Fiscal criminal defence (KKS) – strategy for board

A Warsaw-based technology company receives a notification from the National Revenue Administration (Krajowa Administracja Skarbowa, KAS) that its tax files are under scrutiny for the last five fiscal years. The board chair's first instinct is to treat this as a routine audit. That instinct can be expensive. Under Polish fiscal criminal law, the moment KAS investigators suspect deliberate underreporting, the audit transforms into a proceeding governed by the Kodeks karny skarbowy (Fiscal Penal Code, KKS) – and board members become personally exposed to fines, asset freezes, and, in serious cases, custodial sentences.

Polish fiscal criminal law holds board members personally liable for tax offences committed in the company's name. The Fiscal Penal Code establishes two tiers of offence: fiscal crimes (przestępstwa skarbowe), carrying penalties up to 720 daily fine units or imprisonment, and fiscal misdemeanours (wykroczenia skarbowe), attracting fines up to 40,320 PLN. The threshold separating the two tiers is currently PLN 18,800 in evaded public dues. Proceedings are conducted by KAS, the National Court Register (Krajowy Rejestr Sądowy, KRS), and ultimately by courts within the ordinary judicial system.

This service page explains how KKS proceedings unfold, which defensive instruments are available, where boards most commonly misjudge the risk, and how foreign-owned subsidiaries face additional layers of exposure. A self-assessment checklist at the end allows management to identify gaps before investigators do.

How does personal liability arise under the Fiscal Penal Code?

Liability under the KKS does not require proof of direct action by a board member. Polish fiscal criminal law extends responsibility to anyone who manages a taxpayer's affairs – which courts interpret broadly. A director who delegates VAT compliance but retains overall supervisory authority remains within scope. The key question is not who signed the return, but who held effective control over the process that produced it.

The KKS distinguishes three bases of attribution. First, a person who personally executes an offending act bears direct liability. Second, a person who instructs another to commit the act is equally liable. Third – and most relevant for board members – a person who tolerates a subordinate's offence through negligent supervision can face charges under the misdemeanour provisions. That third category is where most board-level KKS cases originate.

Concrete figures matter here. When evaded dues exceed PLN 18,800, the conduct graduates from misdemeanour to crime. When they exceed ten times that threshold – roughly PLN 188,000 – the offence becomes a "large-scale" fiscal crime, triggering enhanced penalties. At the upper end, evasion exceeding a thousand times the threshold qualifies as a crime of "great scale," for which the KKS authorises sentences of up to five years' imprisonment.

Direct execution of an offending act
Instruction to a subordinate to commit the act
Negligent supervision enabling a subordinate's offence
Holding formal management authority at the time of the act
Exercising de facto control even without formal title

One element frequently misunderstood by foreign executives: Polish law does not require the company itself to be convicted before the individual board member faces charges. KKS proceedings against the natural person run in parallel – or even independently – of any administrative tax assessment against the entity. That parallel track is what makes early defensive strategy so important.

What defensive instruments does KKS law provide?

The Fiscal Penal Code offers several mechanisms that, when deployed promptly, can eliminate or substantially reduce a board member's exposure. The most powerful is czynny żal (active regret), a voluntary disclosure that, if filed before investigators formally present charges, extinguishes criminal liability entirely. Active regret requires the disclosure to be spontaneous, complete, and accompanied by payment of the outstanding dues – typically within a deadline set by the authority, often 30 days.

Active regret is not available in every situation. It is barred when KAS has already commenced an investigation, when the taxpayer is aware that investigators have obtained evidence of the offence, or when the disclosure concerns an act that has already been detected. Timing is therefore decisive. We secured a full extinguishment of KKS liability for a manufacturing client in the Mazowieckie region (autumn 2025) by filing active regret within 48 hours of the client learning that a KAS inspection had been scheduled – before the inspection formally commenced.

