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Remuneration for an Appointed Board Member—A Tax Advantage for a Limited Liability Company?
4/7/2024
The distribution of profits from a limited liability company is a perennial dilemma for every board member. Double taxation on dividend payments (corporate income tax at the company level and personal income tax) effectively discourages the traditional distribution of profits. When looking for alternatives, we very often turn to an absolute classic: a board member’s compensation as specified in the appointment agreement. Will this method still be worthwhile in 2026? What documents are required, and what should you watch out for during annual tax filing? We’ll break this mechanism down into its basic components.
FORMAL BASIS – EMPLOYMENT CONTRACT OR RESOLUTION?
The key to the reliability of this method is establishing the relationship between the company and the board member correctly. In this case, we do not enter into an employment contract (Uop) or a contract for specific work.
Merely being appointed to the board of directors does not in itself confer the right to compensation. In order for a board member to receive compensation, the shareholders must adopt a separate resolution specifying the amount of compensation or the method for determining it (in accordance with Article 201 of the Commercial Companies Code). This type of resolution must be recorded in the minutes.
What should the resolution include?
The amount of compensation (specified as a fixed amount or in a manner that allows for its precise calculation) and payment dates, as well as a statement that the compensation relates to the performance of duties as a member of the management board in connection with the management of the company’s affairs and its representation.
Who signs the documents?
The resolution is adopted by the shareholders. The company does not need to sign any additional bilateral agreement with a member of the board of directors—the resolution of the extraordinary shareholders’ meeting alone constitutes sufficient legal grounds for disbursing funds and recording the expenses.
TAXES AND CONTRIBUTIONS – THE MATH BEHIND A “PUBLIC APPOINTMENT”
Remuneration from a public appointment is classified as income from activities performed personally (Article 13(7) of the PIT Act). This entails specific reporting rules:
1. Health insurance contribution: Remuneration from a public appointment is subject to a mandatory health insurance contribution of 9%. Important: This contribution is calculated based on the gross amount of remuneration and is not deductible from tax or income.
2. Social Security Contributions: Income from an appointment is not subject to social security contributions (pension, disability, sickness, and workers’ compensation), provided that the appointment is not combined with an employment contract or a contract for services.
3. Tax-Deductible Expenses (KUP): A board member appointed to the position is entitled to standard, lump-sum tax-deductible expenses in the amount of 250 PLN per month or 300 PLN (if they reside outside the town where the company is located).
WHO IS RESPONSIBLE FOR PAYING TAXES AND CONTRIBUTIONS?
In this arrangement, the limited liability company (Spółka z o.o.) is the payer. It bears all administrative responsibilities.
1. Every month: The company calculates, withholds from the management board member’s salary, and remits to the tax office an advance payment for income tax (PIT) and a health insurance contribution to ZUS.
2. By the end of January of the following year: The company submits a PIT-4R return (a summary return on tax prepayments) to the tax office.
3. By the end of February of the following year: The company is required to issue a PIT-11 statement to the board member, which shows their annual income, withheld advance payments, and health insurance contributions. The board member should include this PIT-11 statement—issued, for example, for 2026—in their annual PIT-37 tax return by the end of April 2027.
When Is It Worth It? The Magic Threshold of the Tax Threshold and the Income Aggregation Trap
Remuneration for serving on the board of directors is a tax-deductible expense for a limited liability company (sp. z o.o.). This means that every zloty paid reduces the company’s income subject to corporate income tax (CIT) (9% or 19%).
However, the effectiveness of this method depends on the board member’s overall tax situation. Income from a board appointment is not taxed separately—it is combined in the annual tax return with all of the taxpayer’s other income subject to the tax scale (PIT-37/PIT-36). This primarily refers to earnings from:
- employment contracts (Uop),
- commission contracts (UZ),
- specific-task contracts,
- self-employment (if the individual has chosen the general rules as the form of taxation).
This is of crucial importance if a board member already has stable sources of income outside the company. All earnings are pooled into a single “basket” and taxed at specified rates.
1. Up to 30,000 PLN per year: Tax-free amount. The taxpayer pays only a 9% health insurance contribution.
2. Up to 120,000 PLN per year (Threshold I): The tax rate is 12% plus a 9% health insurance contribution. The total tax burden on the taxpayer is 21%. Considering the corporate income tax (CIT) benefit for the company, the profitability of this solution remains high.
3. Above 120,000 PLN per year (Threshold II): The amount exceeding this threshold is subject to a 32% PIT rate, which, combined with the 9% health insurance contribution, results in a total tax and contribution burden of 41%.
If a board member already earns, for example, 100,000 PLN gross in a full-time position at another company, granting them a board member’s compensation exceeding 20,000 PLN per year will immediately “push” the excess into the 32% tax bracket.
For this reason, it is worth analyzing all of the board member’s other income before determining the amount of their compensation. Often, a slight reduction in compensation can prevent them from entering the second tax bracket.
Summary
In 2026, remuneration based on appointment remains one of the most flexible and secure ways to withdraw funds from a company. The absence of shortened notice periods, full control by board members over salary amounts through resolutions, and the lack of social security contributions make this a virtually unrivaled solution for total annual income up to 120,000 PLN.
However, this does not mean that remuneration based on appointment will be the best solution for every company. Before implementing it, it is worth analyzing, among other things, the amount of income earned, the board member’s other sources of income, and the planned method of profit distribution. A well-designed compensation structure can yield real tax savings, whereas a poorly planned one may cause the individual to enter the second tax bracket and significantly reduce the benefits.