Remuneration for participation in board meetings as a tax-deductible expense.

According to the judgment of the Supreme Administrative Court of 27 August 2020 (case ref. II FSK 3010/19), a company may deduct from its revenue the remuneration paid to a board member for monthly board meetings as well as remuneration under an employment contract, provided that the scope of the duties performed does not overlap. The Supreme Administrative Court held that remuneration paid to a board member for participation in meetings may be incurred for the purpose of generating revenue or maintaining or securing the source of that revenue.

In the case in question, the company included in its tax costs expenses related to remuneration paid to the CEO and Deputy CEO under two separate titles. According to the resolution of the extraordinary shareholders’ meeting, the amount of remuneration for each board meeting was determined at the meeting itself. The tax office head, and subsequently the director of the tax chamber in Gdańsk, challenged the tax settlement. The tax authorities held that the scope of the board members’ duties under their employment contracts did not exceed ordinary company management. The company filed a complaint with the Provincial Administrative Court in Gdańsk, which approved its position, finding that the analysis of the employment contracts and board meeting minutes indicated a different scope of duties. The case was then brought before the Supreme Administrative Court, which upheld the interpretation of the Provincial Administrative Court.

However, the Court emphasised that, as a general rule, expenses cannot be deducted twice. Therefore, it is essential that remuneration for participation in board meetings is not already included as part of the employment remuneration costs. The condition for including remuneration for participation in board meetings as a tax-deductible expense is, therefore, the non-overlap of duties related to participation with those performed under the employment contract.