Civil liability insurance for management and accounting staff is becoming a standard in modern business. However, its tax implications continue to raise significant doubts. Can premiums for such policies be treated as a legitimate business expense?
The case concerned a company whose main business activity is the provision of services related to the production of paper and cardboard. The company concluded two insurance contracts, covering losses that might arise due to errors committed by its accounting staff and management bodies. The contracts applied to specific positions rather than individual persons holding them at the time the contracts were signed. Presenting key provisions of the contracts, the company indicated that they would cover both current and future members of the management board, the CFO, the chief accountant and deputy, the HR and administration manager, as well as the payroll and HR administration coordinator. Insurance coverage was also to include individuals acting as promoters, supporters, or beneficiaries.
The company applied for a tax ruling to clarify whether the expenses it incurred for such liability insurance premiums could be recognized as tax-deductible costs under Article 15(1) of the CIT Act. It argued that these expenses should indeed qualify as deductible. According to the company, insuring its accountants and management members primarily protected the company itself, as it safeguarded it against losses arising from non-performance or improper performance of duties by the accountants or from misconduct by its management.
The Director of the National Revenue Information (KIS) disagreed, pointing out that pursuant to Article 15(1) and Article 16(1)(59) of the CIT Act, only insurance premiums listed in the annex to the Insurance and Reinsurance Activity Act may be classified as tax-deductible costs. Civil liability insurance was not among them, and therefore such premiums could not, in the authority’s view, be treated as deductible. The authority also emphasized that a natural person who accepts the function of a management board member or sits on a supervisory board for remuneration assumes personal responsibility for fulfilling that role. Consequently, premiums paid on behalf of such individuals cannot be considered business-related expenses of the company, as they are incurred in the interest of the individuals holding the positions, not the company itself.
The Regional Administrative Court (WSA) in Poznań upheld this view in its judgment of 12 August 2022 (case ref. I SA/Po 85/22), ruling that the expenses in question could not constitute tax-deductible costs. The court stressed that under Article 15(1), an expense may be deductible only if it is incurred by the taxpayer to generate, secure, or maintain income, and if it is related to the taxpayer’s business activity. In the court’s opinion, the insurance premiums did not meet these criteria, as they were intended to protect the interests of the officeholders, not the company.
This position was later confirmed by the Supreme Administrative Court (NSA) in its ruling of 23 July 2025 (case ref. II FSK 1402/22). The court emphasized that the insurance covered not the company, but specific individuals occupying the described positions. Accordingly, the expenses for such insurance were incurred in the interest of those individuals. The NSA added that while the company may be jointly liable for the actions of its employees as their employer, this does not imply that the insurance itself covers the company or that the company assumes the civil liability of its staff.