Tax liability in informal relationships is an issue often overlooked in tax practice, yet extremely important for people living together as a couple without being married (pozostający w faktycznym pożyciu). Unlike spouses, who have clearly defined tax liability rules, cohabiting partners (konkubenci) are subject to completely different legal rules. Understanding these differences is key to proper tax planning and avoiding unexpected financial consequences.
The Tax Ordinance Act (Ordynacja podatkowa) draws a specific distinction between the liability of spouses and the liability of people living together as a couple. This distinction is of fundamental importance in tax practice and can lead to surprising consequences for unmarried couples. Knowing these rules allows you to make informed decisions about running a business and managing assets in informal relationships.
Basic principles of tax liability
Under the Tax Ordinance Act, a taxpayer is a natural person, a legal person or an organisational unit without legal personality that is subject to a tax obligation under tax laws. This definition is key to understanding the whole system of tax liability, because it defines the basic group of persons required to fulfil tax obligations.
The taxpayer is liable with all its assets for taxes arising from tax liabilities (Article 26 of the Tax Ordinance Act). This means that a tax liability is, as a rule, satisfied from the taxpayer's assets, because it is linked to the taxpayer's personal tax obligation. An agreement to take over a tax debt does not change who the taxpayer is in relation to the tax authority and does not release the taxpayer from liability
The principle of the taxpayer's personal liability is the foundation of the Polish tax system. It means that tax liabilities cannot be transferred to other persons through civil-law agreements, and the tax authority, as a rule, pursues the amounts due from the taxpayer. This principle has exceptions concerning certain categories of third parties, but the basic rule remains unchanged.
This follows directly from the Tax Ordinance Act: third parties are liable for a taxpayer's tax arrears only in the cases and to the extent provided for in the Act (Article 107 § 1). That is why attempts to transfer tax liability to third parties through civil-law agreements are ineffective under tax law.
Tax liability of spouses as a reference point
To fully understand the specific situation of cohabiting partners, it is necessary to look at the rules of tax liability of spouses. The Tax Ordinance Act introduces special rules for married people, which differ significantly from the general rules of tax liability.
In the case of married persons, liability covers the taxpayer's separate property and the joint property of the taxpayer and their spouse (Article 29 § 1 of the Tax Ordinance Act). This means extending the scope of liability beyond the taxpayer's own assets to the joint marital property
The rules also provide for special regulations on the legal effects of changes in the joint property regime. The limitation, termination, exclusion or end of joint property does not apply to tax liabilities that arose before certain events. These events are:
- Concluding an agreement limiting or excluding the statutory joint property regime
- Termination of joint property by a final court ruling
- End of joint property due to the incapacitation of a spouse
- A court separation ruling becoming final
The rules on spouses' liability do not make the spouse a taxpayer; they only define the scope of assets from which the taxpayer's liability can be satisfied. The assets of a spouse who is not the taxpayer are covered only to the extent of the joint property, which directly affects what can be subject to administrative enforcement
In practice, this means that where there is joint property between the taxpayer and their spouse, administrative enforcement can be directed at assets covered by this joint property, in addition to the taxpayer's separate property. This rule is intended to protect the interests of the tax authorities while taking into account the specific nature of property relations between spouses.
Why cohabiting partners are not subject to the marital rules
A fundamental principle of interpreting tax law is the prohibition of analogy where the law does not expressly provide for a given solution. The tax liability rules apply only to the taxpayer and the taxpayer's spouse and cannot be extended by analogy to people living together as a couple.
A cohabiting partner is not liable for the partner's tax liabilities and tax arrears on the terms provided for spouses. The rules on spouses' liability should not be applied in this case, because they are exceptional and cannot be interpreted broadly
This position is justified by the legal construction of marriage as a legal institution that creates special property ties between spouses. Cohabitation, even though it may involve similar emotional closeness and an actual shared life, does not create similar legal ties. The lack of a formal legal framework means that rules provided for spouses cannot be automatically applied to cohabiting partners.
The practical consequences of this principle are significant for people in informal relationships. It means that a cohabiting partner's assets are not subject to enforcement for the partner's tax liabilities on terms similar to marital joint property. At the same time, this does not mean complete protection from tax liability, because there are other legal mechanisms that allow such liability to be attributed. Living together without marriage has other tax effects as well – one of them is discussed in living with a partner and PIT.
