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It is increasingly common for employees to perform their work remotely from a country other than Poland. This has specific tax consequences for the tax treatment of this type of work, which employers are often unaware of.
One factor making the analysis of tax treatment particularly difficult in this case is the need to analyze the double taxation treaties applicable in each individual case, and national law if no double taxation treaty applies. Unlike the compulsory social security salary components, there is no EU-wide legislation governing the tax treatment of work performed in another EU member state.
While double taxation treaties must be analyzed separately, such treaties are often very similar. To illustrate the legal situation, the example of the German-Polish Double Taxation Agreement (PGT) on income and wealth tax of May 14, 2003 will be used. By virtue of art. 15 (1) of the PGT, in principle, double taxation can apply to wages, remuneration and the like earned by an employee while working in one of the Member States.
No double taxation will apply if the three conditions specified in art. 15 (2) of the PGT are fulfilled, i.e. if the points below apply to a Polish employee who works remotely from Germany:
· They do not stay for more than 183 days in total in Germany during a 12-month period starting or ending in the fiscal year in question;
The salary is paid by or on behalf of an employer who does not have its registered office in Germany, and
· The salary is not paid by a factory or a permanent point of sale that the employer has in Germany.
In the event of double taxation, the consequences of double taxation can be eradicated in one of the two ways, which are the exclusion of a progressive tax system or the proportional deduction. According to the first method, income earned outside Poland is exempt, while such income is included in the determination of the tax rate. This is the method provided for in the PGT. This means that a Polish employee working remotely from Germany is not required to pay tax in Poland on the salary received as an employee, but if he obtains income from a different source such as an agreement for a specific task, the salary of the job must be added to the income generated by this agreement for a given mission during the establishment of the progressive tax rate. The other of the two methods is proportional deduction. This applies for example in treaties with the Netherlands or Ireland. According to this method, there is also a real taxation of wages in Poland, while at the same time the tax paid abroad is deductible, and the tax paid in Poland for which the rule of proportional deduction was previously applied. is deductible.
To conclude, when an employee works remotely from a country other than Poland, a careful analysis of the relevant bilateral double taxation treaty is required.
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