Month: August 2023

In June this year, the Ministry of Finance prepared an amendment to the Tax Ordinance, which is to introduce changes concerning, among other things, tax interpretations. The novelties are intended to come into effect from 1 July 2024; the bill is currently undergoing consultation. The biggest changes are to relate to application fees, the validity date of tax interpretations and the way in which applications are to be submitted by professional attorneys and entrepreneurs. Tax interpretations are an important guarantee instrument from the point of view of business entities, so it is worth analysing the planned changes and assessing what impact they will have on the situation of companies in Poland.

New fees for tax interpretations

In the current legal situation, pursuant to art. 14f §1 of the Tax Ordinance, a request for a tax interpretation is subject to a fee of PLN 40, which must be paid within 7 days of filing the request. It is worth specifying that the fee does not strictly refer to one application, but to one factual state or future event included in it. In the project prepared by the Ministry of Finance, Article 14f §1 is to be given a new wording: ,,§ 1.An application for the issuance of an individual interpretation is subject to a fee, determined as at the date of its submission, not exceeding 100% of the minimum wage, however, for applicants who are natural persons not conducting business activity within the meaning of the Act of 6 March 2018. – Entrepreneurs’ Law, shall be subject to a fee not exceeding 1% of the minimum wage. The fee must be paid within seven days of the date of submission of the application.”. This means that the amount of PLN 40 will be removed from the Act, and the fee on applications submitted by will be linked to the amount of the minimum wage. The specific values of the fees will be specified in a Decree of the Minister of Finance. Fees on tax interpretations will be differentiated depending on the entity requesting the interpretation. The planned fees for specific groups are:

for applicants in respect of whom tasks are performed by the Head of the First Mazovian Tax Office in Warsaw – PLN 2,800
for the applicants for whom the tasks are carried out by a head of a tax office other than the locally competent one, except for the applicants referred to in point 1 – PLN 1400
for applicants for whom the tasks are carried out by the head of the tax office with territorial jurisdiction, and for other applicants not listed in points 1, 2 and 4 – PLN 400
for applicants who are natural persons not conducting business activity within the meaning of the Act of 6 March 2018. – Entrepreneurs’ Law and for applicants who are natural persons conducting business activity and who apply for an individual interpretation to the extent not related to business activity – PLN 40.
It is advisable to consult a law firm or a tax adviser who will help determine the correct fee in case of doubt.

When filing an application, entrepreneurs will have to reckon with much higher costs than at present. The increase in rates may cause some entities to give up submitting applications for financial reasons, which in turn will limit access to the guarantee tool of tax interpretations.

Dates of validity of tax interpretations

The bill is also to introduce a complete novelty with regard to interpretations, which will have a validity date from the moment the changes come into force. In the current legal state, this type of solution is not in force. An interpretation is issued indefinitely, and in order to terminate its validity, it is necessary to declare its expiry or revocation on the basis of grounds specified in the legislation. The planned changes provide for a 5-year limitation period. After this time, each interpretation will lose its validity and another fee will have to be paid to extend its life. Its expiry date will not be affected by whether the law remains unchanged, even then a particular interpretation will become obsolete after 5 years. All interpretations issued before 2019 will become time-barred on 1 January 2024. The explanatory memorandum indicates that the timeliness will unify and ensure certainty in the application of tax law. However, this solution also seems to have negative consequences for entrepreneurs, because even in a situation where the legal state will not change, after the indicated period they will be forced to incur further costs related to extending the validity of an individual interpretation.

Manner of filing applications by entrepreneurs and professional attorneys

Further changes provided for in the bill are issues related to the manner of submitting requests for interpretations by the above-mentioned entities. The amendment assumes that entrepreneurs and professional attorneys-in-fact will only be able to submit applications electronically. For this purpose, these entities will be able to use only an electronic delivery address or, if they agree to delivery, an account in the tele-information system of the tax authority authorised to issue an interpretation of the e-office system.

