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Events coverage

Settling foreigners’ tax and social-security obligations

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For a foreigner working in Poland, ZUS and PIT regulations are black magic. They differ significantly from the rules by which Polish employees pay their tax and social-security contributions.

“When we employ workers from abroad, as well as those who divide their time between Poland and another country, we want them to focus on the business and work for which they were hired,”said Łukasz Bączyk, tax director at ASB Poland. Together with Justyna Trochimiuk, payroll manager at ASB Poland, he delivered training to BPCC members on 19 November 2019 about this difficult issue.
To determine the tax obligations of a given employee, it’s necessary to determine whether they are a tax resident or not. If the employee is a resident, which means having a place of residence and the centre of your life interests is in Poland, and you are staying in Poland for more than half a year, you are subject to unlimited tax liability in Poland. If the employee is a non-resident, according to the above criteria, only work performed in Poland is subject to taxation.

As regards social security contributions, a person subject to EU legislation is subject to social security in the country in which they physically performs they work. The employer is the payer of the contributions, whilst the employer is responsible for reporting their employees to the insurance office. In the case of non-residents, the A1 certificate –  a document that certifies that the employee is insured in another country – will be required. In this case, if the work is not performed for more than 24 months, the employee may be subject to contributions in their own country. This is regulated by the regulations concerning the posting of workers.

Passive income will also be subject to taxation – it may be taxed in both countries, depending on what results from a given double-taxation agreement.

When settling accounts in the annual tax return for foreign income, it is necessary to submit an additional PIT-36 or 37 form for business income. Double taxation is avoided by means of two mechanisms – progressive deduction or proportional calculation.

Employees receiving income from an employment relationship or pension from abroad are obliged to pay tax advances on their own. However, experience shows that they often do not remember about it or have to use the help of an external expert. Therefore, to improve the effectiveness of such settlements, it is worth considering transferring the settlements of such remuneration, regardless of whether it is the remuneration of Poles earned in another country or foreigners in Poland, to experts specialising in this field.

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