Where active regret is no longer available, the KKS provides two additional instruments. Voluntary surrender (dobrowolne poddanie się odpowiedzialności) allows the accused to accept a penalty without a full trial, typically resulting in a fine rather than a custodial sentence. The court must approve the arrangement, and the prosecution retains discretion to oppose it. Separately, the KKS allows for conditional discontinuation of proceedings where the social harm of the offence is minor, the accused has no prior convictions, and full payment of dues has been made.

Defence strategy must also address the asset-freeze risk. KAS investigators can apply to the district court for a zabezpieczenie majątkowe (provisional asset freeze) covering both corporate and personal assets of the accused director. Acting before such an application is made – by demonstrating co-operation, partial payment, or a restructuring plan – often persuades investigators to limit the scope of any freeze to the corporate sphere. This is where cross-border insolvency planning intersects directly with KKS defence: a board navigating simultaneous insolvency and fiscal criminal exposure needs both tracks coordinated from the outset.

Where do boards most commonly misjudge the risk?

The single most common error is treating a KAS tax audit as an administrative matter until it is too late to use active regret. Boards receive an audit notification, engage their tax advisers, and prepare documentation – without asking whether the conduct under review crosses the KKS threshold. By the time the tax assessment arrives, investigators may already have flagged the case for criminal referral. The window for voluntary disclosure has closed silently.

A second frequent misjudgement involves the board's relationship with internal reporting systems. Polish law on whistleblower protection – now implemented through legislation transposing the EU Whistleblowing Directive – requires companies above a certain headcount to maintain internal reporting channels. A board that suppresses or ignores a whistleblower report about potential tax irregularities faces compounded exposure: both under the KKS and under the separate regime governing whistleblower retaliation. Our whistleblower protection policy guide sets out the compliance steps in detail.

Third, boards in restructuring situations underestimate how insolvency proceedings interact with fiscal criminal liability. Filing for restructuring under the Prawo restrukturyzacyjne (Restructuring Law) does not suspend KKS proceedings. A moratorium on civil debt enforcement does not extend to fiscal criminal fines. Directors who assume that opening a postępowanie sanacyjne (remedial proceedings) shields them personally from KKS exposure are mistaken. The two regimes operate on separate tracks and require separate defensive strategies.

A fourth pitfall: the assumption that a new board member inherits no liability for acts of predecessors. Under the KKS, liability attaches to the person who held authority at the time the offending act occurred. However, if a new director ratifies prior conduct – by filing returns that incorporate earlier misstatements, or by failing to correct known errors – that ratification can constitute a fresh offence. Incoming board members should conduct a KKS-focused due diligence as part of any management transition.

How does cross-border structure affect KKS exposure?

Foreign-owned subsidiaries in Poland face a specific challenge. The parent company's group tax policies may generate KKS exposure at the Polish subsidiary level without the local board being fully aware of the mechanics. Transfer pricing arrangements approved at group level, intercompany royalty flows, and VAT grouping structures all carry KKS risk if the Polish tax treatment diverges from what KAS considers correct. The Polish Financial Supervision Authority (Komisja Nadzoru Finansowego, KNF) monitors financial flows in regulated sectors, adding a further layer of scrutiny for banking and insurance subsidiaries.

We obtained interim protection for a German investor's subsidiary in Lower Silesia (spring 2026), preventing a personal asset freeze against the managing director while transfer pricing adjustments were being negotiated with KAS. The key was demonstrating to the court that the director had acted in good faith on group-level tax opinions and had initiated corrective steps as soon as the discrepancy was identified. Good faith does not eliminate KKS liability automatically, but it is a statutory mitigating factor that courts weigh when determining penalties.

Cross-border insolvency adds another dimension. When a Polish subsidiary enters restructuring while its parent faces proceedings in another jurisdiction, the co-ordination of KKS defence with foreign insolvency counsel is essential. The EU Insolvency Regulation (Recast) allocates jurisdiction for main proceedings to the centre of main interests, but KKS proceedings remain exclusively Polish. A board member resident abroad cannot escape Polish fiscal criminal jurisdiction simply because the parent's insolvency is administered in Germany or Lithuania. Our analysis of cross-border insolvency involving Poland and Lithuania addresses the procedural co-ordination questions in detail.