Liability of a cohabiting partner as a third party
The Tax Ordinance Act provides for a special category of tax liability concerning third parties. This form of liability has a completely different nature and scope from the liability of spouses, and it can only be applied if strictly defined legal conditions are met.
Under the rules, in the cases and to the extent provided for in the relevant provisions, third parties are also liable with all their assets, jointly and severally with the taxpayer, for the taxpayer's tax arrears (Article 107 § 1 of the Tax Ordinance Act). The tax authority rules on such liability by way of a decision (Article 108 § 1), which means that tax proceedings must be conducted.
Third-party liability is accessory and secondary: it arises only if the taxpayer has failed to perform or has improperly performed the tax liability, and it depends on the taxpayer's liability existing. It is also subsidiary liability, which means a strictly defined order of pursuing the amounts due
The tax creditor is not free to choose the order in which it pursues the taxpayer or the third party. This order is strictly defined by tax law: enforcement of a decision on a third party's liability can be started only when enforcement against the taxpayer's assets has proved wholly or partly ineffective, enforcement measures have been abandoned, or enforcement has not been started because it was shown to be likely that it would not recover more than the enforcement costs (Article 108 § 4 of the Tax Ordinance Act).
An important limitation concerns the subject of third-party liability. This liability concerns only tax arrears, i.e. tax liabilities whose payment deadline has already passed. It does not cover current or future liabilities, which is a significant limitation compared with the liability of spouses.
| Type of liability | Time scope | Subject of liability | Procedure |
|---|---|---|---|
| Spouses | Current and future liabilities | All tax liabilities | By operation of law |
| Third parties | Arrears only | Tax arrears and interest | Decision of the authority |
| Cohabiting partners | Arrears only, if conditions are met | Arrears from business activity | Decision of the authority |
Third parties are also liable for late payment interest on tax arrears (Article 107 § 2 point 2 of the Tax Ordinance Act) and, among other things, for the costs of enforcement proceedings (point 4). This means that third-party liability covers not only the tax arrears but also the late payment interest charged on them. However, a third party cannot be liable to a greater extent than the debtor itself
A cohabiting partner as a member of the taxpayer's family
The provision on the liability of members of the taxpayer's family (Article 111 of the Tax Ordinance Act) is key to determining a cohabiting partner's tax liability. Under this provision, a member of the taxpayer's family is liable with all their assets, jointly and severally with the taxpayer running a business, for tax arrears arising from that business and incurred during a specific period.
The definition of a member of the taxpayer's family (Article 111 § 3) covers descendants, ascendants, siblings, spouses of descendants, a person in an adoptive relationship and a person living with the taxpayer as a couple (w faktycznym pożyciu). This definition makes it clear that the concept of a family member also includes people living with the taxpayer as a couple, which covers cohabiting partners.
Joint and several liability of a cohabiting partner for the taxpayer's tax arrears can be imposed in a tax decision only if three conditions are met together. The first condition is that the taxpayer, and not the cohabiting partner, runs the business. The second condition concerns the cohabiting partner's permanent cooperation with the taxpayer in running the business
The third condition is that the cohabiting partner gains benefits from the business run by the taxpayer. All these conditions must be met together, and the absence of any of them rules out attributing tax liability to the cohabiting partner.
The Tax Ordinance Act does not precisely define permanent cooperation, which leaves some room for interpretation. Nor does the provision determine whether cooperation within a legal framework, such as an employment contract or civil-law contracts, excludes liability – this depends on an assessment of the circumstances of the specific case. The cooperation must be permanent, not occasional or casual.
Conditions of a cohabiting partner's liability
For a cohabiting partner to be liable for a partner's tax arrears, all the conditions provided for by law must be met together. The first concerns the taxpayer running a business. This means that a cohabiting partner's liability can arise only in connection with business activity run by the partner and does not cover other sources of income or tax liabilities.