From the point of view of business professionals, this change should be viewed positively. Electronisation in the area of filing applications or communication with the public administration is a major acceleration of the entire procedure.

Summary

The changes planned by the Ministry of Finance for 2024 with regard to tax interpretations will have a major impact on professional entities operating in business. The most serious change for entrepreneurs is related to costs, which will increase significantly. Currently, fees from the application to the issuance of interpretations are relatively affordable, however, this situation will change with the entry into force of the amendment. In addition, interpretations will be subject to a 5-year time limit, the expiry of which will entail further costs. The indicated changes are not yet determined and the bill is at the consultation stage. However, tax interpretations are a useful instrument of protection for entrepreneurs who comply with the content of the obtained interpretation. We encourage you to contact us, our law firm applies for tax interpretations for businesses.

On 22 May 2023, the Family Foundation Act came into force. The aim of the new law is to protect family assets, minimise the consequences of a failed succession and guarantee the continuation of business activities in the form of a family foundation. The transfer of the assets through the instruments provided by the law is intended to protect them from distribution, to enable them to be multiplied and therefore to benefit from them, which will be able to be used to cover the living expenses of the persons designated by the founder. Indeed, the main function of the family foundation introduced by the law is to meet the needs of beneficiaries, i.e. as a rule family members. How will the foundation affect family businesses?

Family foundation: what does the law contain?

The law on the family foundation regulates the organisation and operation of the family foundation, including the rights and obligations of the founder and the beneficiary. Complementary changes are also introduced with regard to the right to inheritance and taxation rules in connection with the establishment, operation and dissolution of a family foundation.

The task of the new institution will be to achieve the objectives set by the founder, based on the assets donated by the founder. This is to serve the purpose of capital accumulation, which in turn increases the chances of investment activity. In doing so, the founder will be given some flexibility to define the specific objectives and outline the vision of the family foundation.

The founder will only be able to be an individual with full legal capacity to transfer assets to the family foundation (either all or part of the founder’s assets, depending on the founder’s wishes). A family foundation will be able to be established by more than one person, also by unrelated persons. Exceptions to this will be made only in the case of establishing a family foundation on the basis of a will (Polish inheritance law allows for the possibility of making a will by only one testator). A family foundation will provide certain benefits to the beneficiaries designated by its founder. The beneficiary, i.e. the person benefiting in accordance with the founder’s will, will be a natural person, a non-governmental organisation conducting public benefit activity or the founder of the family foundation. The law does not provide for a relationship requirement between the founder and the beneficiary. The assets of the family foundation created by the founder’s endowment will constitute the founding fund, the value of which should not be less than PLN 100,000, both at the establishment of the family foundation and later, during its operation.

A family foundation in Poland will be able to receive a donation. In doing so, it should be noted that there is no risk associated with making donations by any individuals, including when making a donation by subsidiaries of a family foundation. By making a donation, the donor will not become a founder. This is to enable the pooling of assets, particularly in the case of joint ownership. In addition to the document establishing the family foundation, i.e. the foundation deed or the will, the statutes will play the most important role. It will regulate the most important aspects of the operation of the family foundation and the organs established therein. Additional organisational issues will be able to be regulated in the bylaw(s), depending on the will of the founder and the members of the family foundation bodies.

Family foundation: organisation

The governing body for the family foundation will be the board of directors. It will be responsible for, among other things, achieving the objectives of the family foundation and taking steps to ensure its liquidity and solvency. As a matter of principle, the supervisory body, the supervisory board, is an optional body for the family foundation. The obligation to appoint a supervisory board will arise when the number of beneficiaries exceeds 25. A member of the supervisory board will be able to be an individual with full legal capacity.

The Family Foundation Act also provides for the obligation to establish a beneficiaries’ assembly, the main purpose of which will be to maintain the continuity of the functioning of the other bodies and thus the proper operation of the family foundation. Beneficiaries, while serving in the bodies of the family foundation, will be obliged to comply with the statutes and to take into account the will of the founder, to the same extent as members of these bodies who do not have beneficiary rights. The registration of the family foundation in the register of family foundations will enable it to acquire legal personality. Notification of the establishment of a family foundation will be made by the founder and, in the case of the establishment of a family foundation in a will, by the board of trustees. The register will disclose the details of the family foundation, which, in view of the need for the board to report changes to them, should remain up-to-date.

