Payments in the form of units of investment funds: when does an employee derive income?
The Provincial Administrative Court in Warsaw resolved a dispute about when to tax variable pay to employees that is in the form of units of investment funds. The court overturned the interpretation of the Director of the National Tax Information Service who had had claimed that income arose twice – first as a benefit in kind from employment when the units were issued and then as income from capital when they are redeemed.
The court opined that such an interpretation contravenes the prohibition on double taxation. The fact that an employee cannot freely dispose of the units during a holding period and that the value of them is merely potential means that definitive income only arises when the units are monetized.
That for employers means there are no tax withholding obligations (calculation, collection of advance payments, payment of contributions) when the units are given to employees. The obligation to settle the tax is on the fund, or - from 2024 - directly on the taxpayer.
Judgment of the Provincial Administrative Court in Warsaw of 9 July 2025, III SA/Wa 1067/25.