Month: May 2025

What is SOKA BAU?

SOKA BAU is the German construction industry holiday fund, which operates based on the collective labour agreement on the operation of social funds in the construction industry (VTV), which under the German Act on the Posting of Workers Abroad (AEntG) also applies to employers delegating their employees to work in Germany. Accordingly, an employer paying wages to a construction worker working in Germany should deduct the appropriate percentage from the wages as a contribution paid to the holiday fund.

Determining whether a given employee qualifies as a construction worker under the collective agreement is not as straightforward as it might seem. The legal act precisely lists the types of work and professions considered construction work and those which are not. Construction work includes, among others: laying and fitting panels, tiles, and mosaics; bricklaying; plastering, stucco, gypsum, and drywall work; building drying; façade work; road construction; and drying of buildings. Work not considered construction includes, for example, that carried out by glaziers, plumbers, or electrical installers, unless such persons perform tasks listed as construction work.

Currently, the contribution payable to SOKA BAU amounts to 15.4% of the gross wage paid for work in Germany and must be paid to the holiday fund’s account by the 20th day of the month following the month for which the contributions are made. For employees posted to work in Germany, only the portion of wages paid for work performed abroad is subject to contributions; the portion paid for work performed in Poland is exempt from contribution deductions.

How does SOKA BAU work?

The holiday fund creates two funds from the collected contributions: the equalisation fund for construction holiday wages (ULKA) and the additional financial security fund in construction (ZVK). The money held in the equalisation fund for construction holiday wages constitutes the amount from which wages paid as holiday remuneration to employees employed in Germany are disbursed.

An employee who, despite contributions being paid, did not take holiday during work in Germany, has the right to request payment of an equivalent for unused holiday pay. The application for payment of the equivalent for unused holiday can be submitted three months after the end of work in Germany, as this is when the holiday fund legally considers that the employee will not return to work in Germany in the near future and holding their contributions is no longer necessary.

Holiday claims and claims for the equivalent expire at the end of the year following the year in which the claim arose. In such cases, SOKA BAU pays compensation for unused holiday or unpaid equivalent.

What are the consequences of not paying contributions?

Delays in paying contributions result in interest charges of 0.9% on the contribution amount for each month of delay. SOKA BAU may initiate legal proceedings in case of unpaid contributions, which can cause additional problems because, according to the collective agreement, the only competent court for these matters is the court in Wiesbaden – the city where the holiday fund’s headquarters are located.

Failure to pay contributions on time also constitutes an offence under German criminal law, in which case a fine of up to €500,000 may be imposed.

Some countries have their equivalents of the construction industry vacation funds like SOKA BAU; such countries include, among others, France, Austria, Italy, and the Netherlands. In such cases, after obtaining the appropriate certificate from the national institution, SOKA BAU exempts the employer delegating construction workers to work in Germany from paying contributions to the German fund, thus avoiding double social security contributions on wages. Unfortunately, Poland does not have an institution similar to the German construction industry vacation fund, and it should be remembered that the Polish Social Insurance Institution (ZUS) is not a Polish equivalent of SOKA BAU. The Polish ZUS is an institution responsible for collecting contributions to provide social security benefits such as accident pensions or retirement pensions, while SOKA BAU collects contributions that protect construction workers in the event of work stoppages and leave situations, where the fund covers the corresponding costs of holiday pay. Accordingly, it can be confirmed that the activities of ZUS and SOKA BAU are not identical, and Poland lacks an equivalent of the German construction industry vacation fund. Therefore, Polish employers delegating construction workers to Germany are obliged to pay contributions to the German construction industry vacation fund.

Agreement between ZUS and SOKA BAU.

In cases of employee delegation to Germany, if no benefits were claimed during the delegation period, it is possible to recover the paid contributions. The employee can do this by submitting an application for the payment of an equivalent for unused holiday benefits. Thanks to the agreement concluded on 24 May 2018, along with the payment of the equivalent, SOKA BAU will transfer to ZUS, to the payer’s account, the appropriate amount of contributions on the paid equivalents in the part financed by the employee. In this way, contributions financed by the employee go directly to the contribution payer’s account.

The transfer of the relevant amounts by ZUS causes, as before signing the agreement between SOKA BAU and ZUS, the payer’s obligation to include the amount of the paid equivalent in the basis for contributions, to settle the due contributions in the appropriate monthly settlement documents, and to include the part of contributions financed by the payer when paying contributions.

The above-described rules for transferring funds apply to contributions on equivalents paid based on applications submitted to SOKA BAU after 1 June 2018. The rules for transferring funds by the fund to cover contributions due for paid holiday benefits have not changed based on the agreement.

