Polish Order: Obligatory healthcare contribution for board members 

Pursuant to the act adopted by the Sejm, income derived from the performance of duties of a management board member under a resolution starting from 2022 would constitute the basis for the obligatory 9% health contribution.

Currently, the function of a member or president of the management board does not qualify for social or health insurance. This will change when Article 15 of the adopted amendment act (with regard to health insurance) comes into force.

• „Article 15 In the Act of 27 August 2004 on healthcare services financed from public funds (Journal of Laws 2021, items 1285, 1292,1559 and 1773), the following amendments are introduced:
  • in Article 66 paragraph 1, after item 35, a new item 35a is added which reads: “35a) persons appointed to perform functions under the act of appointment who receive remuneration on this account.”

Therefore, "persons appointed to perform functions under the act of appointment who receive remuneration on this account" will be added to the list of persons subject to compulsory health insurance. This group includes mainly management board members and commercial proxies who, on the basis of the act of appointment, have established an organizational relationship with the company and receive remuneration for performing this function.

Obligatory healthcare contribution – who will the changes affect?

The law makers did not provide for any exceptions to the obligatory healthcare contribution, thus the change will apply to all board members who are remunerated under the resolution.

It is worth adding that the changes will also apply to income of management board members of not only Polish but also international companies, as long as a given person is subject to Polish legislation in the field of social insurance.

On the other hand, persons who perform duties of management board members in Polish companies, but at the same time are subject to social insurance system in one of the EU / EEA country or in another country with which Poland has concluded a bilateral social security agreement (e.g. the USA, Canada or Australia), will not be covered by Polish contributions, so the additional burden of health insurance will not apply to them.

In order to prove that a given management board member is subject to the social insurance system abroad, despite performing duties in Poland, it is necessary to have a valid A1 form issued by a foreign insurance institution on the basis of EU regulations or an appropriate social security agreement.

Consequences of the changes

These changes will involve an extra burden for persons performing functions on the basis of appointment, in the form of a compulsory health insurance contribution amounting to 9% of the basis for calculating the contribution (or the amount of their remuneration). The entity which pays the remuneration, i.e. the company, will be the entity that registers for insurance and pays the contributions. This contribution will not be deductible from income tax. In practice, therefore, due to the fact that it is not possible to deduct part of healthcare contribution from tax, in many cases it will mean an extra tax and social burden for management board members (only those who perform their functions on the basis of an appointment) from 32 to 41%. In the case of tax non-residents who apply a flat tax rate (20%), the total burden will increase to approximately 29% of their remuneration.

It is worth noting that only persons performing functions on the basis of an appointment who receive remuneration on this account, will be subject to the obligation to pay health insurance contributions, unlike persons performing these functions without remuneration.

The Polish Order adopted by the Sejm will now be referred to the Senate. The planned changes are to enter into force on 1 January 2022 (with some exceptions).