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Guaranteed lower income tax - linear rate for management, but when? |
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Statement dated 8 January 2007 by the Poznan-Winogrady tax office (ref. DG/415-87/06)
According to the Personal Income Tax Act, management services count as
personal rather than commercial services (article 13 item 9 of the
Act). Thus it falls to the remitter (commissioning management services)
to account for associated revenue and deduct allowable expenses at the
flat rate. In practice, income tax will be payable at up to 40%.
There may however be a means to avoid this unfavourable form of
taxation. Essentially the scheme involves two persons (the managers)
establishing a partnership (in the form of a spółka jawna or spółka komandytowa) and signing a management contract. The partnership then issues invoices on account of services provided.
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The partners divide their remuneration in proportion to their share of
profits. This will not be income from personal services since the
contractor is a partnership, a business which simply assigns one of its
partners to perform the contract. The manager thus earns income from
participation in a partnership, which is business profit entitled to be
taxed at the linear rate.
The Poznan-Winogrady tax office has shown itself amenable to this
solution, declaring in a statement dated 8 January 2007(ref.
DG/415-87/06) that “income earned from particiaption in a partnership
(spółka jawna) will count as income from a non-agricultural business,
since services are not provided personally by the consultant, but by
the partners in a partnership.” The Warszawa-Mokotow tax office has
taken a similar approach (statement dated 14 March 2006, ref.
1433/NG/GF/VI/415106/05/06/ WR).
This solution may therefore be attempted, having first referred to this
ruling and claimed the favourable interpretation described here. |
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