Tax matters.

When paying the equivalent to the employee, SOKA BAU is obliged to withhold 21.1% of the paid amount. Of this withheld portion, 20% of the equivalent is the amount allocated for income tax payment in Germany, and 1.1% is the so-called “solidarity surcharge,” which together with the previous part is automatically paid to the Tax Office in Wiesbaden (the city where SOKA BAU is based). Accordingly, this income is taxed in Germany, will be exempt from taxation in Poland, and should be reported on the PIT-11 form as income earned in Germany.

The vacation fund system for the construction industry (SKOA BAU) requires monthly reports from entities obliged to participate in the system to properly calculate the monthly contribution amounts. The primary method of submitting data to the vacation fund system is by completing the appropriate electronic forms via the online vacation fund system. Upon meeting specific criteria and submitting the relevant application, it is possible to submit this data in a non-electronic form.

Access to the online data submission system is possible after completing preliminary formalities, which involve filling out the appropriate application and sending it back with a signature to SOKA BAU. At the start of using the system, it is necessary to fill in the relevant fields with basic information for each employee, such as date of birth, full name, and address. Each month, the deadline for submitting the required information for that month is the 15th day. The system requires data on working time in Germany and wages paid; after submitting this information, the system automatically calculates the contribution costs for the given month. The determined amount must be paid into the vacation fund’s account by no later than the 20th day of the respective month.

The non-electronic procedure for submitting monthly information to the SOKA BAU system is possible after submitting the aforementioned application, provided it is proven that the electronic procedure is uneconomical or impossible for the employer due to other personal reasons. Until the application is reviewed, the employer is authorised to submit information in a non-electronic manner. The non-electronic procedure consists of completing forms previously sent by SOKA BAU and sending them back to the vacation fund no later than the 15th day of the given month, just like in the electronic procedure. Data submitted via the non-electronic procedure does not differ from data submitted through the online system.

The deadline for submitting the relevant data is final and cannot be changed or extended; exceeding it may result in interest charges for late payment. However, the regulations governing the vacation fund allow for corrections to the submitted reports. Corrections to the submitted data can be made no later than 30 September of the year following the year in which the data was submitted. However, if the employment relationship ends and the employee is no longer covered by the construction industry vacation fund contributions, corrections can be made no later than the 15th day of the second month following the month in which the employment relationship ended for that employee.

After the end of each calendar year, the employer will receive from SOKA BAU an account statement for each employee containing data such as:

• period of employment
• days employed in Germany
• contributory wages
• days of granted leave

However, the employer is not obliged to personally handle all formalities related to monthly reports and may delegate these tasks to another entity, which, upon receiving a special power of attorney on a form specified by the vacation fund, will have access to the online system and will be able to make reports on behalf of the employer.

The term “performs work for the employer”, mentioned in Article 8(2a) of the Act of 13 October 1998 on the Social Insurance System (consolidated text: Journal of Laws 2021, item 423), includes performing a contract of mandate (or another contract for the provision of services to which the provisions concerning contracts of mandate apply) concluded by an employee with an entrepreneur engaged in the sale of goods of their employer (e.g., via the Internet), to whom this entrepreneur is personally or capital-related, even if the scope of duties under the contract of mandate differs from those under the employment contract and the place of performing the contract of mandate is outside the place of performing the employment contract. This is stated in the Resolution of the Supreme Court of 26 August 2021, ref. III UZP 3/21.

It concerns the so-called triangular contracts, that is situations where an employer additionally employs their employee (e.g., under a contract of mandate) through another entity (e.g., a labour agency). In such a relationship, a person performing work under an agency contract, contract of mandate, other service contract, or contract for specific work, if concluded with the employer with whom they have an employment relationship, and also if they perform work for the employer under such a contract, is also considered an employee. Such a worker is mandatorily subject to insurance both under contracts of mandate and employment contracts.

Supreme Court’s position

In jurisprudence and doctrine, it is accepted that Article 8(2a) of the Social Insurance System Act extends the concept of an employee for social insurance purposes beyond the scope of an employment relationship. From the latter part of this provision—in connection with several provisions of social insurance law and health insurance—it follows that the employer, by virtue of recognising a person performing work under a civil law contract concluded with a third party as an employee for social insurance purposes, is the payer of social insurance and health insurance contributions for such a civil law contract (based on the income earned by the employee under the contract of mandate). The definition of “employee” adopted in Article 8(2a) creates certain difficulties for employers in fulfilling their social insurance obligations regarding these persons, which has been noted in case law and legal literature. These difficulties are evidenced by extensive jurisprudence interpreting this provision, including rulings and resolutions of the Supreme Court. However, in the case submitted to the Supreme Court for resolution, the legal issue did not directly concern the fact that Article 8(2a) in connection with Article 18(1a) imposes on the employer contribution payer obligations, even though the civil law contract is concluded with another entity (a third party). This issue has already been resolved in earlier case law, especially in the Supreme Court’s Resolution of 2 September 2009 (OSNP 2010 No. 3-4, item 46), which held that an employer whose employee performs work for them under a contract for specific work concluded with a third party is the payer of pension, disability, sickness and accident insurance contributions under that contract. It follows that social insurance law provisions impose contribution payer obligations on employers concerning a civil law contract concluded by an employee with a third party if, under such a contract, the employee performed work for the employer with whom they have an employment relationship.

