The fourth of the publications in series “12 Rules of the Cross-Border Secondment” presents the situation of an employee seconded from Poland to work abroad and his tax obligations in Poland. 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.
- In order to define tax obligations of a seconded employee correctly, first thing to be checked is tax residence;
- The employee’s tax residence determines what portion of income will be taxable in Poland.
Tax liability in Poland
The issue of tax residence has been described in more details in the third article of the series. In the case of employees who have a center of vital interests in Poland, will be Polish tax residents. This means that all global income earned by these employees will be taxed in Poland. However, income earned outside of Poland may be exempted from taxation in Poland on the basis of the provisions of the appropriate double taxation agreement concluded between Poland and the country to which the employee was seconded.
In the case of longer period of secondment of employee from Poland, there can be a situation of changing tax residence due to the lack of strong private and economic ties in Poland. In indicated situation, there is a change in tax obligations in Poland – from the day of changing of tax residence, the income of the employee will not be subject to taxation in Poland.
Additionally, it should be also noted that when there is no double agreement in place between Poland and other country, the income of the employer may be taxed twice – in Poland and in the country of work.
Obligations of the remitter – Polish regulations
The fact that an employee is seconded to work abroad does not release the employer from the obligations of the remitter. These obligations depend on the tax residence of the individual, so it is recommended to engage in discussion with the employee in this field to establish in which country is his center vital interests located.
As a rule, remitter has obligation to:
- calculate monthly income tax advances,
- pay the advances to the Polish tax office,
- issue PIT-11 information and deliver it to the employee after the end of the tax year.
However, according to article 32 paragraph 6 of the Personal Income Tax Act:
Work establishment shall not charge income tax advance payments on income earned by an employee from work performed outside the territory of the Republic of Poland on the condition that the income is taxable or will be taxable outside the territory of the Republic of Poland.
Determining whether the income will be the subject to taxation in another should be done on the basis of tax residence or amount of days spent abroad.
To summarize, in case of employees seconded to work abroad, the obligation of paying income tax advances in Poland will be still responsibility of the Polish employer (unless the obligation was excluded due to the fact that taxation of income occurred in the country where work was performed). The obligation of the employer is also to prepare and provide the employee with PIT-11 information.
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