The family foundation will be jointly and severally liable for the founder’s obligations incurred prior to the establishment of the family foundation. In addition, it will be able to be liable for the founder’s maintenance obligations arising both before and after the establishment of the family foundation when enforcement of the founder’s assets is unsuccessful (subsidiary liability). The family foundation will therefore be liable for the founder’s outstanding, current and future obligations towards the person subject to the maintenance obligation. Claims of persons towards whom the founder has a maintenance obligation, whether they are beneficiaries or not, will be satisfied first. In doing so, the liability of the family foundation is limited to the value of the property contributed by the founder.

The new legislation also provides mechanisms for the termination of a family foundation and its liquidation similar to the solutions known in company law. The family foundation will be dissolved if the competent bodies of the family foundation pass an appropriate resolution to that effect. In exceptional cases, the family foundation will be able to be dissolved by a court.

The possibility to waive the right to a reserved share (also in part) and the possibility to spread, defer or even reduce the amount of the reserved share, taking into account the personal and financial situation of the person entitled to the reserved share as well as of the person obliged to satisfy the reserved share claim, will be introduced. In addition, the benefits received from the family foundation by the beneficiary will reduce the value of the reserved share and the received reserved share will reduce the value of future benefits to which the beneficiary is entitled from the family foundation.

A family foundation and taxes

The following aspects should be pointed out with regard to the taxation of a family foundation. The acquisition by individuals from the family foundation of benefits and property in connection with the dissolution of the family foundation will be taxed with personal income tax, in an amount depending on the degree of the beneficiary’s relationship to the founder (exemption in the case of the founder and relatives belonging to the so-called ‘zero group’ in relation to the founder, as defined in the Inheritance and Donation Tax Act, i.e. spouse, descendant, ascendant, stepchild, sibling, stepfather and stepmother, 15% in the case of other persons). Only the portion of such benefit or property acquired by the funder or a person belonging to ‘group zero’ in relation to the funder, corresponding to the current proportion specific to that funder in the estate inventory, will be exempt from personal income tax. The family foundation will, in turn, be subject to the income tax introduced in the Corporate Income Tax Act on the benefit transferred or made available by the family foundation directly or indirectly and the property in connection with the dissolution of the family foundation at a rate of 15 per cent.

The VAT consequences of transactions and events carried out in connection with the introduction of a family foundation into the legal system will be determined in specific factual situations on the basis of the existing national VAT legislation taking into account the regulations arising from the VAT Directive and other EU legislation. The Act does not introduce changes in this respect.

Changes on the economic market, deterioration of the financial situation or new investments often force a limited liability company to raise additional funds. The Polish Commercial Companies Code provides such a possibility in the form of additional contributions from the shareholders. This is an instrument beneficial to the company in a situation where it does not want to use external sources. The Commercial Companies Code does not limit the purposes for which the funds from the additional payments can be used. However, in practice, companies most often reach for additional payments from shareholders in situations of financial difficulties. Additional funds often provide a way out of a difficult financial situation and are a necessary tool for the company to avoid a long-term financial crisis including, ultimately, bankruptcy.

Shareholder surcharges versus a loan?

Surcharges are not of a clear-cut nature, the institution being something between a shareholder loan and a shareholder contribution to the share capital. Surcharges can only be of a monetary nature and should be imposed and paid by the shareholders equally to their shares. They constitute part of the company’s assets, but it should be remembered that they do not enlarge the shares in the share capital or increase it either. Their purpose, like a loan, is to recapitalise the company, which gives it various options in its future operations. A loan is always repayable, surcharges are in principle also of a temporary and repayable nature, however, under certain conditions they may be non-reimbursable to the shareholders. Furthermore, interest is generally not charged on surcharges. The next issue that makes the difference between a loan and a surcharge is how both will be reported and treated in the balance sheet. A loan will be shown under liabilities, which may restrict the company from incurring other liabilities, whereas surcharges will be shown under liabilities as reserve capital, which does not have such restrictive consequences. If you are in doubt about which option is right for your company, it is worth consulting a law firm.