The second condition requires permanent cooperation of the cohabiting partner with the taxpayer in running the business. Article 111 § 1 of the Tax Ordinance Act shows that the basis for family members' liability for the taxpayer's tax arrears is permanent cooperation in the taxpayer's business combined with gaining benefits from it. Interest accrues on arrears, although in some situations a reduced rate of late-payment interest applies.
Transferring liability to a member of the taxpayer's family requires all the conditions to be met together. The cooperation must be permanent and systematic and cannot be limited to sporadic or casual activities. It must also be accompanied by gaining benefits from the taxpayer's business
The third condition concerns gaining benefits from the business run by the taxpayer. This condition is particularly important because it also sets the upper limit of the cohabiting partner's liability. This liability is limited to the amount of the benefits obtained (Article 111 § 5 point 1), which is a significant limitation compared with full joint and several liability.
In practice, assessing whether these conditions are met can be difficult, particularly as regards the nature and scope of the cooperation and the amount of benefits gained. The tax authority must conduct detailed evidentiary proceedings to establish the actual facts and make a correct decision on the cohabiting partner's liability.
- The taxpayer must run a business on their own account
- The cohabiting partner must permanently cooperate in running this business
- The cooperation cannot be sporadic or casual
- The cohabiting partner must gain measurable benefits from the partner's business
- All conditions must be met together in the same period
Limits of a cohabiting partner's liability
A cohabiting partner's tax liability is subject to important limits, which result both from the nature of this liability and from specific legal rules. The first limit is that liability is capped at the amount of the benefits obtained. This means that a cohabiting partner cannot be liable for an amount exceeding the value of the benefits actually gained from the business run by the partner. In addition, this liability as a rule does not cover taxes not collected by the taxpayer as a tax remitter (płatnik) (e.g. income tax advances on employees' pay), except those not collected from family members (Article 111 § 5 point 2 of the Tax Ordinance Act).
The second limit concerns the material scope of liability. A cohabiting partner is not liable if the taxpayer does not run a business. Liability concerns only tax liabilities arising from the business and does not cover other tax liabilities, such as income tax from other sources or liabilities relating to personal assets. We can take over the day-to-day tax settlements of the business itself through our accounting services.
A cohabiting partner is also not liable if they do not permanently cooperate with the taxpayer in the business. Sporadic help or occasional support is not enough for tax liability to arise. Systematic and lasting involvement in the partner's business is required
The third limit is procedural and concerns the accessory nature of the cohabiting partner's liability. The tax authority can reach the cohabiting partner's assets (start enforcement of the decision on their liability) only when enforcement against the taxpayer's assets has proved wholly or partly ineffective, enforcement measures have been abandoned, or enforcement has not been started because it was shown to be likely that it would not recover more than the enforcement costs (Article 108 § 4 of the Tax Ordinance Act).
Issuing a tax decision against a cohabiting partner as a third party creates joint and several liability. In this case, joint and several liability means that payment of the arrears by one of the liable persons also reduces the debt of the other, but the authority is not entirely free to choose: enforcement against the cohabiting partner's assets is possible only in the situations set out in Article 108 § 4, and only up to the amount of the benefits specified in the decision.
Practical example: A woman in an informal relationship with a business owner helped him run a clothing shop for three years. Every day she served customers, operated the till and took part in buying stock. She benefited from this business in the form of maintenance and additional money. After tax arrears arose at the business owner (from the business, during the period of cooperation), the tax authority may rule that she is jointly and severally liable up to the amount of the benefits gained, and may start enforcement against her assets only when enforcement against the taxpayer proves ineffective.
Differences between the liability of spouses and cohabiting partners
The fundamental differences between the tax liability of spouses and cohabiting partners result from the different legal basis and nature of these forms of liability. The liability of spouses is automatic and results directly from marriage and the existence of joint property. It does not require a separate administrative decision or meeting any conditions other than being married.
By contrast, a cohabiting partner's liability is discretionary and requires all the statutory conditions to be met together and an administrative decision to be issued by the tax authority. This means that tax proceedings must be conducted and that all the conditions of liability must be shown to be met.
The liability of spouses covers all the taxpayer's tax liabilities, both current and future, while a cohabiting partner's liability is limited to tax arrears arising in connection with the business. This difference is of fundamental practical importance for the scope of potential liability
Another important difference concerns the assets covered by liability. In the case of spouses, liability covers the joint property and the taxpayer's separate property, while in the case of a cohabiting partner it covers all their assets but is limited to the amount of the benefits gained.
