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Tax deductible costs in relation to a management board member’s life insurance


On February 4, 2022 the Head of the National Revenue Information Service (hereinafter: the KIS Head) issued a private tax ruling, ref. no. 0111-KDIB2-1.4010.330.2021.2.BJ, concerning inclusion of life insurance premiums of a member of a company's management board as tax deductible costs.

An application for a private tax ruling  was filed by a limited liability company  providing book-keeping services. Due to the fact that it offers services to clients from all over the country, the sole member of the management board, also being a shareholder in the company, often undertakes business trips in order to fulfil his contractual obligations. The applicant is planning to take out a life insurance policy for the member of the management board, as the latter's continuation on the board is conditional on the conclusion of such policy. Hence, the company had doubts whether or not the expenses incurred on life insurance premiums for the member of the management board constitute tax deductible costs for the company.

In the applicant's assessment, the insurance policy purchased by the company will serve to strengthen the ties with the company and sustain the business relationship. The conclusion of the agreement may also influence the effectiveness of the board member’s performance as the insurance will ensure security for the member's family, e.g. in the event of an accident while performing his representative duties for the company. Consequently, the expenses incurred by the company will be indirectly connected with the income obtained from its business activity.

The tax authority, in a private tax ruling, confirmed the applicant's position, indicating that as long as the board member’s right to the additional benefit referred to in the application results from a resolution of the shareholders' meeting or from the company's articles of association, the costs of the premiums paid may be included in the company's tax deductible costs - both in the insurance part and, in principle, in the investment part.

The KIS Head underlined that in the future event described, Art. 16 (1) (38) of the CIT Act would not be applicable. The provision excludes from tax deductible costs expenditures connected with non-reciprocal benefits to shareholders. However, in the case at issue, the company's benefit to the member of the management board in the form of payment of an insurance premium corresponds to a reciprocal benefit in the form of performance by the member of the management board of specific tasks and activities deriving from his position.

Art. 16 (1) (38a) of the CIT Act is also relevant here, which stipulates that payments to, inter alia, members of companies’ governing bodies are not tax deductible, except for the remuneration paid on account of their functions. However, this article will not apply either, because the management board is not a governing body, but an executive, managing body.



Karol Śmiałko, Tax Consultant, ATA Tax Sp. z o.o.

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