The third of the publications in series “12 Rules of the Cross-Border Secondment of Employees” focuses on the situation of seconding an employee to 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 secondment of employees.
- Determination of tax residence should be the first of steps taken in order to defining the tax obligations of an employee seconded to work in Poland correctly;
- Whether a given employee will be subject to unlimited or limited tax liability in Poland depends on the employee’s tax residence;
- Employees seconded by foreign employers to work in Poland are obligated to pay tax advances personally (self-assessment).
Tax residence – Polish regulations
Tax residence of the employees staying on the territory of Poland, should be determined according to the paragraphs of article 3 of the Personal Income Tax Act.
The first paragraph provides that:
Natural persons, if their place of residence is in the territory of the Republic of Poland, shall be liable to pay tax on the entirety of their revenues regardless of the location of their sources (unlimited tax-paying liability).
The next paragraph of the regulation quoted indicates that a resident of the Republic of Poland is a natural person who stays in the territory of the Republic of Poland for over 183 days in a given tax year or has the center of personal or economic interest (center of interest) in territory of the Republic of Poland.
When counting period of 183 days is calculates, only the days on which the employee was physically present in Poland should be taken into account.
The period of 183 days also includes the days when the employee wasn’t actually working but was still physically on the territory of Poland, i.e. weekends, holidays, holidays, sick leave. However, the pool of 183 days does not include days which has been spent in the territory of other countries, regardless of the destination.
It should be noted that according to article 4a of the Personal Income Tax Act, the provisions of article 3 should be provided while taking into account double taxation agreements (DTA) of which Poland is a party. Thus, the provisions of the DTA should be analyzed in the first order. This means that if the seconded employee has been recognized as a Polish tax resident and at the same time as a tax resident of the country from which he was seconded (on the basis of local regulations), a final decision should be based on the respective DTA provisions.
Income taxation – Polish regulations
In case of employee seconded to work on the territory of Poland we can distinguish three situations of which each will have different consequences for the taxpayer:
- An employee which has stayed in Poland for business needs for less than 183 days during the tax year (also according to the DTA provisions) and does not have a center of vital interests in Poland – the employee, as a rule, will not establish a tax liability in Poland,
- An employee which has stayed in Poland for business needs for more than 183 days during the tax year (also according to the DTA provisions) and does not have a center of life interests in Poland – the employee will establish a limited tax liability in Poland,
- An employee which has stayed in Poland for business needs for less than 183 days during the tax year (also according to the DTA provisions) and has a center of life interests in Poland – the employee will establish unlimited tax liability in Poland.
The first of the presented situations will result in arising of tax obligation in Poland. Second of the situations will result in arising of tax obligation only with respect to the income obtained on the territory of Poland. And finally the third one will result in arising the tax obligation on global income in Poland.
Obligations of the employee seconded by a foreign employer to work in Poland
In case of seconding employee by a foreign employer to work in Poland, an employee is obligated to calculate and pay the amount of income tax personally. It is caused by the fact that, in the light of Polish tax regulations, there is no payer in the territory of Poland so employee must take over his obligations.
When calculating the amount of the advance payment, the employee can deduct tax base by statutory tax deductible costs applicable in Poland and paid social security contributions if the entity employing the seconded worker is based in one of the Member States of the European Union.
To summarize in case of secondment by a foreign employer to work in Poland, the employee is responsible for calculating and paying income tax advances.
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