoholic beverages, e.g. coffee, tea, juices, nuts, sticks, biscuits, milk, water, sugar), which are made available at the company’s premises to employees in the course of their tasks. These expenses do not constitute representation expenses”.

 

Grocery shopping and catering operations

The situation is different if you are in the business of catering, catering or trading in food products. In this case, the purchase of food products is directly related to your business and can be included as a tax-deductible expense without major problems. However, it is important to document exactly what products were purchased and how they were used.

 

Summary

The purchase of groceries can be included as a deductible expense, but only in certain situations and with proper justification. It is worth bearing in mind the relevant documentation and being prepared for possible questions from the tax authorities. As always, the devil is in the detail and each situation requires individual analysis.