4 September 2020

Remuneration and taxes of the Management Board Members of an LLC in Poland


The Management Board Member  may be either the shareholders of the company or third parties. They must be individuals. Unlike in other jurisdictions, under Polish law it is not admissible that the position of the Management Board Member is held by a legal person.

No remuneration

Sometimes the founders on an LLC who at the same time are the Management Board Members do not expect any remuneration, at least at the very beginning, when the company is still in the development phase. It is perfectly legal.  They may exercise their function in the Board without any kind of remuneration. 

Remuneration payable on the basis of a resolution of the General Meeting of Shareholders

However, usually at some point the Management Board Members wish to be remunerated for their efforts. In such a situation they may perceive remuneration granted to them by virtue of a resolution of the General Meeting of Shareholders. Such a remuneration is subject to progressive Personal Income Tax (PIT) but not to the social security contributions (ZUS). See below for the PIT rates. 

Service contract

Often, the Management Board Members perform their duties on the basis of the civil contract (service contract) for the managing the company. Such a remuneration is subject to progressive Personal Income Tax (PIT) and to the social security contributions (ZUS). See below for the PIT rates.

Economically, this solution is close to the employment contract. The company is not, however, bound by the limitations of the employment law. This solution is therefore much more flexible for the company and less protective for the manager.  

B2B contract

It is admissible that the Management Board Members conclude B2B contracts with the company. On the basis of such a contract they may perform different types of services. As long as these services do not entail the management of the company – the taxation of the remuneration may be preferential (19%). Also the social security contributions (ZUS) are significantly lower than in case of employment contract or service contract.

I need to underline, however, that B2B contracts are subject to careful examination by the tax authorities. In case of any tax control the company will have to prove that the services have actually been performed. Sometimes, the legislation on transfer pricing may come into play. Therefore concluding a B2B contract for intangible services such as “consulting”, “marketing”, “advisory” represents a risk both for the company and for the manager. Any B2B solution  has to be studied in detail and tailor made for the individual company and manager.

Employment contract

In some cases it is important for the Management Board Members to be employed in the company on the basis of an employment contract. This is a solution which grants less flexibility for the company and more protection for the manager. The employment of the Management Board Members on the basis of the employment contract is costly. The salary perceived by the manager is subject to progressive Personal Income Tax (PIT) and to the social security contributions (ZUS). See below for the PIT rates.

When an employment contract is not admissible?

Employment contract cannot be concluded in cases where there is only one shareholder in the LLC and at the same time this person holds the position in the Management Board. 


John Brown sets up a limited liability company “Orange Horse” seated in the Poland. He owns 100% of shares in this company. At the same time he is the only Management Board Member of “Orange Horse” LLC. 

John Brown cannot conclude the employment contract with “Orange Horse” LLC.

The reason for this restriction is the lack of subordination link which is an inherent element of any employment contract. Therefore, obviously,  since nobody can be his/her own boss – the employment contract in a “sole-shareholder” LLC is legally impossible.

Tax rates

The Polish PIT is progressive and in the simplest case it is due according to the following rates: 

  1. 17% of the net income – up to the equivalent of ~20.000 EUR,
  2. 32% of the income exceeding the equivalent of ~20.000 EUR.

In some cases, due to an individual situation of a tax payer, there are deviations in how the actual tax should be calculated. It is also necessary to underline that if a Management Board Member is a tax resident of another State, then in order to identify all tax burden resting on him/her it is necessary to analyse the respective bilateral double tax treaty concluded between Poland and the respective State. 

Social security rates

The precise amount of the social security contributions depends on the individual salary. However, it is usually around 30% of the gross salary.

4 September 2020 | Agata Adamczyk LL.M

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