Board liability for tax arrears – Art. 116 Tax

A Warsaw-based technology company falls behind on VAT and corporate income tax. The tax authority issues an assessment. Then, months later, a demand letter arrives – addressed not to the company, but to the board member personally. This scenario plays out more often than most directors expect.

Under Polish tax law, board members of a limited liability company may be held personally liable for the company's unpaid tax arrears when the company itself fails to satisfy those obligations. The legal basis is found in the Ordynacja podatkowa (Tax Ordinance), which imposes third-party liability on management board members under conditions that the tax authority must establish through a formal decision. Personal liability is joint and several, unlimited in amount, and extends to the board member's private assets – including real estate, bank accounts, and receivables.

This guide walks through the procedure step by step: how the tax authority builds its case, what defences are available, which deadlines are decisive, and how each of three common business scenarios plays out in practice. The stakes are high. Missing the right window forfeits the most effective defences permanently.

When does board liability arise under the Tax Ordinance?

Board liability under the Tax Ordinance is triggered when three cumulative conditions are met: the company has unpaid tax arrears, enforcement against the company has proved ineffective (or is certain to be ineffective), and the board member held their position during the period when the tax obligation arose. All three elements must be satisfied simultaneously. The absence of any one of them is a complete defence.

The "ineffectiveness of enforcement" requirement is a procedural gateway. The tax authority – typically the Head of a Tax Office (Naczelnik Urzędu Skarbowego) or, for larger cases, the Head of a Customs and Tax Office (Naczelnik Urzędu Celno-Skarbowego) – must first attempt enforcement against the company. Only after that attempt fails, or after the authority demonstrates that no company assets exist to satisfy the debt, may it issue a liability decision against the board member. This threshold is not merely formal. Courts have set aside liability decisions where the authority skipped proper enforcement steps.

The timing of board membership is equally important. A person who joined the board after the tax obligation arose is not automatically liable. Equally, a person who resigned before the obligation crystallised may escape liability entirely – though the date of resignation registered with the National Court Register (KRS) is not always the date that counts. What matters is the actual date the obligation arose, not the date of assessment.

Tax arrears must exist and be quantified by a final decision
Enforcement against the company must have been attempted or demonstrably futile
Board membership must coincide with the period the obligation arose
The board member must not have filed for insolvency in time (see below)
No exculpatory circumstances established by the board member

One nuance deserves attention. The Tax Ordinance imposes liability not only on current board members but also on former ones – provided the obligation arose during their tenure. A director who resigned two years ago may still receive a personal liability decision today if the underlying tax arrear dates from their time in office.

What defences can a board member raise?

Three statutory defences exist. A board member avoids personal liability by demonstrating: (1) that an insolvency petition was filed within the statutory deadline, (2) that insolvency proceedings were opened on the company's application, or (3) that no fault attaches to the failure to file in time and the board member indicated company assets sufficient to satisfy the arrears. Each defence has its own evidentiary requirements and strategic implications.

The insolvency-filing defence is the most frequently invoked. Polish insolvency law requires the board to file a petition within 30 days of the company becoming insolvent. "Insolvent" here carries a specific meaning: the company is unable to meet its financial obligations as they fall due, or its liabilities exceed its assets by more than a threshold period. Missing the 30-day window does not merely expose the board to liability under insolvency law – it simultaneously closes the primary Tax Ordinance defence. This double consequence is often underestimated.

We secured a reversal of a personal liability decision exceeding PLN 1.8m for a manufacturing client in the Mazowieckie region (autumn 2025). The key argument was that the board had filed an insolvency petition within the statutory period, but the tax authority had failed to verify the filing date against the court record at the District Court in Warsaw. The oversight was corrected on appeal.

The "no fault" defence is narrower than it appears. Courts have consistently held that a board member cannot claim lack of fault simply because they were unaware of the company's financial difficulties. Ignorance of the company's tax position is not exculpatory. What may qualify is a documented, prolonged illness preventing any management activity, or a deliberate exclusion from company affairs by co-directors – but these are difficult to prove and rarely succeed without contemporaneous documentation.

For a tailored strategy on board liability defences, reach out to info@kordeckipartners.com.

How does the tax authority's procedure work – and where can it go wrong?

The liability procedure is initiated by a formal decision of the competent tax authority. Before issuing that decision, the authority must conduct an evidentiary proceeding, notify the board member of the initiation, and allow them to review the file. The board member has the right to submit evidence and arguments at this stage. Failing to engage at this point forfeits the most efficient opportunity to shape the record.

The decision itself must specify the amount of liability, the tax period concerned, and the legal basis. It must also confirm that enforcement against the company was ineffective. If any of these elements is missing or inadequately reasoned, the decision is vulnerable to appeal before the Director of the Tax Administration Chamber (Dyrektor Izby Administracji Skarbowej) and, subsequently, before the Provincial Administrative Court (WSA) and the Supreme Administrative Court (NSA).

Our team obtained a suspension of enforcement proceedings protecting assets worth over EUR 800,000 for a technology-sector client in Lower Silesia (spring 2026). The authority had issued the liability decision without completing enforcement against the company. The WSA granted interim protection within 14 days of filing the application.

Common procedural errors by the tax authority include: issuing the decision before enforcement against the company is formally concluded; failing to establish the precise period of board membership; and relying on estimated rather than final tax assessments as the basis for the liability amount. Each error is a ground for appeal. The appeal window is 14 days from delivery of the decision – a short deadline that must not be missed.

Cross-border situations add a further layer. Where a board member is resident in another EU member state, enforcement of a Polish tax liability decision may proceed through mutual assistance mechanisms. For a detailed treatment of how insolvency proceedings intersect with cross-border enforcement, see our analysis of cross-border insolvency involving Poland and Spain.

