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SWEDISH MANAGING DIRECTOR NOT TAXED IN POLAND

2015-09-29

A Polish tax resident being a Swedish managing director (verkställande direktör) will not pay income tax in Poland. Such standpoint was presented by the Head of the Tax Chamber in Warsaw in the tax ruling dated 24th February 2015 (Ref No IPPB4/415-965/14-5/JK3).

In the application for the tax ruling, the taxpayer stated that the taxpayer will be a Polish tax resident and will receive the salary from the Swedish company in which the taxpayer will be employed as the managing director (verkställande director). The issue that the tax authority dealt with was a proper classification of the salary of the Swedish managing director under the regulations of the treaty on avoidance of the double taxation concluded between Poland and Sweden (“Treaty”). Such exercise was further complicated due to the different classification of the position held by the taxpayer in the Swedish company under the laws of Poland and Sweden. Different classification of the salary received by the taxpayer by the Polish and Swedish tax authorities could lead to the double taxation (or double non-taxation) that could not be avoided by the application of the regulations of the Treaty.

The Head of the Tax Chamber finally decided that, even despite the fact that verkställande director is not the member of the board of directors of the Swedish company, still the salary of verkställande director should be taxed in the country where the registered office of the company is located, i.e. pursuant to the rules set forth for the members of the board of directors in Article 16 of the Treaty. Consequently, the Head of the Tax Chamber confirmed that the salary of the Polish tax resident performing the function of verkställande direktör of the Swedish company based on the employment agreement should be taxed only in Sweden and exempt from the income tax in Poland.

The ruling issued by the Head of the Tax Chamber in Warsaw gives certain clarity on the approach presented by the Polish tax authorities with respect to the taxpayers employed at the position of the managing director not only in Sweden but also in other countries having similar structure of corporate bodies (this includes among others remaining Scandinavian countries).

Related People: Tomasz Rysiak, Agnieszka Pytlas-Skwierczyńska
Related Service Areas: Tax
Related Countries: Poland

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