An invoice for company management may seem like a simple optimisation tool, but in practice it often creates significant tax risks. Particular caution is needed where someone combines management functions with services provided to their own company through a sole proprietorship. We recently discussed this issue in a tax commentary published by Prawo.pl.
Choosing the right form of cooperation with a company is not only about the tax rate itself, but also about assessing the actual tax risk involved. We recently published a commentary on Prawo.pl discussing these risks and the current approach of the tax authorities.
In practice, one of the more problematic areas is the provision of B2B services to a related company or, in other words, an invoice for company management. This is particularly the case where a person acts in a dual capacity within the company – as a shareholder/member of the management board or manager, and at the same time as an entrepreneur issuing invoices for additional services.
We have already discussed the issue of services provided to one’s own company and the risks connected with lump-sum taxation on the Outsourced.pl blog.
Invoice for Company Management and Services Provided to One’s Own Company
The greatest doubts arise where a taxpayer attempts to split activities performed for their own company into two separate arrangements: management taxed under the progressive tax scale, and services rendered as part of a business activity taxed under the lump-sum regime. From the perspective of the tax authorities’ current practice, such models are being reviewed increasingly strictly.
“If a given individual acts in a dual role within a company and combines management with services taxed under the lump-sum regime, they risk a dispute with the tax authorities. For some time now, the tax authorities have treated such arrangements as a sign of tax optimisation. If this is confirmed in practice, then in the event of a tax audit the authority may demand that all income obtained from the company be taxed under the progressive tax scale.”
dr Piotr Sekulski, tax advisor
In practice, this means that merely separating agreements on paper may not be enough. What matters is the actual nature of the activities, their scope, the way they are performed, and whether the services provided through the sole proprietorship overlap with management functions.
NSA Judgment and Refusals to Issue Tax Rulings Are an Important Warning Sign
A warning for taxpayers comes not only from the current practice of the Director of the National Tax Information Office, but also from case law. More and more often, situations arise where the authority – after obtaining an opinion from the Head of the National Revenue Administration – refuses to issue an individual tax ruling, finding that the described model may lead to tax avoidance.
Against this background, the judgment of the Supreme Administrative Court of 5 November 2024, case no. II FSK 996/24, is particularly important. This judgment shows the methodology used by the tax authorities, as well as by the administrative courts, in this area.
KSeF and JPK CIT Will Increase Audit Capabilities
Practical risk is also increasing for systemic reasons. Mandatory KSeF and JPK mean much easier access for the authorities to data on settlements between a company and related entities. As a result, cooperation models that previously might not have attracted much attention will become increasingly easy to identify and compare.
Invoice for Company Management – What Should Be Done in Practice?
If a taxpayer combines management functions with additional services provided to the company, they should pay particular attention to genuinely separating those areas.
„Although the proposed introduction of a 17% lump-sum tax rate on services provided to one’s own company may seem unfavourable, it could put an end to years of disputes concerning the taxation of management board members. The absence of this type of regulation means that entrepreneurs must remain cautious both in relation to settlements with their own company and in choosing the lump-sum tax rate. It should also be noted that the popular 8.5% rate is often challenged.”.
dr Piotr Sekulski, tax advisor
If you are considering a cooperation model with your own company and want to assess whether lump-sum taxation is safe in your case, it is worth reviewing not only the tax rate itself, but also the entire structure of the relationship, the scope of duties and the supporting documentation. Feel free to contact us at www.outsourced.pl .
