The death of an employee is not only a human event but also a challenge in managing legal and tax risks. Employers, eager to reliably fulfill their obligations to the deceased's family, often instinctively resort to tried-and-true methods: calculating the amount of remuneration due, collecting income tax advances, and preparing the PIT-11 form. While such an approach is dictated by a desire to exercise due diligence, it may prove erroneous under the interpretation of tax authorities.
Often, this mistake stems from a fear of the tax authorities – taxpayers prefer to collect tax "just in case" rather than risk being accused of failing to pay it. However, in the case of post-death settlements, the legal reality can be counterintuitive. The key to properly closing an employee's file isn't the amount of the payment, but rather verifying the status of the recipient. This is the key to determining whether we are operating under the Personal Income Tax Act or entering the realm of inheritance taxation.
When does remuneration cease to be income from employment?
A fundamental change in the classification of income occurs upon the employee's death. According to the interpretation of the Director of the National Tax Information Service of December 5, 2025, file reference 0112-KDIL2-1.4011.863.2025.1.MKA, in certain scenarios, the payment of the final salary is not subject to the Personal Income Tax Act at all. This is pursuant to Article 2, Section 1, Item 3 of the Personal Income Tax Act, which excludes the application of Personal Income Tax regulations to income subject to the Inheritance and Gift Tax Act.
In the factual circumstances presented in the above interpretation, the authority indicated that if the deceased's funds become part of the estate, their legal nature changes. They cease to be income from employment and become property rights acquired through inheritance. The principle that should be followed is that inheritance tax excludes income tax. If a payment becomes part of the estate, the employer loses its status as a personal income tax payer with respect to that benefit.
Substantial survivor's pension
To avoid errors, employers must audit the eligibility of individuals claiming benefits. The key provision here is Article 63 § 2 of the Labor Code, in conjunction with Article 922 of the Civil Code. The Labor Code introduces a simplified procedure under which property rights arising from an employment relationship are transferred first to the spouse and individuals who qualify for a survivor's pension, bypassing the inheritance process (Article 922 § 2 of the Civil Code).
Only in the absence of such individuals do these benefits "enter into the estate." However, the existence of one eligible entity (i.e., a person meeting the conditions for obtaining a survivor's pension) is sufficient, and the benefit will not be included in the estate.
In practice, this means that if, for example, an adult daughter who has already completed her education and therefore does not meet the criteria for a survivor's pension applies for the benefit (as in the case described in the aforementioned interpretation), these funds become part of the estate. This signals to the employer a complete overhaul of the settlement procedure.
Without PIT-11
A key lesson for HR and payroll departments is that when a payment is made to the estate, the employer is not the payer of personal income tax (PIT). This means there is no obligation (or right) to collect advance tax. Furthermore, issuing a PIT-11 form for the heir in such a scenario is a formal error, as it documents income from the wrong source.
In such a situation, the burden of settling the tax returns shifts entirely to the heir, who must settle the inheritance and gift tax liabilities.
To protect your company in the event of an audit, it is worth implementing a verification procedure – for example, requesting declarations or documents from your heirs confirming their status (e.g. a certificate from the Social Insurance Institution (ZUS) confirming your lack of entitlement to a survivor's pension or a student ID in the case of children).
Salaries and benefits inherited
If the deceased employee did not have a spouse or other person entitled to a survivor’s pension, the following property rights are included in the estate:
• remuneration for work (for the time worked until the date of death),
• sick pay,
• sickness benefit.
Although sick pay and salary constitute separate sources of income during an employee's lifetime, upon death they lose their individual character and become a single package of property rights. If they are inherited, the entire package is exempt from personal income tax.
Verification of authorized persons is the key to correct settlement
In the face of an employee's death, the HR and payroll department cannot blindly proceed in the same manner in every case. Before collecting the advance payment and preparing the PIT-11 form, it is necessary to thoroughly determine the group of eligible individuals and their status under pension and disability pension regulations, as this determines the proper fulfillment of the payer's obligations.
This article is for informational purposes only and does not constitute legal advice.
The law is current as of February 6, 2026
.
Author/Editor of the series:
