Management Board in the Crosshairs of the Tax Office: Liability for the Company’s Tax Obligations, Including Numerous Cases Involving Foreigners in Poland
Principles of Liability
Liability Overview
The liability of management board members of capital companies for the company’s tax obligations is analogous to their liability under corporate law, as specified in Article 299 of the Polish Commercial Companies Code (KSH). However, it also applies to management board members of joint-stock companies, representing a broader scope compared to liability for civil-law obligations. According to Article 116 of the Tax Ordinance (OrdPU), management board members are liable for the company’s tax arrears if enforcement against the company proves ineffective.
Scope of Personal Liability
The scope of liability has been extended to include proxies and partners of companies in organization if the company lacks a management board. Since July 1, 2021, liability also applies to management board members of a simple joint-stock company and its equivalent in organization. Unlike other third parties, the liability of management board members does not require them to derive any financial benefits from performing their function.
Subsidiarity of Liability
Nature of Subsidiary Liability
Management board members’ liability for tax obligations is subsidiary, meaning it arises only after the ineffectiveness of enforcement against the company’s assets has been established. Only then can the tax authority issue a decision holding a board member liable. Without a formal determination of enforcement ineffectiveness, the transfer of liability to management board members is not possible.
Judicial Interpretation
Judicial rulings emphasize that determining enforcement ineffectiveness requires exhausting all available enforcement measures. This determination can be documented through, for instance, an order discontinuing enforcement. It is also crucial that liability cannot be imposed on a board member if there is no unequivocal evidence confirming enforcement ineffectiveness.
Temporal Scope of Liability
Liability Period
Board members are liable for tax arrears that arose during their tenure. The key date is the due date of the tax obligation. If a board member ceased their function before the obligation arose, they are not liable for such arrears.
Liability in Companies in Organization
In companies in organization, proxies or partners may be liable for tax arrears if no management board has been appointed. Since July 1, 2021, this also includes management board members and the board of directors of simple joint-stock companies.
Subject-Matter Scope of Liabilit
Tax Obligations Covered
The liability of management board members encompasses all tax obligations mentioned in Article 107 of the Tax Ordinance, including social security contributions. However, a significant limitation is that board members are only liable for obligations whose payment deadlines fell during their tenure.
Exclusions
Judicial rulings indicate that board members are not liable for additional tax obligations unpaid by the company within the payment deadline if these do not qualify as tax arrears under the Tax Ordinance.
Conditions for Exemption from Liability
A management board member can avoid liability if they:
- Demonstrate that they:
- Filed a petition for bankruptcy or initiated restructuring proceedings in a timely manner, or
- Were not at fault for failing to file such a petition.
- Identify assets
- Of the company that could significantly cover the tax arrears.
Timely Filing of Bankruptcy Petition
The appropriate time to file a bankruptcy petition is when the company’s insolvency becomes permanent, and filing could protect creditors’ interests. It is crucial that the petition meets formal requirements; rejected or returned petitions do not absolve board members from liability.
Absence of Fault
The absence of fault may be proven in cases such as prolonged illness, foreign delegation, or other circumstances preventing the board member from managing the company. However, the division of responsibilities among board members does not exclude liability; every board member should oversee the company’s basic financial matters.
Burden of Proof
The burden of proving the conditions for exemption rests with the management board member. They must demonstrate circumstances that release them from liability, such as lack of fault or the existence of company assets sufficient to cover tax arrears. However, tax authorities are obliged to collect evidence necessary for a reliable assessment of the board member’s liability.
Summary
The liability of management board members for a company’s tax obligations is an essential tool for protecting the interests of the state treasury. However, the regulations provide numerous mechanisms for exemption from liability, provided the board member can prove they acted with due diligence or that creditors can be satisfied from the company’s assets. The introduction of additional regulations concerning simple joint-stock companies expands the scope of Article 116 of the Tax Ordinance, highlighting the growing responsibility of individuals managing capital companies.
