The secondment of employees to work abroad is a common practice caused e.g. by the expansion of business to other countries. The tax implications of a cross-border secondment vary depending on the circumstances of the worker’s secondment. In the secondment of employees to work abroad, consideration must be given to, among other things, the determination of tax residency and tax and contribution obligations.
This post launches our series of articles on “12 Rules of the Cross-Border Secondment of Employees”. In this series we will present the most important issues related to the process of seconding employees to Poland and from Poland. Each publication will present an individual issue in details. The entire series of articles will be a compendium of general knowledge on the cross-border seconding of employees.
Secondment of workers
Secondment of employees to perform work in another country is a common phenomenon in today’s globalized world. Many companies choose to second employees to, for example, fill staff shortages in other group companies or to carry out a specific assignment in another country. Each country has its own rules setting out the terms and conditions of such secondment and the potential tax and contribution consequences thereof. It should be noted that the posting may give rise to a tax liability in the country to which the employee is seconded.
According to the European Commission report from 2024, as many as 12% of all posted workers in the EU came from Poland. Poland, Lithuania and Germany are the countries most frequently sending posted workers, while the most frequently receiving countries are Germany, Austria, Belgium and France. The main stream of delegations in Europe is between Poland and Germany.
Cross-border secondment of employees applies both to employees who live in Poland on a daily basis and are seconded to work in another country, and to employees who are residents of other countries and are seconded to work in Poland
The secondment of employees between two countries is usually done by signing an amendment to the current employment contract, which sets out the terms and conditions of the secondment. It is also possible to carry out work abroad as part of a business trip. The differences between secondment and business travel will be outlined in the following articles in the series.
There are many factors to consider when seconding employees to work abroad. The most important in this respect is to check the obligations arising from the regulations in the country of secondment as well as those arising from international law.
Delegating employees to the territory of another country is one of the ways to implement contracts between enterprises operating in two other countries, or to develop newly established branches.
The need to carry out tasks through delegated employees is often caused by a shortage of specialists in the country that receives the delegated employee, or it results from purely economic reasons. When an entrepreneur decides to expand into a market in another country, Company is often forced to delegate they experienced employees to develop newly established branches in other countries.
In addition to developing their own foreign branches, enterprises carry out orders for companies from other countries and delegate their qualified employees for this purpose.
Moreover, seconding an employee allows you to maintain the current employment conditions and, in most cases, remain in the current social security system. This is undoubtedly an advantage for people who plan to return to the countries from which they were posted after the secondment ends.
Regulation of delegated employees situations
The most important questions that bother taxpayers come down to the problem of determining:
- employee’s tax residence,
- the moment when tax liability arises in the country where a given employee performs work,
- what is the taxation of income from work in the country of residence and in the country of actual performance of work,
- relevant legislation in the field of social and health insurance.
The above issues, in addition to national tax and insurance laws, are regulated by international agreements, in particular: double taxation avoidance agreements and EU regulations.
In order to unify the rules for avoiding double taxation, a multilateral convention was created implementing the measures of tax treaty law, the so-called MLI Convention. Any country can join it; for this purpose, it is necessary for a given country to ratify the convention.
We will discuss each of the above-mentioned problems in subsequent articles of the 12 Commandments series.
To sum up, the tax consequences of cross-border posting vary in terms of tax liability in individual countries and social and health insurance obligations. It depends on the individual situation of the taxpayer. Differences in the regulations of different countries in this respect raise a number of doubts both on the part of employees, posting companies and companies receiving posted employees.
Co-author: Karolina Nieścior, Tax advisory services
The series of “12 Rules of the Cross-Border Secondment of Employees” consists of the following articles:
- Cross-border secondment of employees
- Secondment and delegation
- Employee seconded to work in Poland
- Employee abroad – taxes in Poland
- Secondment – social and health insurance
- Secondment – documentation
- Secondment – double taxation agreements
- Secondment – income taxation in different countries
- Secondment – annual tax return
- Cross-border secondment of workers Directive
- Secondment – tax advisor assistance
- Secondment – additional questions