How to apply the surcharges?

Pursuant to Article 177 §1 of the Commercial Companies Code (k.s.h.), the obligation of shareholders to apply surcharges must be included in the company’s agreement. Such an obligation may be included in the original company’s agreement or may be introduced as part of an amendment to the company’s agreement. It is important to note that, in such a case, an amendment to the company’s agreement imposing a surcharge obligation on the shareholders will require the consent of all shareholders. Despite the discrepancies concerning the question of whether the obligation to make surcharges may be imposed only, on some shareholders, it should be considered that the obligation must be imposed on all shareholders. Importantly, the articles of association must specify the numerical amount of the surcharge in relation to the share. The obligation to pay surcharges is triggered by a resolution of the company’s shareholders’ meeting, except where the company’s articles of association regulate the amount and timing of surcharges to be paid. Most often, however, it is the resolution of the shareholders’ meeting that determines the amount of surcharges and the deadline for their payment. The deadline for payment of surcharges specified in the resolution of the shareholders’ meeting is very important from the point of view of the shareholder’s liability, as pursuant to Article 178 §2 of the Commercial Companies Code the company will be entitled to interest for delay if it fails to fulfil its obligation on time. The reason as a result of which the shareholder did not pay a certain amount of the surcharge remains irrelevant in this case. In addition, the company will be able to claim compensation from the shareholder for damages resulting from the delay. However, the regulations allow for other rigours of liability to be included in the articles of association, which means that it is possible to modify them by mitigating the amount of interest or waiving certain claims. When adopting a resolution on additional payments, it is advisable to seek the assistance of a law firm in order to obtain the most favourable provisions.

Surcharge recovery – how and when?

The return of surcharges is also a very important issue. As in the case of their granting, their return will require the adoption of a specific resolution by the shareholders’ meeting. However, it will not be possible in every situation. According to the Commercial Companies Code, surcharges may be returned if the surcharge is not required to cover a balance sheet loss. Reimbursement may not take place until one month has elapsed from the date of the announcement of the intention to reimburse in the Monitor Sądowy i Gospodarczy. It can be concluded that the refund procedure regulated by the Commercial Companies Code is quite time-consuming and costly, as a fee must be paid for each day of the announcement. According to the regulations, returns should be made equally to all shareholders. However, it is possible to regulate in the company’s agreement much more favourable, flexible and quicker conditions for the return of surcharges. It is advisable to seek advice from a lawyer in order to establish the best possible provisions in this regard.

Surcharges and tax consequences?

Corporate income tax (CIT)
Under the CIT Act, surcharges applied by shareholders are not treated as income if paid in accordance with the Commercial Companies Code. Therefore, the payment of surcharges will not give rise to a liability in this respect.

Personal income tax (PIT)
Shareholders who are natural persons do not have to pay income tax on the income in the form of the return of surcharges in an amount determined in PLN as at the date of their actual contribution. However, the interest earned by the partner, where interest on the surcharge has been reserved, is subject to taxation.

Tax on civil law transactions (PCC)
In the Act on tax on civil law transactions, surcharges are treated as an amendment to the company’s agreement. As such, they are taxed on the same basis as the conclusion of a company’s agreement or an amendment to that agreement. Therefore, the tax rate is 0.5% of the amount of the additional payments. The obligation to pay PCC tax on additional payments to a limited liability company rests with the limited liability company itself, which, as a taxpayer, is obliged to file a declaration on PCC, calculate and pay the tax within 14 days of the date on which the resolution on additional payments was adopted.

