The Polish Supreme Court has issued a resolution dated on 17 of June 2015 (sign. III UZP 2/15) in connection with recognition a social security cost incurred by entrepreneur who is the member of the Board of Directors and performs his business activities under the management contract. According to the mentioned resolution, member of the Board of Directors who performs his management activities under management agreement concluded with the Company cannot be subject to social insurance in respect of business activities, but under a contract for services which determines the scope of responsibilities and duties.
In the consequences, a such person who performs his business activities in mentioned manner is obligated to change the method of calculating social security cost. So far, the social security cost was calculated based on the amount – not less than 60% of the average salary announced by the Central Statistical Office. After the Court’s resolution the base of social security cost should be calculated on the grounds of the amount of actual income from concluded agreements of management.
The resolution issued by the Supreme Court has the power as a principle of law, it means that the presented interpretation will be binding from the date of the resolution (i.e. from 17 of June 2015). Undoubtedly, in the respect of cases in the similar facts the other panel of judges will be obligated to take a decision in the same meaning, by the time the changing the mentioned thesis by different panel of judges of the Supreme Court. Additionally, this point of view changes the taxpayer’s (Company) position, because as the tax remmiter will be obligated to deduct a Social Security Insurances for the period in which management services were provided.
It is worth saying that the Social Insurance Institution could changes his opinion to the rules of treating the social insurance cost in the respect to the previous years (including interest). Moreover, this point of view may be applied by Social Insurance Institutions to the persons who performs his business activities in the same manner (under the management agreement) as the member of the Board of Directors.
Please note, that the justification of the resolution is not published yet but it seems it could not change the general understanding of the new approach. It may be questionable also whether the approach will be applied also for the previous months/years. We expect that Social Insurance Institution will announce its decision in the next months.