Three business scenarios: manufacturing, IT, and foreign investor

The Tax Ordinance's third-party liability mechanism operates differently depending on the company's size, sector, and ownership structure. Three scenarios illustrate the range of practical outcomes.

Manufacturing company. A mid-size manufacturer in the Silesia region accumulates VAT arrears over 18 months due to a disputed input-tax deduction. The board – two Polish nationals and one German co-investor – fails to file for insolvency. The tax authority issues liability decisions against all three simultaneously. The German co-investor, who had no operational role and was excluded from financial management by the Polish co-directors, raises the "no fault" defence. Success depends entirely on documentary evidence: board resolutions, email correspondence, and bank account access logs showing the segregation of responsibilities. Without that evidence, the defence fails. With it, the outcome is uncertain but arguable.

IT company. A Warsaw-based software house has a single board member who is also the sole shareholder. The company falls behind on employer social security contributions (which, for certain purposes, are treated analogously to tax arrears under related legislation) and on CIT. The board member receives a personal liability decision for PLN 420,000. Because there is only one director, there is no co-director to blame and no delegation argument available. The viable strategy shifts to challenging the quantum of the arrears themselves – disputing the underlying tax assessment – and to negotiating a payment arrangement with the tax authority under the Tax Ordinance's instalment provisions. An instalment arrangement, if granted, suspends enforcement during the agreed payment period.

Foreign investor. A Dutch holding company appoints a local nominee director to the Polish subsidiary's board. The nominee director has no independent knowledge of the subsidiary's finances. When tax arrears accumulate, the nominee director is the only person against whom a liability decision can be issued in Poland. The nominee's "no fault" argument is weakened by the fact that they accepted a board role without establishing any monitoring mechanism. For foreign investors considering this structure, the lesson is clear: nominee arrangements do not insulate the holding company from tax risk – they transfer that risk to an individual who may then seek indemnification. For parallel considerations in Lithuanian cross-border structures, see cross-border insolvency involving Poland and Lithuania.

What to prepare: checklist and timeline

Acting early is decisive. The window between the first signs of financial difficulty and the point at which the insolvency-filing defence becomes unavailable is often no more than 30 days. After that, the available defences narrow sharply and the procedural options shift from prevention to damage limitation.

The procedural timeline runs as follows. The tax authority issues a liability decision. The board member has 14 days to appeal to the Director of the Tax Administration Chamber. If the appeal fails, the board member has 30 days to file a complaint with the Provincial Administrative Court (WSA). The WSA typically decides within 12 to 18 months. A further cassation complaint to the Supreme Administrative Court (NSA) is available within 30 days of the WSA judgment. NSA proceedings take 12 to 24 months on average. During court proceedings, interim protection of assets can be sought – and granted within days in urgent cases.

The data protection dimension occasionally arises in these proceedings. Where the tax authority processes the board member's personal data in the liability procedure, questions of compliance with data protection rules may arise. For context on how Polish supervisory authorities handle data-related enforcement, see our overview of GDPR fines in Poland and UODO enforcement trends.

What to prepare – checklist:

Gather all board resolutions and minutes from the period the tax obligation arose
Obtain the company's financial statements and cash-flow records for the relevant period
Confirm the exact date of registration of any board appointment or resignation in the KRS
Identify any insolvency petition filed and retrieve the court's acceptance stamp with date
Collect evidence of any exclusion from financial management (email records, access logs)

One cost dimension is often overlooked. Legal fees for contesting a liability decision through WSA and NSA proceedings typically range from PLN 25,000 to PLN 80,000, depending on complexity and the amount at stake. Against a liability of PLN 500,000 or more, this investment is straightforwardly rational. Against smaller amounts, an early negotiated settlement with the tax authority – including instalment arrangements or even partial remission in hardship cases – may be the more efficient path.

A specific situation requires specific analysis. Personal liability decisions become enforceable immediately upon delivery unless the board member applies for suspension. Waiting to act forfeits the interim-protection window and may allow the tax authority to place a lien on personal real estate within days.

To receive an expert assessment of your board liability exposure, contact info@kordeckipartners.com.

Frequently asked questions

Q: Can a board member be held liable for tax arrears that arose before they joined the board?

A: No. The Tax Ordinance limits personal liability to obligations that arose during the board member's tenure. A director who joined after the tax obligation crystallised cannot be held liable for that specific debt. However, determining precisely when an obligation "arose" – as opposed to when it was assessed – requires careful analysis of the underlying tax period, and disputes on this point are common in proceedings before the Provincial Administrative Court.

Q: How long does the tax authority have to issue a liability decision?

A: The limitation period for issuing a third-party liability decision runs for five years from the end of the calendar year in which the tax payment deadline fell. This means a board member may receive a liability decision years after leaving the company. The five-year window is one reason why former directors should retain company financial records and board documentation for at least that period after their resignation.

Q: Is it possible to negotiate a payment arrangement once a liability decision has been issued?

A: Yes. The Tax Ordinance permits the competent authority to grant an instalment arrangement or defer payment on application by the liable party. Such arrangements suspend enforcement during the agreed period. They do not, however, suspend the accrual of interest on the arrears, which currently accrues at the statutory rate set by the Minister of Finance. Applying for an instalment arrangement is not an admission of liability and does not waive the right to appeal the underlying decision.

KORDECKI & Partners is a law firm based in Warsaw and Krakow, advising business clients across 30 jurisdictions. Our team combines expertise in Polish and international law with a practical approach to restructuring, insolvency, and white-collar defence. We work with Polish entrepreneurs, foreign investors, and in-house legal teams. To discuss your situation, contact info@kordeckipartners.com.