On 10 July this year, the Council of Ministers adopted a draft law amending certain laws to improve the legal and institutional environment for entrepreneurs. The amendment was prepared by the Ministry of Development and Technology. The proposed amendment went to legislative work in the parliament on 19.07.2023. According to plans, the amendment will be mostly effective as early as 1 January 2024. The new legislation is primarily intended to introduce another set of simplifications and conveniences for entrepreneurs. It can be said that the new package prepared by the ministry is a continuation of previously introduced pro-business laws aimed at entrepreneurs, which were intended to create a favourable and developmental environment for companies in Poland. The new regulation is primarily about easier rules for doing business, improvements for succession and greater transparency of economic law for business entities. The changes in question are to concern dozens of laws, including civil law, commercial companies, public business law, banking law and administrative regulations. In total, the draft includes changes to be introduced into more than 50 laws. In this article we will present some of the proposed solutions, which may prove to be the most crucial from the point of view of entrepreneurs and their activities.

Continuation of the Business Constitution

In 2018, the so-called: business constitution was introduced in Poland, which consists of a set of 5 laws. The regulations were intended as a package aimed at developing and improving the business environment. Above all, their aim was to create a new, simpler and more beneficial relationship between entrepreneurs and public administration. The bill proposed by the Ministry of Development and Technology is a continuation of the regulations introduced in 2018. The amendment is largely concerned with simplifying and speeding up administrative procedures. Entrepreneurs in offices will not have to submit a power of attorney document if it will be possible to establish the existence of the power of attorney on the basis of relevant registers e.g: KRS. The amendment provides for a further departure from the possibility for offices to require the use of a stamp from entrepreneurs. The draft also places great emphasis on the manner in which projects concerning the running, commencement or termination of business activity are prepared. Normative acts undertaken in this area should be prepared on the basis of the principle of proportionality, adequacy and balancing of administrative obligations, as well as in a transparent manner for business entities. The amendment also provides for an appropriate vacatio legis for acts in the field of economic law, which, as a rule, should not be shorter than one month.

Simplified administrative procedures – specific solutions

The prepared bill provides for a package of various solutions in the area of administrative procedures. They are primarily intended to make proceedings before public administration authorities easier and faster for entrepreneurs. Among other things, the amendment will introduce the so-called hybrid decisions, meaning that the authority will deliver the decision to the entrepreneur traditionally on paper, but attachments will be able to take a different form, for example, electronic. The new regulations will introduce another innovation, the so-called: soft service. The authority will be able to ask the entrepreneur to take a position without the need to initiate proceedings immediately. The amendment will impose an obligation on public administration bodies to prepare a justification in a situation where a given action will have to be taken by an entrepreneur in person or by proxy. The changes will also cover issues related to inspections carried out at the premises of companies. Under the new provisions, the authority will be obliged to provide the controlled entity with a list of documents and information which must be prepared by the controlled entity prior to the planned control, together with the notice about it. Significant changes will also be introduced with regard to appeals. In the event of an appeal against a decision to a higher instance, the body of first instance will be obliged to take into account any circumstances indicated by the body of second instance. Violation of this obligation will be subject to certain disciplinary and disciplinary sanctions for the authority and the employee. The regulations will also introduce changes with regard to administrative penalties. The amendment assumes for public administration bodies the possibility of their remission also ex officio.

Succession administration – significant changes

The new legislation will also introduce significant changes to the Law on Succession Administration. The draft provides that the succession administration will be automatically extended until the court issues an appropriate order, unless there are grounds for its termination. The amendment also provides for simpler procedures with regard to the establishment of the succession management itself. Currently, an entrepreneur does not have the right to appoint successive administrators, he can only appoint the first one during his activity, who will act after his death. Once the amendment comes into force, these provisions will change. The entrepreneur will be entitled to appoint successive administrators during his lifetime, and if he does not do so, this power will pass to his heirs after his death. The bill is also intended to reduce the number of heirs required to appoint a successor administrator. After the amendment, 75% of shares will be required for the selection procedure, instead of 85% as at present. The bill also clarifies the remuneration issues, the new regulations clearly provide for the administrator to receive remuneration, which is not so obvious under the current regulations. Significant changes will also be made to banking law. The bill also provides that the account of a deceased entrepreneur will be maintained under the current rules. This means that if the deceased used electronic banking, the successor administrator will also have full access to it.

