The last few months have proven that travel restrictions or mandatory quarantine measures due to COVID-19 cause not only inconvenience to private life, but also the urgent need to determine tax and social security consequences of remote working.
Poland has implemented a few anti-crisis shields since the outbreak of COVID-19. They provide for the following setup of remote working:
→ the employer may recommend remote working until 3 months after the termination of the epidemic and is obliged to provide tools and materials needed for remote work and logistical support for remote work;
→ the employee must have the skills, technical and housing capabilities to perform the work remotely and the type of work itself allows for remote working and depends on instructions from the employer;
→ the employer is obliged to keep records of the activities carried out, including, specifically, a description of said activities, as well as the date and time of their performance.
Nevertheless, anti-crisis shields do not refer to tax or social security consequences.
On 3 April 2020, the OECD issued the “Secretariat Analysis of Tax Treaties and the Impact of the COVID-19 Crisis”, which addresses several tax concerns. The document clearly shows that: it is very unlikely that teleworking triggered by COVID-19 will affect the treaty tax residence position. Furthermore, tax obligations arising in the country of home office should be suspended or a way should be found to refund the tax to the employee.
Polish tax authorities have neither commented on the OECD Secretariat Analysis nor issued a statement presenting their own position. Neither have there been any private rulings issued lately for applicants in comparable cases. Bearing in mind the lack of local guidelines, employers and their remote workers may search for the answers in the OECD publication. At the same time, the approach of the Polish tax authorities must be observed very carefully in the coming months.
A similar conclusion applies to social security. The Polish Social Security Institution (ZUS) has not commented on the consequences of remote working caused by COVID-19. Whenever the official statements were issued, they referred to other pending topics. For example: suddenly, many employees, although healthy and able to work, were placed in quarantine due to contact with a person suffering from COVID-19. The ZUS confirmed employees’ right to carry out work remotely and receive a full salary during quarantine.
It is expected that temporary solutions will influence the post-COVID employment model in many industries which do not require constant presence on site.
If the home office becomes an employee’s permanent place of work in the future, then personal income tax and social security consequences must be determined under standard rules. In general, such an arrangement will simply lead to the obligation to pay taxes (on a monthly and annual basis) and social security contributions (on a monthly basis) in Poland. Depending on the specific scenario, registration in Poland or an additional agreement with the employee on assumption of the remitter’s duties may be needed.
Employers should also keep in mind that they may become CIT/VAT liable in Poland due to an employee’s remote work. Detailed terms and conditions of employment will prejudge whether an employer has so-called permanent (CIT) or fixed (VAT) establishment in Poland.
