Seconding employees to Poland and PIT obligations

Seconding employees to Poland now requires a much broader analysis than simply checking how long an employee will stay in the country. For foreign companies and international groups, the key issue is not only where the employment contract was formally signed, but also who actually benefits from the employee’s work, who bears the economic cost of that remuneration, and whether the operating model in Poland may create a permanent establishment for tax purposes. This is exactly where two risk areas begin to overlap: the consequences for the company and the Polish personal income tax (PIT) obligations of the employee.

In practice, many businesses assume that short-term work performed in Poland by foreign personnel will not trigger material tax consequences. However, in international project structures, the length of stay is only one element of the analysis. It is equally important to determine whether the specific model creates an economic employer in Poland and whether the remuneration is effectively borne by a permanent establishment of the foreign enterprise in Poland.

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Why seconding employees to Poland requires tax analysis

Seconding foreign employees to perform work in Poland is common in international groups. It may involve temporary support for a Polish group company or the implementation of a project in Poland without creating a formal local structure such as a subsidiary or branch.

From a tax perspective, however, the absence of a formal legal presence in Poland does not automatically mean there are no obligations in Poland. If a foreign enterprise conducts business in Poland in a way that meets the criteria set out in the applicable double tax agreement, a permanent establishment may arise. In that case, the company must analyse not only corporate income tax (CIT) consequences, but also how the remuneration of individuals working in Poland should be taxed.

For a business, this means employee secondment to Poland must be assessed more broadly than as a simple mobility issue. It is an area where operational, HR and project decisions can directly affect tax obligations in Poland.

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Work performed in Poland and the basic PIT taxation rule

As a general rule, employment income relating to work physically performed in Poland may be taxed in Poland. This follows from the principles used in double tax treaties, which are based on the OECD Model Tax Convention.

In practice, businesses often rely on the 183-day rule. However, this is a simplification that can be misleading. The fact that an employee stays in Poland for fewer than 183 days is not, by itself, enough to exclude taxation in Poland. For remuneration to remain taxable only in the employee’s country of residence, other conditions must also be met at the same time.

The three elements most commonly analysed are:

• the length of the employee’s stay in Poland,
• the status of the employer paying the remuneration,
• whether the cost of the remuneration is borne by a permanent establishment located in Poland.

If even one of these conditions is not met, remuneration for work performed in Poland may need to be taxed in Poland, even where the employee’s stay is relatively short.

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The 183-day rule does not provide automatic protection

In business practice, it is the 183-day rule that most often leads to incorrect assumptions. Companies frequently assume that short-term secondment automatically removes Polish tax obligations. In reality, what matters is not only the number of days of physical presence in Poland, but also the actual operating model.

Tax risk increases in particular where the seconded employee:

• performs tasks that are an integral part of the business carried on in Poland,
• works under the day-to-day supervision of a Polish team or project structure,
• uses infrastructure provided in Poland,
• carries out tasks whose economic benefit remains with the Polish business,
• is costed in a way that suggests the remuneration is charged to operations in Poland.

In such cases, analysing only the duration of the stay is not enough. The tax authorities will focus on the real nature of the relationship and the actual use of that person’s work.

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Who is the economic employer and why it matters so much

One of the key concepts in employee secondment is the economic employer. This is not the entity named in the employment contract, but the one that actually benefits from the employee’s work and bears the related economic consequences.

The analysis focuses primarily on:

• who organises the employee’s day-to-day work and gives instructions,
• who controls where, when and how the tasks are performed,
• who provides the tools and infrastructure needed for the work,
• who decides on the scope of duties and evaluates results,
• who bears the business risk connected with the work performed,
• who ultimately bears the cost of the employee’s remuneration.

In practice, assessing these elements often requires combining tax analysis with a review of employment arrangements and settlement models. For that reason, early support with tax advisory in Poland and payroll services in Poland can be particularly valuable.

If, based on the overall facts and circumstances, the Polish entity or a permanent establishment in Poland is the real beneficiary of the seconded employee’s work, that entity may be treated as the economic employer for tax purposes. In such a case, the argument that the remuneration is formally paid by a foreign company may not be sufficient.

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Permanent establishment risk for a foreign company in Poland

The second key issue is permanent establishment risk. In practice, a permanent establishment in Poland may arise even if the foreign company does not have a separate legal entity or a formally registered branch in Poland.

This risk should be analysed in particular where the activity in Poland is organised and recurring, and where the presence of employees in Poland serves the business of the foreign enterprise. The more stable and operationally significant the activity carried out in Poland becomes, the greater the likelihood that the Polish tax authorities will examine whether a permanent establishment exists.
In practice, warning signs include:

• A regular presence of personnel in Poland

If a foreign company regularly sends employees to Poland and that presence is not merely incidental, the risk increases that the business will be viewed as carried on in an organised way in Poland.

