There is a chance of no healthcare contribution for proxies and foreign board members
From the beginning of 2022, persons appointed to perform functions by virtue of an act of appointment who receive remuneration in this respect, such as members of the management board, have been covered by the obligation to pay healthcare contribution. However, the matter is not clear in the case of foreigners, as well as proxies. The solution may be a request for an individual ruling to the NFZ (National Health Fund).
With the entry into force of the Polish Deal, persons appointed to perform functions by virtue of an act of appointment, who receive remuneration therefor, have been subject to the obligation to pay healthcare contribution. In very simple terms, this means an increase in the burden on members of management boards performing their functions based on an appointment by a mandatory healthcare contribution amounting to 9% of the basis for calculating the contribution, which will be the amount of remuneration received. The intention of the legislator was to strike at management boards of companies, but at the same time the changes will also affect members of other bodies – e.g. supervisory boards. However, a question arises: what about proxies? The answer is not clear.
In the justification of the Polish Deal, we can read that persons appointed to perform functions on the basis of an act of appointment, and who receive remuneration for this, are inter alia proxies.
There is however a problem with the interpretation of the provisions, because in accordance with the Civil Code, proxy is a power of attorney granted by an entrepreneur subject to the obligation of entry in the Central Register of Business Activity or in the Register of Entrepreneurs of the National Court Register, which includes authorization to perform judicial and extrajudicial activities connected with running an enterprise. The question arises as to whether a commercial proxy can be referred to as a ‘function’ and its granting as an ‘act of appointment’? In practice, proxies often have a very similar status to members of management boards in companies, but from legal point of view, a proxy is more related to an ordinary power of attorney than to any “function”, even though the provisions of the Companies Code use the concept of the “appointment” of a proxy (interchangeably with the “establishment of a proxy”). If it was considered that, contrary to the reasoning of the Code, a proxy does not meet the above-mentioned criteria, consequently, a proxy would not be subject to the obligation to pay healthcare contribution.
The recommended solution to the described problem is to apply for an individual ruling – however, not to the Director of National Fiscal Information, but to the NFZ. It is worth applying for the interpretation for three reasons. Firstly, because it seems that at this moment there is a chance to obtain a positive decision. Secondly, because any explanations published on websites have no protective power and there is a risk involved in relying on them. Thirdly, because the cost of such an interpretation is only PLN 40.
What does ZUS (Polish Social Security Office) say about it?
In connection with the entry into force of the Polish Deal, the website of the Social Security Office includes a tab for changes in the healthcare contribution from 2022 – frequently asked questions. We can find there a question with the following content: Do appointees include not only board members but also other persons, e.g. committee members, etc.? ZUS answered as follows: Yes, not only board members. Also other persons, provided that the income obtained by them is qualified to the source indicated in Article 13 point 7 of the PIT Act.
Mentioned in the reply Article 13 point 7 of the PIT Act stipulates that revenues received by persons (regardless of the method of their appointment), who are members of management boards, supervisory boards, commissions or other bodies constituting legal persons, shall be considered as revenues obtained from activities performed in person.
The tax authorities have repeatedly expressed their opinions on the qualification of income obtained from performing the function of a proxy. According to the tax authorities, this type of revenue should be qualified as revenue from other sources (e.g. individual tax ruling of 9 October 2019, ref. 0113-KDIPT2 2.4011.437.2019.2.MK). Therefore, the answer provided by ZUS shows that a proxy should not be subject to the obligation to pay healthcare contribution.
ZUS also referred to persons receiving remuneration for an appointment who are Polish tax non-residents. According to ZUS, such a person is not subject to insurance. Unfortunately, ZUS did not indicate the legal basis for its answers.
What should we do if we pay remuneration to a proxy or a foreign member of the management board?
The recommended solution to the described problem is to apply for an individual ruling – however, not to the Director of National Fiscal Information, but to the NFZ. The Act on health care services financed from public funds provides in its Article 109 that the President of the Fund examines individual cases in the scope of health insurance. On the other hand, the Entrepreneurs’ Law authorisies companies to apply for interpretations regarding public tributes, other than taxes. Such an individual ruling has a similar protective power as in the case of individual ruling issued by the tax authorities. The procedure for issuing such ruling is also similar. The ruling should be requested by the payer, i.e. the company that pays dues to the member of the management board/proxy.
There are at least three reasons for which it is worth to apply for the interpretation. Firstly, because it seems that at this moment there is a chance to obtain a positive decision. Secondly, because any explanations published on websites have no protective power and relying on them involves risk. Thirdly, because the cost of such an interpretation is only PLN 40. It seems that this is a reasonable price to pay for the possibility of not charging high contribution on often very high salaries paid for persons holding functions in the company.