Category: Bez kategorii

Accommodation costs during business assignments

On January 9th this year, the Supreme Administrative Court (NSA) once again affirmed the previously presented stance, stating that providing accommodation to an assigned employee by the employer does not generate income on the employee’s side that would be subject to personal income tax (PIT).

In the analyzed case, the company offered its specialized services in the renovation and maintenance of production lines abroad, mainly within the European Union. This involved numerous travels by employees to locations far from their places of residence by several hundred or even several thousand kilometers. Consequently, the employer either provided free accommodation or covered the costs associated with their accommodation at a location and under conditions chosen by the company.

The dispute between the company and the Director of the National Fiscal Information and the Administrative Court primarily arose from whether providing employees with free accommodation related to assignments constitutes income taxable under personal income tax.

The Supreme Administrative Court’s ruling in favour of the company resulted from its filing of a cassation complaint against a previous judgment of the Administrative Court in Cracow, which agreed with the stance of the Director of the National Fiscal Information, asserting that providing accommodation to an employee is in their interest and, therefore, generates income on their side. Consequently, the employer is obliged to include it in the calculation of advance payment for personal income tax.

The NSA disagreed with this position and, drawing on guidelines established by the Constitutional Tribunal regarding non-remunerated benefits, concluded that providing accommodation to employees during assignments is in the employer’s interest. The employer gains a benefit in the form of contract fulfillment, which would not be possible without the assigned employees.

Equally important was the NSA’s reference to European law. The directive concerning the posting of workers to provide services specifies that reimbursements for expenses such as travel, meals, and accommodation are not included in the remuneration of these workers.

The position presented by the NSA is another, following similar judgments in August 2023, confirming that a consistent judicial line is being established on this matter.

 

Business travel of remote workers

In the case of another group of employees primarily working remotely, it is worth examining a recent individual interpretation issued by the Director of the National Fiscal Information. It was stated that the travel of such an employee to the office, if requested by the employer, should be considered as a business trip.

In the analyzed case, the limited liability company operated in the IT industry and employed workers residing in various regions of Poland who performed their duties remotely. The place of work specified in the contract was the province where the respective employee lived. Their presence in the office was sometimes necessary for the performance of their duties, and the company wanted to confirm its reasoning that, in such cases, it constitutes a business trip for these employees. The tax authorities had no objections.

A positive consequence for employers and employees of recognizing such a journey as a business trip is the possibility of exempting the costs of such travel from PIT based on Article 21(1), point 16, letter a) of the Personal Income Tax Act.

When availing of these exemptions, interested parties should, however, be mindful of the limits set by the Minister of Labor’s regulation of January 29, 2013 (i.e., Journal of Laws from 2023, item 2190).

Do these issues concern your organization? Do you need assistance in regulating remote work or in settling accounts for mobile employees? If so – do not hesitate to contact us!

 

With a population exceeding 38 million and ranking as the sixth-largest economy within the European Union, Poland currently stands as one of the most attractive destinations to do business, renowned for its welcoming investment climate. This, among others, is significantly underpinned by the country’s strategic geographical location at the heart of Europe, intersecting major trade routes.

In addition, with the hopeful prospect of an imminent end to the war in Ukraine, Poland emerges as a beacon of potential for companies aiming to contribute to the reconstruction of the war-torn region.

 

War in Ukraine and its impact on Poland’s entrepreneurial landscape

Since the outbreak of war, an estimated 6 million Ukrainian refugees have sought refuge and asylum in European Union countries. As of July 18, 2023, according to UNHCR data, Poland emerged as the primary destination for these displaced individuals, with approximately 1.6 million Ukrainians applying for asylum or seeking temporary protection within its borders.

Since then, Poland has not only become a shelter for refugees but also a new home for Ukrainian businesses. These Ukrainian companies have sought a safer operating environment, appreciating such advantages as Poland’s geographical location and cultural proximity. In addition, experts emphasize that, despite the ongoing war, Ukrainian companies are actively preparing for their country’s recovery. They are eager to establish partnerships that provide a solid foundation for future expansion, both into Western European markets and their homeland, Ukraine. Some even entertain that the branches established in Poland may become permanent, leading to mutually beneficial collaboration between Polish and Ukrainian businesses.

Taking the above into account, Poland emerges as an ideal destination for entrepreneurs looking to participate in Ukraine’s reconstruction efforts. However, to ensure success of this endeavor, it is essential to consider key aspects related to opening and running a business in Poland.

 

Specific business operational opportunities

First of all, it seems essential for an entrepreneur to determine at the outset whether they are establishing an entity in Poland or not. This aspect is especially important in the light of possibilities that Poland offers as one of the few countries in Europe which allows employment under a foreign contract without the requirement to establish a branch. The Polish employment system offers a variety of work arrangements corresponding to the specific needs of individuals based on their working environments.

Consequently, distinct forms of employment exist, each characterized by different principles of income taxation (progressive, linear or lump sum), social security contributions and labor law obligations. These forms encompass, among others: appointment to the Management Board, managerial contracts, B2B (business-to-business contracts), employment contract.

Also, under certain business justifications and proper structuring, individuals may choose to perform their duties based on two different legal forms, taking advantage of the benefits associated with various employment or cooperation arrangements, so-called “split structures”.

 

Hints on taxation of individual’s income

Taxation of an individual’s income plays a pivotal role in selecting the most suitable form. Certain forms offer tax preferences that are for instance provided for creative workers, by transferring copyrights to the employer, or for businesses conducting research and development activities.

However, choosing the most advantageous form of taxation often carries risks if not managed properly, and preferably should be executed with the guidance of a tax advisor, to ensure that proper accounting practices are in place. Due to the scope of duties performed, some activities may not fall under a given form of employment. Misclassifications may lead to the tax authorities questioning a chosen form of cooperation, potentially reclassifying e.g. the B2B contract as an employment contract and subjecting it to the progressive taxation rules (32% PIT above the threshold of PLN 120 000 income).

The aforementioned solutions are in accordance with the presently effective legal regulations.

For individuals temporarily relocated to Poland or with their center of personal or economic interests located outside Poland, determining tax residence is also crucial, adhering to the Polish Personal Income Tax Act and relevant tax treaties to prevent double taxation. Notably, Polish tax residents are taxed on their global income, whereas non-Polish residents are only taxed on income generated within Poland, making it essential to navigate these complexities with the aid of a professional tax advisor.

Finally, it is essential to emphasize that there is no “shadow payroll” concept in Poland. Individuals who are Polish tax residents or derive income from the territory of Poland are obliged to withhold monthly tax advances to the relevant tax authorities.

With regard to Polish Social Security (ZUS) and healthcare duties, depending on the business setup, these obligations may be fulfilled either by the employer or the individuals themselves.

 

Ensuring compliance

To mitigate these risks and streamline operations, many businesses choose to outsource these obligations to professional consulting and accounting firms, who ensure that all fiscal responsibilities are accurately and punctually managed, thereby avoiding negative consequences and reducing operational costs.

In the field of human resources and payroll, professional consulting companies provide comprehensive support starting from the necessary registration depending on the type of employment, along with all related obligations in the field of insurance and taxes, through monthly calculation of remuneration and, at the end of the year, preparation of annual declarations. They also support entrepreneurs in the event of termination of employment, settlement of payroll and issuance of necessary documents.