Other novelties for entrepreneurs

Regulations concerning leasing agreements will also be amended. According to the amendment, these agreements will be able to be concluded in documentary form without the need for an electronic signature verified with a qualified certificate. The bill also places emphasis on amicable resolution of disputes in business matters. The amendments assume that, in this respect, the court should refer the parties first to mediation. The new regulation will also cover the Tax Ordinance Act. The bill introduces the possibility to waive the appeal against the decision of the first instance. In addition, it will be possible to sign the MDR-3 form ‘Beneficiary information on the application of a tax scheme’ by a proxy, and the closed catalogue of information that a taxpayer is obliged to include in his tax strategy will be clarified. The amendment also provides for the creation of a single place where information on local tax rates covering property taxation will be collected.

Summary

In summary, the bill on amending certain laws to improve the legal and institutional environment for entrepreneurs provides for a large number of changes in many areas of the law. The changes are intended to create favourable conditions for business and to encourage various entities to undertake business activity in Poland. The changes are evidently aimed at simpler, more transparent and beneficial solutions for entrepreneurs. It can be expected that the adopted path will, to some extent, encourage companies to invest in Poland and that the new regulations will be positively assessed by business entities. However, not all of the proposed novelties may prove beneficial to companies in practice. Moreover, given the number of changes to be introduced at the same time, the amendment may initially cause some confusion. To avoid this, we encourage you to contact the experts at ATL Law.

Despite the fact that regulations tightening the regime for posting workers to EU countries came into force in 2020, the majority of entrepreneurs still fail to comply with the requirements of the EU and the country of posting when sending workers abroad. Unaware of the rules, employers often only find out about the posting requirements during inspections by foreign authorities. Unfortunately, by then it is too late and the entrepreneur faces severe sanctions.

Who is a posted worker?

A posted worker is a worker who is temporarily sent by his or her employer (principal) to perform a service in another EU member state. Importantly, from the perspective of EU law, it is irrelevant whether the posted worker is seconded (receives an addendum to his/her employment contract temporarily changing his/her place of employment) or sent on a business trip (by order of the employer). In both cases, we are dealing with a posted employee.

Posting of employees abroad – sources of law

Let us recall that the issues related to posting are regulated by Directive 96/71/EC of the European Parliament and of the Council (EU) (as amended after 28 June 2018) and the national legislation of the EU countries implementing it. There is still a lingering belief among Polish employers that it is sufficient to provide employees with A1 certificates and a foreign minimum wage. This is a mistake that can expose not only the entrepreneur but, in some cases, also its employees to negative consequences. It also does not help that consultants of Polish social security authorities (e.g. ZUS), while confirming that employers have fulfilled their obligations on the Polish side, sometimes mislead entrepreneurs as to the requirements applicable in the country of posting.

Posting of employees abroad – basics

Whether an employer is faced with sending its employees abroad to provide services to contractors or sending them to its foreign company, it will have to comply with the local terms and conditions of employment. The situation is similar when it is the foreign company that uses a temporary work agency to hire a Polish employee to work for its company.

The conditions in question relate to:

minimum rest periods
maximum working time
minimum paid annual holidays
remuneration (including all its compulsory elements) as stipulated by national law or universally applicable collective agreements
health and safety at work
protective measures for pregnant women, women immediately after childbirth and young people (under 18 years of age)
equal treatment of women and men
accommodation conditions for workers in the host country, if to be provided by the employer
allowances or reimbursement of travel, board and lodging expenses when these are required during the posting.
Compliance with local working conditions alone is not sufficient to ensure full legality of the posting process. All because of the additional administrative obligations imposed on employers in connection with customs control, as well as the so-called ‘rule of preference’.