The differences also concern how long liability lasts. The liability of spouses can be limited or excluded by changing the property regime, but such changes do not affect liabilities that arose before the change. A cohabiting partner's liability may end when they stop cooperating in the business, but this also does not affect liabilities that have already arisen.
| Aspect | Spouses | Cohabiting partners |
|---|---|---|
| Legal basis | Automatic, by operation of law | Decision of the tax authority |
| Scope of liabilities | All tax liabilities | Only arrears from business activity |
| Conditions | Marriage and joint property | Three statutory conditions met together |
| Amount limits | No limits | Up to the amount of benefits gained |
Proceedings concerning a cohabiting partner's liability
Proceedings to determine a cohabiting partner's tax liability are special and require the tax authority to conduct detailed evidentiary proceedings. The authority must establish all the facts relevant to the ruling on liability, including the nature of the relationship between the taxpayer and the cohabiting partner, the scope of cooperation in the business and the amount of the benefits gained.
The first stage of the proceedings is to establish that the taxpayer and the cohabiting partner were living together as a couple. The tax authority must gather evidence confirming that such a relationship existed in the period in which the tax arrears arose. This may be evidence of living together, running a shared household or other signs of an actual shared life.
The second stage of the proceedings concerns establishing the nature and scope of the cohabiting partner's cooperation in the business run by the taxpayer. The authority must show that the cooperation was permanent and systematic, not sporadic or occasional. Evidence may include witness statements, documents confirming participation in the business or other evidence
The third stage of the proceedings is to establish the amount of the benefits the cohabiting partner gained from the taxpayer's business. This is one of the most difficult aspects of the proceedings, because the benefits can take different forms – from direct cash payments to benefits in kind, such as maintenance or use of assets connected with the business.
The tax authority must also establish the period in which the cohabiting partner cooperated with the taxpayer and which periods in which tax arrears arose overlap with this cooperation. A cohabiting partner's liability can concern only arrears that arose in the period in which they actually cooperated in the business.
After the evidentiary proceedings, the tax authority issues a decision on the cohabiting partner's liability as a third party. This decision must contain a detailed factual and legal justification, including an indication that all the statutory conditions of liability are met and the amount of the cohabiting partner's liability.
Practical consequences and recommendations
Knowing the rules on cohabiting partners' tax liability is crucial for people in informal relationships, especially when one partner runs a business. Being aware of the potential tax consequences allows you to make informed decisions about getting involved in your partner's business.
The first practical recommendation is to document the nature of your cooperation with a partner who runs a business. If the cooperation is regular and brings measurable benefits, it is worth considering formalising it by concluding an appropriate contract. This may be an employment contract, a contract of mandate (umowa zlecenia) or a contract for specific work (umowa o dzieło), depending on the nature of the services provided.
Formalising the cooperation puts the financial arrangements between the partners in order and makes it easier to show what benefits the cohabiting partner actually gained. However, the law does not determine that cooperation under a contract excludes liability on the terms provided for family members – this depends on an assessment of the circumstances of the specific case
The second recommendation is to keep detailed records of any benefits gained from the partner's business. If tax proceedings are initiated, such records can help to determine the scope of liability precisely and avoid inflated claims by the tax authorities.
The third recommendation is to regularly monitor the tax situation of the partner who runs a business. Detecting tax problems early makes it possible to take preventive action and avoid tax arrears that could lead to the cohabiting partner's liability.
- Document the nature and scope of your cooperation with your business-owner partner
- Consider formalising the cooperation through an employment contract or a civil-law contract
- Keep detailed records of the benefits gained
- Regularly monitor your partner's tax situation
- If in doubt, consult a tax adviser
- Consider concluding an agreement governing your property relations
Practical scenario: A couple in an informal relationship run a restaurant together, but formally only one of the partners is the owner. The other partner works in the restaurant every day, serves customers, manages staff and gains financial benefits from it. If tax arrears arise, the partner who does not formally own the restaurant may be held liable for tax on the terms provided for family members, up to the amount of the benefits gained.