• Performance of key business functions in Poland

The more important the tasks performed by seconded employees are to the core business of the enterprise, the harder it becomes to treat their presence as merely preparatory or auxiliary.

• Use of operational infrastructure in Poland

Ongoing use of office space, technical infrastructure or local resources in Poland may strengthen the argument that a permanent establishment exists.

• Charging employment costs to the Polish structure

If employee remuneration is allocated to business carried on in Poland, this matters not only for CIT analysis, but also for assessing the taxation of employees’ remuneration.

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When a foreign employee’s remuneration will be taxed in Poland

If a seconded employee physically performs work in Poland and that work supports business carried on here by a foreign enterprise or by its permanent establishment, the remuneration may be subject to PIT in Poland. This can happen even where the stay in Poland is not long.

From a practical perspective, the following combination of circumstances is especially important:

• the work is performed in Poland,
• the tasks form part of the core business activity carried out in Poland,
• the remuneration is economically borne by a permanent establishment or operating structure in Poland,
• the real beneficiary of the work is an entity in Poland.

In this model, taxation in Poland is not an exception, but a real and often likely consequence of the way the work has been organised.

Obligations on the employee’s and employer’s side
If remuneration for work performed in Poland is taxable in Poland, specific obligations arise for the employee and often also for the entities involved in the secondment model.

On the employee’s side, these may include in particular:

• tax registration obligations in Poland,
• an obligation to calculate and pay tax advances where there is no Polish withholding agent,
• an obligation to file an annual tax return in Poland.

It is worth noting that the fact that little or no final tax may ultimately be due does not automatically mean there are no filing obligations. In practice, the assessment should always be made individually, taking into account the employee’s tax residence status, the type of income earned, the relevant double tax treaty and the method used for collecting tax advances.

On the employer’s side, further questions arise as to whether there is a Polish withholding agent, whether a tax reporting process needs to be implemented in Poland, and whether the secondment model requires organisational changes before the project begins.

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Seconding employees to Poland and other regulatory risks

The consequences of seconding foreign employees to Poland do not end with PIT. In many cases, other areas also need to be analysed in parallel.

CIT risk

If the operating model creates a permanent establishment in Poland, the foreign company may also face obligations under Polish corporate income tax rules. This applies both to determining whether the permanent establishment exists and to attributing the relevant income and costs to it afterwards.

Obligations under posted worker regulations

Depending on the cooperation model, a foreign employer may also be required to comply with regulations on the posting of workers in the framework of services, including information and notification duties towards the National Labour Inspectorate (Państwowa Inspekcja Pracy, PIP) in Poland.

Work and residence legalisation risks

If third-country nationals are being seconded to Poland, a separate assessment of the legality of work and residence is also required. In some cases, intra-group or project-based secondment does not eliminate the need to obtain the appropriate permits.

Payroll and documentation risks

Problems also arise where the tax model is not aligned with HR documentation, mobility policies, intercompany settlements and day-to-day operational practice. In fact, inconsistencies between documentation and the actual way the work is performed are one of the most common triggers for scrutiny.

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How businesses should approach planned employee secondment to Poland

Before starting a project involving foreign employees in Poland, it is worth carrying out an analysis that covers not only employment law, but also tax, intercompany settlements and the practical management of personnel.

A good approach is to verify in advance:

• who will supervise the seconded employees on a day-to-day basis,
• which entity actually benefits from the results of their work,
• where and how remuneration costs will be charged,
• whether the activity in Poland may be treated as a permanent establishment,
• which obligations will arise for the employees and for the company,
• whether notifications or additional compliance actions are required.

This makes it possible to reduce the risk of a situation in which the correctness of the model is assessed only after several months of running the project, when some obligations should already have been fulfilled.

For companies planning more complex international mobility arrangements, earlier support with tax advisory in Poland and payroll services in Poland may be particularly helpful, especially where the secondment involves a long-term presence of personnel in Poland, intercompany settlements and permanent establishment risk assessment.

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Seconding employees to Poland should be assessed not only from an organisational perspective, but above all from a tax perspective. For PIT purposes in Poland, the key factor is not simply the formal employer or the number of days spent in Poland, but the actual model under which the work is performed. Particular attention should be paid to whether there is an economic employer in Poland and whether the foreign company’s activity may create a permanent establishment in Poland.

The more closely the seconded employee is integrated into the day-to-day business carried on in Poland, the greater the risk that the remuneration will be taxable in Poland and that additional tax and regulatory obligations will arise for the company. For this reason, the analysis should be carried out before the secondment begins, rather than only as a reaction to a tax audit or settlement problem.

Where planned employee secondment to Poland forms part of a broader operational or investment model, it is worth organising the tax, HR and documentation issues in advance in order to reduce the risk of errors and ensure consistency across the whole structure.

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If you have any further questions or require additional information, please contact your business relationship person or use the enquiry form on the HLB Poland website.

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