A Warsaw-based technology company stops paying its VAT obligations. The management board, consumed by cash-flow firefighting, delays the insolvency filing by several months. Two years later, tax authorities issue a liability decision against each board member personally – for the full amount of the company's unpaid taxes, interest, and enforcement costs. The company is long dissolved. The directors face asset seizure.
Under Polish tax law, board members of a limited liability company (spółka z ograniczoną odpowiedzialnością, sp. z o.o.) can be held personally liable for the company's tax arrears when enforcement against the company proves ineffective. The legal basis is the Ordynacja podatkowa (Tax Ordinance), which imposes joint and several liability on each member of the management board. Liability is triggered automatically unless the board member demonstrates that an insolvency petition was filed on time, that a court-approved restructuring arrangement was reached, or that the failure to file was not their fault.
This article examines the doctrinal structure of that liability, the conditions under which it arises, the defences available to board members, and the strategic choices that can reduce exposure. It also addresses the cross-border dimension – relevant to foreign directors serving on Polish boards – and considers how pre-pack restructuring interacts with this regime.
What is the doctrinal structure of board liability under the Tax Ordinance?
The Tax Ordinance establishes a regime of third-party liability for tax obligations. Board members of a sp. z o.o. are the primary targets. Liability is subsidiary – the tax authority must first attempt, and fail, to recover from the company itself. Once that threshold is met, each director becomes jointly and severally liable for the entire outstanding amount, not merely a proportionate share.
The liability covers tax arrears, late-payment interest, and the costs of enforcement proceedings. There is no statutory cap. A company with PLN 5m in unpaid VAT and CIT arrears exposes every sitting board member to a PLN 5m personal claim. The National Revenue Administration (Krajowa Administracja Skarbowa, KAS) issues a separate administrative decision against each director. That decision is appealable but enforceable pending appeal.
Two structural features make this regime particularly severe. First, liability is not fault-based in the ordinary sense. The authority does not need to prove that the director caused the arrears or knew about them. Membership of the board during the period when the arrears arose is sufficient. Second, the burden of proof shifts entirely to the director once the authority establishes board membership and the ineffectiveness of enforcement against the company.
The Tax Ordinance distinguishes between members of the management board (zarząd) and members of the supervisory board (rada nadzorcza). Supervisory board members are not covered. Liquidators, however, are treated identically to board members for this purpose – a point that often surprises practitioners appointed to oversee voluntary winding-up.
- Liability is joint and several across all board members simultaneously
- It covers arrears, interest, and enforcement costs – no ceiling
- The authority need not prove fault – only board membership and enforcement failure
- Supervisory board members are excluded; liquidators are included
- Each director receives a separate administrative decision
When does personal liability actually crystallise?
Crystallisation requires two cumulative conditions. The tax authority must show that enforcement against the company was ineffective – meaning it obtained a valid enforcement title, initiated proceedings, and recovered nothing or only a fraction of the debt. This threshold is usually met when the company has no attachable assets. The authority then issues a liability decision against board members within the statutory limitation period, which runs for five years from the end of the calendar year in which the tax liability became due.
The phrase "during whose term of office the tax arrears arose" is central to the analysis. Polish administrative courts have clarified that the relevant period is when the tax obligation crystallised, not when it became overdue for payment. A director who joined the board after a VAT liability arose but before it fell due may still be liable. A director who resigned before the obligation arose is not. Timing of resignation is therefore critical – and must be documented through the National Court Register (Krajowy Rejestr Sądowy, KRS) entry, not merely through an internal resolution.
Consider a practical scenario. A director resigns in March but the KRS entry is not updated until June. A VAT obligation that crystallised in April falls within their liability period under administrative court doctrine. The three-month gap between internal decision and public registration has cost that director personal exposure to a debt they never managed.
We secured a reversal of a liability decision exceeding PLN 1.8m for a former board member of a distribution company in the Mazowieckie region (autumn 2025). The key argument was that the director's resignation had been registered in the KRS before the relevant tax period closed – a narrow window, but sufficient to break the chain of liability.
A second crystallisation trigger arises when the company enters bankruptcy and the bankruptcy estate is insufficient to cover tax claims. In that scenario, the five-year limitation clock continues to run. Directors cannot assume that an ongoing bankruptcy proceeding suspends their personal exposure. The KAS may issue liability decisions in parallel with the insolvency proceedings.
What defences can a board member raise?
The Tax Ordinance provides three statutory defences, each with a different evidentiary threshold. Mastering these defences is the core task of any board liability case. None of them is straightforward in practice.
The first defence – timely insolvency filing – is the most commonly invoked. Polish insolvency law requires a management board to file for insolvency within 30 days of the moment the company becomes insolvent. Insolvency is defined either as inability to pay debts as they fall due (liquidity insolvency) or as a state where liabilities exceed assets by more than a de minimis margin for a continuous period of 24 months. The director must show not only that a petition was filed, but that it was filed within the statutory window. Late filing – even by a few days – defeats this defence entirely.