For non-resident board members, there is a practical urgency around the 30-day voluntary disclosure deadline. Polish procedural law does not extend that deadline for foreign residents. KAS notification letters sent to the company's registered address are deemed served regardless of whether the individual director personally received them. Non-resident directors should therefore establish a reliable mechanism for monitoring KAS correspondence from the moment they join a Polish board.

To receive an expert assessment of your company's KKS exposure, contact info@kordeckipartners.com.

What is the self-assessment checklist for board members?

A structured self-assessment allows management to identify KKS risk before investigators do. The checklist below covers the five areas most frequently implicated in board-level KKS proceedings. Each item represents a question the board should be able to answer affirmatively. Any negative answer warrants immediate legal review.

Has the company reviewed all tax returns for the last five years against the current KKS thresholds (PLN 18,800 for crimes; PLN 188,000 for large-scale crimes)?
Are internal reporting channels operational and compliant with the whistleblower protection legislation, with records of all reports received and actions taken?
Has each board member been individually assessed for KKS exposure arising from their specific supervisory responsibilities – not just the CFO or tax director?
Is there a documented protocol for escalating KAS audit notifications to external KKS counsel within 24 hours of receipt?
For foreign-owned subsidiaries: has group-level transfer pricing documentation been reviewed by Polish counsel for KKS compatibility within the last 12 months?

The checklist is a starting point, not a substitute for legal advice. KKS risk is highly fact-specific. A board that scores well on all five items may still carry exposure from a specific transaction or reporting period that the checklist does not capture. The value of the exercise is to create a documented record of diligence – which itself functions as a mitigating factor in any subsequent proceeding.

Three business scenarios illustrate how the checklist translates into practice. A manufacturing group in Silesia with 400 employees and a complex VAT structure should prioritise items one and four: the volume of transactions creates statistical exposure, and rapid escalation protocols are essential. An IT company in Małopolska with significant intercompany licensing revenue should focus on item five: transfer pricing is the most common trigger for KKS referral in the technology sector. A foreign investor establishing a new subsidiary should treat item three as the entry point: defining each board member's KKS exposure profile before the first tax return is filed costs far less than defending charges afterwards.

For a tailored KKS risk strategy for your board, reach out to info@kordeckipartners.com.

Frequently asked questions

Q: Can a board member use active regret if the company has already received a tax assessment but no KKS charges have been formally presented?

A: The availability of active regret depends on whether investigators have already obtained evidence of the specific offence – not merely whether an administrative assessment exists. A tax assessment issued by KAS does not automatically bar active regret, but it is a strong signal that investigators are aware of the conduct. The board member must act within hours, not days, of learning about the assessment. Legal counsel should review the specific facts immediately, because the window can close without formal notification to the individual.

Q: How long does a KKS proceeding typically take, and what are the main cost exposures?

A: A KKS investigation at the preparatory stage typically runs between six and eighteen months before any charges are formally presented. Full court proceedings can add a further one to three years. Cost exposure for the individual director includes defence counsel fees, potential fines (up to 720 daily units, with each unit currently capped at PLN 62,000), and provisional asset freeze costs. Early resolution through voluntary surrender or active regret is almost always more economical than full proceedings – both in time and in financial terms.

Q: Is it a misconception that only the CFO or finance director faces KKS liability?

A: Yes – this is one of the most damaging misconceptions in practice. The KKS attributes liability to anyone exercising effective management authority over the taxpayer's affairs. A CEO who approves the annual budget, sets the transfer pricing policy, or signs off on dividend distributions that affect taxable income is within scope even if they never reviewed a single VAT return. Every board member should obtain an individual KKS exposure assessment, not assume that liability is confined to the finance function.

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 fiscal criminal defence, restructuring, and board liability. We work with Polish entrepreneurs, foreign investors, and in-house legal teams. To discuss your situation, contact info@kordeckipartners.com.