Posting of workers abroad – additional requirements

The countries to which a worker is posted establish additional obligations depending, among other things, on the sector of the company (or within which the posted workers work), the amount of remuneration or the form of employment of the persons sent abroad. Most commonly, these obligations relate to notifying the competent authorities prior to the start of the posting, as well as ensuring the availability and translation of the relevant documentation. It is worth noting that the type and scope of obligations vary depending on the country to which employees are posted.

Particularly formalised are the cases of posting abroad of foreign nationals (citizens of non-EU countries) and labour intermediation (posting of employees under the rules of temporary work agencies). In such cases, most countries require the registration of Polish employers in foreign trade registers, obtaining the relevant licence and residence title for employees.

Local employment conditions – what are they?

According to the Posting of Workers Directive, a posted worker cannot have less favourable terms and conditions of employment during the posting period than local workers employed in the same/similar industry. On the other hand, the most favourable terms and conditions of employment possible must be provided to posted workers, taking into account the legal system of the country from which the worker is posted (Poland) and the country of posting (abroad). The issue is also not made any easier by the fact that in most Western European countries we are not only dealing with statutory labour regulations, but dozens of so-called collective agreements that may also apply to posted workers. The shortcut of providing the posted employee with a minimum foreign wage and a holiday period is therefore not enough.

Posting of workers abroad – ignorance of the law harms

Below is an overview of the range of penalties provided for failure to comply with posting regulations in the representative EU countries to which Polish employers most commonly post employees:

Germany

Penalties of up to EUR 30,000. Penalties of up to €500,000 in the case of violations in the field of temporary work agencies.

France

Sanctions of up to EUR 500,000 (depending on the number of posted workers)

Netherlands

Administrative sanctions of €750 to €8,000, which may be increased by 75% depending on the circumstances of the infringement.

Belgium

Administrative sanction: from €50 to €6,000, in extreme cases criminal liability of 6 months to 3 years’ imprisonment.

In the event of non-compliance with residence regulations for posted workers from outside the EU, the country’s customs authorities may deport a third-country national to his or her home country.

Social security

The issue of social security is only one of the many obligations of the posting employer, but nevertheless it should not be neglected. In order to benefit from the possibility to pay social security contributions on the employee’s salary in Poland for the duration of the posting, an A1 form must be applied for. The A1 document confirms that the posted employee is registered in the social security system of the posting country and does not have to pay contributions in the country of posting.

When applying for an A1 document, the start and end dates of the posting in another EU country must be stated. The maximum period of posting that can be given is 24 months.

Posting of workers abroad – risks

Posting employees abroad involves risks not only in terms of failing to comply with the regulations that condition the posting itself. There are a number of pitfalls exploited by foreign control authorities with regard to, among other things, tax regulations or broad definitions of labour intermediation. For example, in Germany, some of the sectors in which workers are posted are automatically recognised as labour intermediation, which obliges Polish entrepreneurs to obtain the relevant licence before starting to post. The lack of such a licence entails a fine of up to EUR 500 000. In addition, as a rule, only EU citizens may be posted to Germany as agents of employment, which excludes the possibility of posting, for example, citizens of Ukraine or Belarus. Another example is the so-called tax establishment, the creation of which obliges entrepreneurs sending employees abroad to tax part of their profits in the countries of secondment. The popular 183-day rule will not always apply either.

Unfortunately, as in the case of posting regulations, most entrepreneurs only become aware of the aforementioned risk points in the event of an inspection by foreign customs, labour inspectorates or the tax authorities, in which case the possibilities of defending the company’s interests are already very limited.

Do not hesitate – rely on experts

ATL Law advises entrepreneurs on matters related to international labour mobility, including tax and social security issues. We support companies in completing the formalities related to the posting of employees abroad, including to EU and non-EU countries, relocations, as well as the performance of work by posted employees in the territory of Poland. We approach each posting process on an individual basis, indicating responsibilities and a course of action appropriate to the client’s industry and scale of operations. We help to establish the right collective agreements, show how and where to report secondments and minimise the risk in case of inspections.