Table of contents
- Where is employment income taxed during a workation?
- Does a stay of less than 183 days mean no tax abroad?
- How should the 183-day period be calculated for remote work abroad?
- Do Spain, Italy and Greece apply the same rules?
- Does the employee remain a Polish tax resident?
- What happens if the income becomes taxable abroad?
- Can tax obligations arise from the very first day of a workation?
- Case study: one month of remote work from Spain
- How can tax risks related to workation be managed safely?
Where is employment income taxed during a workation?
An employee of a Polish company plans to perform work remotely from Spain, Italy or Greece for several weeks. The employment contract remains unchanged, remuneration continues to be paid by the Polish employer, and the trip is of a private nature. Does this mean that nothing changes from a tax perspective?
Not necessarily.
In the case of employment income, not only the employer’s place of establishment matters, but above all the country in which the work is physically performed. If an employee works from an apartment in Spain, a hotel in Italy or a house in Greece, the portion of remuneration attributable to those days may be treated as income from employment exercised in that country.
According to the general principle found in double taxation treaties, the remuneration of a Polish tax resident may be taxed in Poland unless the employment is exercised in another state. In that case, the country where the work is performed may obtain the right to tax the relevant portion of the income. However, most treaties provide an exception if specific conditions are met simultaneously.
Does a stay of less than 183 days mean no tax abroad?
This is one of the most common and potentially risky misconceptions regarding workation arrangements.
The 183-day rule is not a standalone tax exemption. As a general principle, remuneration remains taxable only in the country of residence provided that all three of the following conditions are met:
- The employee’s stay in the country where the work is performed does not exceed the threshold specified in the applicable treaty, most commonly 183 days.
- The remuneration is paid by, or on behalf of, an employer that is not resident in the country where the work is performed.
- The remuneration cost is not borne by a permanent establishment or fixed base of the employer located in that country.
Failure to satisfy even one of these conditions may result in the country from which the employee performs their duties obtaining taxing rights over the income, even if the stay is shorter than 183 days.
importnat
Simply staying abroad for fewer than 183 days does not guarantee that the remuneration will remain taxable exclusively in Poland. It is also necessary to determine who ultimately bears the remuneration cost and whether the employee is effectively working for a foreign entity or a foreign permanent establishment of the employer.
How should the 183-day period be calculated for remote work abroad?
The method of calculating the threshold should always be verified under the relevant double taxation treaty. Depending on the wording of the treaty, the period may be measured by reference to the tax year, calendar year, or any rolling twelve-month period.
When calculating the period, physical presence in the country is generally decisive. The count may include not only actual working days, but also weekends, public holidays, vacation days, and days of arrival and departure if the employee is physically present in that country. As a result, tracking only working days may not be sufficient.
Repeated trips can also create complications. An employee may spend three weeks in Spain in spring, another month in summer, and work from Spain again later in the year. Although each trip may appear short when analysed separately, they may need to be aggregated for tax purposes.
Do Spain, Italy and Greece apply the same rules?
The basic taxation mechanism is similar because Poland has concluded double taxation treaties with all three countries. However, this does not mean that every situation can be assessed using a single universal approach.
Before travelling, it is important to review the current wording of the applicable treaty, including any modifications resulting from the Multilateral Instrument (MLI), as well as local legislation and administrative practice.
The analysis should take into account, among other things:
- the exact period spent in the country;
- the number of days during which work is physically performed there;
- the employee’s tax residency;
- the entity paying the remuneration;
- the method of allocating or recharging employment costs;
- the entity benefiting from the employee’s work;
- the existence of a foreign branch or permanent establishment of the employer;
- other stays of the employee in the same country;
- local registration, reporting and withholding obligations.
Does the employee remain a Polish tax resident?
A short-term workation does not necessarily result in a change of tax residency. The number of days spent abroad is only one of several relevant criteria.
Under Polish tax law, attention must also be paid to the employee’s centre of personal and economic interests, commonly referred to as the centre of vital interests. If an individual remains a Polish tax resident, they are generally subject to taxation in Poland on their worldwide income, subject to the provisions of the applicable treaty.
For longer or recurring stays abroad, factors such as the location of the family home, the availability of a permanent home, the place where professional and business activities are carried out, and other personal and economic ties should also be considered.
What happens if the income becomes taxable abroad?
If Spain, Italy or Greece acquires the right to tax remuneration for work performed within its territory, the following obligations may arise:
- registration of the employee for tax purposes;
- calculation and payment of local tax advances;
- filing a foreign tax return;
- appropriate allocation of remuneration to days worked abroad;
- verification of the Polish employer’s withholding obligations;
- prawidłowego zastosowania metody unikania podwójnego opodatkowania w Polsce.
The fact that another country gains taxing rights should not automatically result in double taxation of the same income. The applicable treaty provides mechanisms to eliminate double taxation. Nevertheless, compliance obligations may still arise and adequate documentation must normally be maintained.
Can tax obligations arise from the very first day of a workation?
Yes. In certain cases, tax exposure in the country where the work is performed may arise without waiting for the 183-day threshold to be exceeded.
Particular attention should be paid where:
- remuneration costs are recharged to a foreign company;
- the employee primarily performs work for a local entity;
- a local entity directs and supervises the employee’s work;
- remuneration costs are borne by a foreign permanent establishment;
- the employee regularly works from the same country;
- the economic beneficiary of the work is a foreign entity.
In such circumstances, it is necessary to analyse not only the employment contract itself but also the actual working arrangements and the cost allocation model within the group.
Case study: one month of remote work from Spain
A Polish tax resident spends one month working remotely from Spain. The employee continues to work for a Polish company, receives remuneration from Poland, the remuneration cost is not recharged to any Spanish entity or establishment, and the employee does not perform services for a Spanish company.
In such a model, the short duration of the stay may support the conclusion that the remuneration remains taxable exclusively in Poland, provided all treaty conditions are met. In this scenario, no obvious basis for taxation in Spain exists. However, any change in the facts would require a fresh assessment.
For example, if the remuneration cost is recharged to a Spanish company, the employee works under the direction of a Spanish entity, or the remuneration cost is borne by a Spanish permanent establishment of the Polish employer, the outcome may be different.
It is also important to remember that workation is not only a tax issue. Working from another country may also affect social security obligations, including the applicable social security system, the requirement to obtain an A1 certificate, and obligations towards foreign authorities. These aspects are often just as significant as tax considerations and require a separate analysis. In the next article of our series, we will discuss the social security implications of workation and the international coordination rules applicable within social security systems.
How can tax risks related to workation be managed safely?
A workation arrangement does not automatically mean that tax must be paid in Spain, Italy or Greece. However, it cannot be assumed that employment in Poland and a stay of fewer than 183 days will always be sufficient to keep all tax obligations exclusively in Poland.
A sound compliance process should include verification of the destination country, the planned duration of stay, the employee’s tax residency, the funding of remuneration costs, and the entity that actually benefits from the employee’s work. Maintaining accurate travel records is equally important, as a lack of information about previous or future stays may prevent a proper assessment of thresholds and obligations.
Are you planning a workation arrangement for an employee in Spain, Italy, Greece or another country? Grant Thornton experts can help assess tax exposure, verify the application of the 183-day rule, and determine potential obligations for both the employee and the employer. Assess the tax risks before the trip takes place.
Read more: Workation Outside Poland: A Benefit or a Risk for Employers?