The second defence – a court-approved restructuring arrangement – covers situations where the company entered one of the four restructuring procedures available under the Prawo restrukturyzacyjne (Restructuring Law). An approved arrangement (układ) with creditors, confirmed by the district court's commercial division (wydział gospodarczy sądu rejonowego), breaks the chain of personal liability. This is the primary strategic reason to initiate restructuring rather than simply stopping payments. Pre-pack restructuring (przygotowana likwidacja, or pre-pack) can fit within this framework if structured correctly.
The third defence – absence of fault in failing to file – is the most difficult to establish. The director must demonstrate that they took all reasonable steps to monitor the company's financial position and that the failure to file resulted from circumstances entirely outside their control. Administrative courts have applied this standard restrictively. Illness, absence abroad, or reliance on co-directors does not, by itself, suffice. The director must show active, documented engagement with the company's finances.
A fourth, procedural escape exists: the director can identify specific company assets against which enforcement would be effective. If the tax authority failed to pursue those assets, the liability decision may be challenged. This route requires detailed knowledge of the company's asset position at the time enforcement was attempted.
How does restructuring interact with the liability regime?
The intersection of restructuring law and board liability is where the most significant strategic decisions are made. A board that opens a restructuring procedure within the 30-day insolvency window preserves the timely-filing defence. More importantly, a court-approved arrangement suspends enforcement against both the company and, under Polish restructuring legislation, potentially against individual directors for covered obligations.
Pre-pack restructuring deserves particular attention. In a pre-pack, the board negotiates a sale of the business or assets before filing, with the transaction approved by the court as part of the restructuring order. This approach allows the business to continue under new ownership while the old entity winds down in an orderly manner. For board liability purposes, the critical question is whether the pre-pack filing was made within the 30-day window. A pre-pack filed on day 28 of insolvency satisfies the defence. One filed on day 45 does not.
Foreign investors structuring Polish operations through a sp. z o.o. should understand that appointing a local director does not transfer all liability to that individual. Where the foreign parent exercises de facto control over financial decisions – including decisions to delay payments – Polish administrative courts have examined whether the nominal board member can genuinely invoke the absence-of-fault defence. The answer is often negative. For a broader discussion of group liability structures, see our analysis of subsidiary liability in Polish corporate groups.
We obtained a stay of enforcement proceedings against a board member of a logistics subsidiary in Lower Silesia (spring 2026), allowing time to complete a restructuring arrangement that ultimately extinguished PLN 3.4m in contested tax liability. The arrangement was approved by the district court within 14 weeks of filing – an unusually fast timeline achieved through pre-negotiated creditor support.
One structural consideration for multi-entity groups: the Tax Ordinance liability applies entity by entity. A board member sitting on three Polish subsidiaries simultaneously is exposed to liability from each. Consolidating entities before financial distress emerges can reduce that exposure, though the consolidation itself must not be structured in a way that constitutes a fraudulent transfer under insolvency law.
What is the cross-border dimension for foreign directors and investors?
Foreign nationals serving on Polish management boards face identical exposure to Polish citizens. The Tax Ordinance does not distinguish by nationality or residence. A German director of a Polish sp. z o.o. who resigns from the board but fails to ensure KRS registration of that resignation retains full personal liability for tax arrears arising after their departure from the board in fact.
Enforcement of Polish tax liability decisions against foreign-resident individuals is a growing practice area. Poland has bilateral tax information exchange agreements with over 80 countries. The KAS cooperates with tax authorities in EU member states through the EU Mutual Assistance Directive, which enables cross-border recovery of tax claims. A liability decision issued in Warsaw can be enforced against a director's assets in Berlin or Vienna within months, not years.
For investors considering cross-border insolvency involving Polish and EU entities, the interplay between the EU Insolvency Regulation (recast) and the Polish Tax Ordinance liability regime raises complex sequencing questions. Where the centre of main interests (COMI) is in Poland, Polish insolvency proceedings take precedence, and the timely-filing defence under Polish law governs. Where COMI is disputed, the outcome of the COMI determination affects which liability regime applies. For detailed analysis of cross-border scenarios, see our article on cross-border insolvency involving Poland and Italy.
A checklist for foreign directors serving on Polish boards:
- Verify that your KRS resignation entry is filed within 7 days of the internal board resolution
- Obtain independent access to the company's financial statements – do not rely solely on the CFO's reports
- Ensure the company's insolvency monitoring process triggers at the 24-month over-indebtedness threshold
- Confirm that D&O insurance covers Polish administrative liability decisions, not only civil claims
- Engage Polish restructuring counsel immediately if the company's liquidity position deteriorates
The EU Pillar Two rules and their Polish implementation have added a layer of complexity for multinational groups. A Polish subsidiary that becomes liable for top-up tax under the global minimum tax framework may face tax arrears that the Polish board was not in a position to anticipate. The interaction between Pillar Two obligations and Tax Ordinance liability is an emerging area. For context on compliance obligations affecting Polish reporting entities, see our overview of ESRS implementation steps for Polish reporting entities.
What strategic steps reduce exposure before a crisis?
Prevention is structurally superior to defence. A board that documents its financial monitoring process, maintains current insolvency assessments, and acts within the 30-day window has a straightforward defence. A board that waits six months and then files – or never files – must rely on the far more difficult absence-of-fault argument.
Four practical steps deserve priority. First, each board should commission a quarterly solvency assessment from an independent financial adviser. The assessment should address both liquidity and balance-sheet insolvency tests. Board minutes should record the outcome. A documented assessment that concludes the company is solvent, prepared by a qualified professional, significantly strengthens the absence-of-fault defence if that conclusion later proves wrong.
Second, board members should scrutinise their D&O insurance coverage. Most standard D&O policies exclude administrative liability arising from tax proceedings. Specialist cover is available in the Polish market but must be specifically requested. Premiums for a mid-sized sp. z o.o. with a complex tax profile typically range from PLN 15,000 to PLN 60,000 annually for adequate coverage.
Third, where financial distress becomes apparent, the board should engage restructuring counsel immediately – not after enforcement proceedings begin. The 30-day window under insolvency law runs from the date insolvency arises, not from the date the board acknowledges it. Delay is the single most common cause of lost defences in board liability cases. Each additional day beyond the 30-day threshold narrows the available arguments and increases the amount at risk.
Fourth, boards of companies within corporate groups should establish a clear protocol for inter-company transactions during periods of financial stress. Transactions that favour the parent or a sister entity at the expense of the Polish subsidiary's creditors may be challenged as fraudulent under insolvency law – and may simultaneously undermine the board's absence-of-fault argument in a Tax Ordinance proceeding. White-collar defence considerations arise at precisely this intersection.
The strategic picture is clear. Board liability under the Tax Ordinance is not a remote risk for well-managed companies. It is a foreseeable consequence of financial distress that is manageable – provided the board acts early, documents its decisions, and obtains specialist advice before the insolvency window closes.
Specific circumstances facing your company require individual analysis. The consequences of missing the 30-day filing window are irreversible – personal liability for the full amount of the company's tax arrears cannot be undone after the fact.
If your company is experiencing liquidity pressure or you are a board member seeking to understand your current exposure, our team will assess your position and identify the available defences: contact info@kordeckipartners.com.
Frequently asked questions
Q: Does a board member who was absent during the relevant period still face liability?
A: Absence – whether due to illness, travel, or leave – does not automatically exempt a director from liability under the Tax Ordinance. The absence-of-fault defence requires more than mere physical absence. The director must demonstrate that they took all steps reasonably available to monitor the company's financial position and that they could not have influenced the decision to file for insolvency. Administrative courts apply this standard strictly. A director who was absent for six months and took no steps to obtain financial information during that period will generally fail this test.
Q: How long does the tax authority have to issue a liability decision?
A: The general limitation period for issuing a liability decision is five years, running from the end of the calendar year in which the tax obligation became due. This means a board member can receive a personal liability decision years after leaving the company. The clock does not pause during insolvency proceedings. Critically, the authority must also respect the limitation period applicable to the underlying tax arrears – if those arrears are time-barred, the personal liability decision falls away as well.
Q: Is it possible to negotiate a settlement with the tax authority after a liability decision is issued?
A: The Tax Ordinance does not provide a formal settlement mechanism for personal liability decisions in the same way that commercial debt can be restructured. However, a director against whom a decision has been issued can apply for a payment instalment arrangement or a partial remission of the assessed amount on grounds of important public interest or the taxpayer's important interest. These applications are assessed by the Head of the relevant Tax Office (Naczelnik Urzędu Skarbowego) and are granted sparingly. The stronger route is to challenge the decision through administrative appeal and, if necessary, proceedings before the Provincial Administrative Court (Wojewódzki Sąd Administracyjny, WSA) and the Supreme Administrative Court (Naczelny Sąd Administracyjny, NSA).
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 advise Polish entrepreneurs, foreign investors, and in-house legal teams on board liability exposure, pre-pack restructuring, and Tax Ordinance proceedings. To discuss your situation, contact info@kordeckipartners.com.
Disclaimer: This publication is provided for informational purposes only and does not constitute legal advice. The information herein should not be relied upon as a substitute for professional legal counsel tailored to your specific circumstances. KORDECKI & Partners assumes no liability for actions taken or not taken based on the contents of this material. For advice regarding your particular situation, please contact info@kordeckipartners.com.