How, in the case of third-country nationals seeking residence or protection, working remotely for companies based outside Poland, are they to pay taxes in Poland. Are they entitled to do such work while claiming protection?
The issue of employment of third-country nationals in Poland is mostly regulated by:
1. Act on Promotion of Employment and Labour Market Institutions
2. Labour Code Act
3. Act on Foreigners
4. Act on Granting Protection to Foreigners within the Territory of the Republic of Poland
5. Law on Assistance to Citizens of Ukraine in connection with Armed Conflict in the Territory of the State
6. Personal Income Tax Act
Due to the multiplicity of legal acts, each case must be considered individually. However, the question posed is of a general nature and the answer will only provide a general overview of the legislation.
First of all, it is necessary to answer the question of what the legal employment of a foreigner is.
In the regulations on the employment of foreigners, it is difficult to find an answer to this question, therefore the definition of “illegal performance of work” indicated in the Act on Promotion of Employment and Labour Market Institutions should be used.
Illegal performance of work by a foreigner is the performance of work by a foreigner who is not authorised to perform work within the meaning of Article 87(1) or who does not have the relevant work permit, not being exempted under specific provisions from the obligation to have a work permit, or whose basis of residence does not entitle him to perform work.
Subsequently, the question of what it is to do work needs to be answered.
Performance of work by a foreigner means employment, the performance of other gainful employment, and performance of functions in the management boards of legal persons that have been entered in the relevant registers.
According to the definition presented, the performance of work includes, inter alia, employment or other gainful employment (e.g. under a contract of mandate).
The legislator did not exclude from this regulation the situation when the employer is an entity with no registered office in Poland.
Moreover, in the legal definition of an employer, the legislator indicated that an employer is an organisational unit, even if it does not have legal personality, as well as a natural person if they employ at least one employee.
Therefore, unless international agreements between the Republic of Poland and the country of the employer’s registered office regulate this issue differently, it is possible to accuse a foreigner of performing work illegally.
The risk of being charged is minimal but should nevertheless be taken into account by the potential employee.
Here, everything will depend on the position of the Border Guard (which verifies the legality of employment) or the Head of the Office for Foreigners (the appeal body in cases of obligation to return).
Regarding the obligation of persons residing in Poland but performing work for foreign entities not established in Poland to pay taxes, reference should be made to the definition of “tax residency”.
Tax residency in Poland is connected with the obligation to settle income in Poland on an unlimited tax liability basis.
In other words, persons with such residence are liable to tax on their entire income (revenue) regardless of the location of the sources of revenue (unlimited tax liability).
Natural persons, if they do not have their place of residence in the territory of Poland, are subject to tax obligation only on income (revenues) earned in the territory of Poland (limited tax obligation).
The criteria for determining the residence for tax purposes of an individual are contained̨ in Article 3(1a) of the Personal Income Tax Act.
A natural person is domiciled in Poland if:
1) has a centre of personal or economic interests (centre of life interests) in Poland, or
2) stays on the territory of Poland for more thaṅ 183 days in a tax year.
The definition of residence, included in the PIT Act, covers two criteria: residence in the territory of Poland for more than 183 days in a tax year or possession in the territory of Poland of a centre of life interests understood as a centre of personal interests or a centre of economic interests. The conjunction “or” means that if at least one of these criteria is met, the taxpayer may be regarded as a person who is a resident of Poland.
It is also important to bear in mind the problem of double taxation, i.e. the payment of taxes in the country where the person lives and in the country where the employer is established.
In this context, it is important to verify whether there is an agreement between Poland and the country of the employer’s registered office. Most agreements to which the Republic of Poland is a party provide that the remuneration of a person resident in Poland is taxable only in Poland.
At the same time, it should be indicated that in the case of foreign employers who do not have a registered office or representative offices in Poland, the employee who is a tax resident in Poland is responsible for the correct assessment of advance tax payments.
Pursuant to Article 44(1a), taxpayers who receive income from employment relationships abroad without the intermediation of payers are obliged to pay monthly advances on income tax without summons during the tax year.
This must be done by the 20th day following the month in which the income was earned, and for December – before the deadline for filing the return.
These advances should be paid according to the tax scale, applying the rate of 17% to the income earned.
After the end of the year, a return on form PIT-36 must be submitted by the end of April.