A guide for international groups delegating employees to management positions in Polish subsidiaries

A common structure, an uncommon tax trap

International corporate groups operating in Poland frequently second their own employees to serve on the management boards of Polish subsidiaries. The arrangement makes business sense: the parent company retains oversight, the seconded manager maintains employment continuity abroad, and the Polish entity benefits from experienced leadership aligned with the group’s strategy.

From a tax perspective, however, this structure is far from straightforward. The interplay between Polish domestic tax law, applicable double tax treaties, and the internal remuneration flow within the group creates a set of obligations that Polish subsidiaries cannot afford to overlook. A recent individual tax ruling issued by the Director of the National Tax Information Office (KIS) on 22 April 2025 (ref. 0115-KDIT1.4011.176.2025.1.MR) provides a useful framework for understanding these obligations.

Substance over form – how Poland classifies board remuneration

One might expect that a person employed under a foreign employment contract would be taxed in Poland under the rules applicable to employment income. Polish tax law takes a different approach. Under Article 13(7) of the Personal Income Tax Act (PIT Act), income received by members of the management boards of legal entities is classified as income from personally performed activities (działalność wykonywana osobiście), irrespective of the formal legal basis of appointment. However, in practice, where remuneration is split between board functions and other roles (e.g. employment or management services), different tax classifications may apply to each component.

This means that even where the secondment is formalised through an addendum to a foreign employment contract, the nature of the functions actually performed – not the label attached to the contractual relationship – determines the tax classification. If the individual serves on the management board of a Polish company and exercises management functions, Article 13(7) applies to the board-related portion of their remuneration.

Poland’s right to tax – limited tax liability of non-residents

A non-resident – that is, an individual who does not have their place of residence in Poland – is subject to Polish tax only on income sourced in Poland (Article 3(2a) of the PIT Act). The critical question is therefore whether remuneration for serving on the board of a Polish company constitutes Polish-source income, even if it is paid by a foreign entity.

The tax authorities have consistently confirmed that it does. In practice, primary importance is attached to the registered seat of the company whose board the individual serves on. The place where management functions are exercised may be relevant in specific cases, but is generally not decisive for directors’ fees under double tax treaties. The technical payment channel – including scenarios where the parent company pays the manager and subsequently recharges the cost to the Polish subsidiary – is irrelevant to this classification.

Double tax treaties – the directors’ fees article

Where a double tax treaty is in force between Poland and the board member’s country of residence, its provisions must be applied in conjunction with Polish domestic law (Article 4a of the PIT Act). Most treaties concluded by Poland include a “directors’ fees” clause (typically Article 16), which permits the country where the company is established to tax such remuneration, without excluding taxation in the country of residence (subject to double taxation relief mechanisms).

In the context of the April 2025 ruling, the relevant treaty was the Poland-Germany double tax convention of 14 May 2003. Article 16(1) of this treaty grants Poland the right to tax the remuneration of a German resident serving as a board member of a Polish company. This provision operates as a specific provision (lex specialis) in relation to the general employment income rules under Article 15 of the treaty, meaning that the directors’ fees article takes precedence where management board functions are at issue.

The OECD Model Tax Convention Commentary, while not legally binding, serves as an important interpretive tool in this area and is routinely referenced by Polish tax authorities to distinguish management board remuneration from ordinary employment income.

The method for eliminating double taxation – whether by exemption or by tax credit – depends on the relevant treaty and should be verified in each case.

Tax rate – flat 20% on gross income

Once Poland’s taxing right is established, the default rate is set out in Article 29(1)(1) of the PIT Act: a flat-rate withholding tax of 20% on gross income, unless a double tax treaty or specific circumstances justify a different treatment. Unlike the general rules applicable to Polish tax residents, this rate is applied to the gross amount of remuneration, with no deduction for income-earning costs.

The tax is generally final in nature in Poland, although the taxpayer may opt for taxation under general rules in certain cases, and may still have reporting obligations in their country of residence.

Who acts as the withholding agent – the parent or the subsidiary?

In group structures where remuneration is technically paid by the foreign parent and recharged to the Polish subsidiary, it is not immediately obvious which entity bears the withholding obligation. An earlier ruling by the Director of KIS, dated 19 December 2022 (ref. 0112-KDIL2-1.4011.754.2022.1.KF), addressed this question directly.

In the circumstances described in the ruling, the tax authority concluded that the Polish subsidiary – as the entity that ultimately bears the economic cost of the remuneration – acts as the withholding agent within the meaning of Article 41(4) of the PIT Act. The parent company may be treated as an intermediary in such structures, particularly where the costs are fully recharged to the Polish subsidiary. However, this assessment depends on the specific structure and allocation of economic burden within the group, and should not be treated as a universal rule.

Consequences of non-compliance

Failure to fulfil withholding obligations exposes the Polish subsidiary to liability under the Tax Ordinance Act. A withholding agent that fails to collect tax, or collects it in an incorrect amount, is liable with its entire assets for the shortfall, together with late payment interest. In parallel, the board member as taxpayer may also face liability, since the absence of withholding does not extinguish the underlying tax obligation.

For international groups, the practical takeaway is clear: the fact that the seconded individual formally remains employed abroad does not relieve the Polish subsidiary of its fiscal responsibilities. A systematic review of secondment arrangements is essential to identify cases where delegated employees are, in substance, performing management board functions.

Practical checklist for Polish subsidiaries

Based on the rulings discussed above and the applicable provisions, Polish subsidiaries should take the following steps when a foreign employee is seconded to a management board position. First, confirm whether the individual actually performs management functions within the meaning of Polish company law – registration in the National Court Register (KRS) is a strong indicator, although the actual scope of functions performed remains decisive. Second, verify whether a double tax treaty is in force between Poland and the board member’s country of tax residence, and identify the applicable directors’ fees provision. Third, determine whether the Polish entity bears the economic cost of the remuneration – if so, it is likely the entity responsible for withholding the 20% tax. Fourth, obtain a valid certificate of tax residence from the board member, which is a prerequisite for applying treaty provisions. Fifth, consider applying for an individual tax ruling, particularly where the remuneration structure is non-standard.

Separate social security considerations should also be reviewed, as different rules may apply depending on whether the remuneration is based on a formal appointment to the management board or on contractual arrangements such as an employment or service agreement.

Key takeaways

The taxation of foreign board members’ remuneration in Poland is an area where the employment structure and payment mechanics can easily distract from what truly matters: the nature of the functions performed and the seat of the company. The April 2025 ruling confirms that Polish tax authorities apply a substance-over-form approach, looking through contractual arrangements to the economic reality of the situation. Polish subsidiaries that engage foreign nationals in management roles should proactively ensure compliance with their withholding obligations to avoid exposure to tax liability and penalties.

At ATL Law, we regularly advise Polish subsidiaries of international groups on withholding obligations arising from the secondment of foreign employees to management board positions. We help determine whether remuneration is taxable in Poland, identify the applicable tax rate, and establish which entity within the group is responsible for tax collection. If your company uses secondment arrangements or plans to appoint a foreign resident to its management board, we invite you to get in touch.