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.
SUMMARY:
- 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.
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.
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.
The secondment of employees to another country’s territory is one way of fulfilling contracts between companies operating in two other countries, or developing newly established branches.
The need to carry out tasks through seconded employees is often due to a shortage of specialists in the country that hosts the seconded employee, or for purely economic reasons. An entrepreneur deciding to expand his/her market in another country is often forced to second his experienced employees to develop newly established branches in other countries.
In addition to the development of their own overseas branches, companies carry out assignments for companies in other countries and second their skilled employees for this purpose.
At the same time, one of the countries to which foreign companies regularly second their employees is Poland. The emerging branches of foreign companies prove that companies from other countries are constantly interested in gaining share on the Polish market.
In addition, the secondment of an employee allows the employee to keep his or her current terms and conditions of employment and, in most cases, to remain in the current social security system. This is undoubtedly an advantage for those who, after the secondment, plan to return to the countries from which they were seconded.
Regulation of seconded
The most important questions for taxpayers boil down to the issue of determination:
- the tax residence of the employee,
- when tax liability arises in the country in which the employee performs work,
- how the taxation of income from work develops in the country of residence and in the country of actual work,
- the applicable social and health insurance legislation.
In addition to national tax and insurance laws, these issues are regulated by international treaties, in particular: double taxation agreements and EU regulations.
Each of the issues mentioned will be discussed in the following articles of the 12 Rules series.
In summary, the tax consequences of a cross-border secondment vary in terms creating tax liability in each country and the obligation of social and health insurance. This depends on the individual situation of the taxpayer. The differences in the laws of different countries in this regard raise a number of questions both on the part of the employees, the seconding companies and the companies hosting the seconded employees
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
