Punitive 70% severance tax: the WSA in Gdańsk sides with the taxpayer

The punitive 70% severance tax was intended as a tool to limit high severance packages in state-controlled companies. In practice, however, it is applied far more often than it should be—sometimes even to individuals who are not senior managers. What is more, taxpayers who have doubts increasingly cannot obtain a substantive individual tax ruling, because the Head of the National Revenue Information (Director of KIS) refuses to issue it right away. The refusal is justified by an “justified suspicion” of tax avoidance (Article 119a of the Polish Tax Ordinance). In a judgment of 15 October 2025, case no. I SA/Gd 626/25, the Voivodeship Administrative Court (WSA) in Gdańsk criticised this practice.

We have already written about the punitive 70% severance tax and problems with the authorities’ practice here:

Punitive 70% Tax on Severance Payments

Punitive 70% severance tax – what does the provision say?

The legal basis is Article 30(1)(16) of the Polish PIT Act, under which a 70% flat-rate tax is levied on income (revenue) from severance payments or compensation, including for shortening the notice period or termination of the contract—to the extent that the amount exceeds three times the monthly remuneration received by the taxpayer under that contract.

The provision also refers to the definition of the company in Article 30(1)(15) of the PIT Act—i.e., companies in which the State Treasury / a local government unit (JST) / other public entities hold, directly or indirectly, a majority of voting rights (also based on agreements with other persons).

In practice, it is precisely the “majority of votes” condition that is key—and often disputed.

Why does KIS refuse to issue an individual tax ruling?

In “difficult” (or potentially contentious) cases, the Director of KIS increasingly uses the mechanism provided for in the Polish Tax Ordinance: Article 14b § 5b(1) of the Tax Ordinance. This provision allows the authority to refuse to issue an individual tax ruling by way of a decision if there is a “justified suspicion” that the elements of the facts / future event may constitute an act or an element of an act covered by the general anti-avoidance rule, i.e. Article 119a § 1 of the Tax Ordinance.

In practice, it looks like this: the taxpayer asks for an interpretation of the provisions (e.g., whether their company meets the criterion from point 15, whether their activities constitute “management”, etc.), and instead of giving a clear answer, the authority issues a refusal, invoking a “suspicion”.

Punitive 70% severance tax – what did the WSA in Gdańsk decide (I SA/Gd 626/25, 15 Oct 2025)?

In this case, the WSA in Gdańsk set aside the decisions of the Director of KIS refusing to issue an individual ruling, finding that:

• The authority cannot change the facts presented by the taxpayer or “add” circumstances that are not included in the application in order to support its thesis.
• If the authority has doubts as to key elements of the description, it should request clarification/supplementation, rather than build a refusal on assumptions.
• A “justified suspicion” must be based on arguments and follow from the reality of the application—it cannot be the result of unfettered speculation.

In the circumstances of this case, the court indicated, among other things, that the authority went beyond the description provided in the application and assumed (without basis) that the key condition regarding a “company with a majority of votes” was met, relying on the fact that the withholding agent collected the 70% tax “out of caution”.

What does this change in practice?

First, the judgment is a real “light at the end of the tunnel”: it reminds the authorities of the basic rule of the ruling procedure—an individual ruling must concern the facts described by the taxpayer, not facts “presumed” by the authority.

A refusal is permitted under Article 14b § 5b(1) of the Tax Ordinance in conjunction with Article 119a § 1 of the Tax Ordinance, but it is an exceptional mechanism. From the very structure of the provision it follows that the suspicion must be “justified”, i.e. based on arguments relating to the description in the application, and not on assumptions made by the authority.

Second, the mere collection of the 70% tax by the withholding agent is sometimes a precautionary action and does not automatically determine whether the conditions under Article 30(1)(15) and (16) of the PIT Act are met.

Third, it provides guidance for taxpayers for whom the withholding agent collected the 70% PIT “out of caution”: the judgment increases the chances that KIS will have to address the merits in similar cases instead of ending the case with a refusal. In other words, the authority should stick to the facts, and where something is missing—it should request supplementation.

The judgment is not final, so the case will likely be brought before the Supreme Administrative Court (NSA)—but it already shows that administrative courts are able to scrutinise “automatic” refusals.

Punitive 70% severance tax – how can we help?

If the punitive 70% severance tax affects you, the problem is usually not the provision itself, but establishing whether its conditions are met at all and how to handle the matter safely from the perspective of the taxpayer and/or the withholding agent. In such cases, we can support you, among others, with:

• verifying the statutory conditions under Article 30(1)(15) and (16) of the PIT Act, including analysis of the ownership structure and voting rights (direct/indirect), as well as whether a given contract and scope of duties may be classified as “management-related”;
• assessing the correctness of the withholding agent’s collection of the 70% PIT (whether there was a basis for it) and indicating possible further scenarios;
• preparing legal/tax arguments and the evidence package;
• preparing an application for an individual tax ruling in a way that minimises the risk of a “procedural” refusal (and support in case of refusal—complaint to the WSA);
• supporting communication with the employer/withholding agent (if the tax was collected “out of caution”) so as to establish a position as quickly as possible and avoid unnecessary escalation.

If you wish, you can send a short note: who paid the benefit, what was the basis (severance/compensation/recompense), what was the legal basis of employment and scope of duties, and what the voting structure in the group looks like (in outline). On this basis, we will indicate where the disputed points are and what course of action is most reasonable.

Contact us!