In the legal question submitted to the Supreme Court, the issue concerned directly the interpretation of the phrase “performs work for the employer”, which is the factual basis for applying Article 8(2a) with further consequences under the Social Insurance System Act to determine the contribution payer.

 

Justification

The Court noted that, according to case law, “work performed for the employer” means work whose actual beneficiary is the employer, regardless of the formal legal relationship connecting the employee with the third party. This means that irrespective of the type of activities performed by the employee arising from the employment contract and the contract concluded with the third party, and irrespective of the nature of the activity conducted by the employer and the third party, a sufficient condition for applying Article 8(2a) of the Social Insurance System Act is the employer’s benefit from the tangible results of their employee’s work, remunerated by the third party with funds obtained from the employer based on the contract linking the employer with the third party (it need not be a subcontract, it may be any type of cooperation contract). From the perspective of financial flows, the employer transfers funds to the third party to finance a specific task that constitutes the subject of their own business, and the third party, fulfilling their obligation, employs the employer’s employees (see Supreme Court judgment of 7 February 2017, II UK 693/15, LEX No. 2238708). Financial flows may have different titles and forms (see Supreme Court resolution of 26 August 2021, III UZP 6/21, according to which financing by the employer in any way of remuneration for the work performed by the employee under a contract concluded with a third party speaks in favour of applying Article 8(2a) of the Social Insurance System Act).

How to correctly calculate the contribution?

According to Article 18(1a) of the Social Insurance System Act, the contribution assessment base for social insurance contributions also includes income from agency contracts, contracts of mandate, or other service contracts, to which, pursuant to the Civil Code, the provisions on contracts of mandate or contracts for specific work apply.

The refusal to conclude an agreement for granting a benefit for the protection of jobs from the Guaranteed Employee Benefits Fund to subsidise the wages of employees affected by economic downtime or reduced working hours due to COVID-19, issued pursuant to Article 9(2) of the Act of 11 October 2013 in connection with Article 15g(1) and (17) of the Act on special solutions related to prevention, counteraction and combating COVID-19, other infectious diseases and crisis situations caused thereby (Journal of Laws, item 374, as amended; hereinafter: the COVID-19 Act), may be challenged before the administrative court – reads the ruling of the Supreme Administrative Court (NSA) of 24 September 2021 (case ref. I GSK 1074/21).

Facts of the case

A company applied for wage subsidies for employees subject to economic downtime or reduced working hours under Article 15g of the COVID-19 Act. By a letter dated (…) August 2020, the Director of the Voivodeship Labour Office in Warsaw informed the claimant that its application for subsidy of wages of employees affected by economic downtime or reduced working hours under Article 15g of the Act of 2 March 2020 on special solutions relating to prevention, counteraction and combating COVID-19, other infectious diseases and crisis situations caused thereby (Journal of Laws, item 374, as amended; hereinafter: the COVID-19 Act) had been rejected. The justification stated that the claimant – as an educational institution – could not be recognised as an entrepreneur within the meaning of Article 1 or 2 of the Act of 6 March 2018 – Entrepreneur’s Law (Journal of Laws of 2019, item 1292, as amended), and therefore could not apply for the benefit under Article 15g(1) of the COVID-19 Act. The company challenged this refusal before the Voivodeship Administrative Court (WSA) in Warsaw.

Position of the WSA in Warsaw

The WSA held that the letter from the Director of the Labour Office did not fall within any of the categories of cases under Article 3 § 2 of the Act of 30 August 2002 – Law on Proceedings before Administrative Courts (Journal of Laws 2019, item 2325, as amended; hereinafter: p.p.s.a.), which fall within the jurisdiction of administrative courts. Certainly, it was not an administrative decision, ruling, written tax interpretation, nor a local law act or a supervisory act over the activity of a local government unit. The court only considered whether the challenged letter could be treated as “another act or action within public administration,” as mentioned in the p.p.s.a.

The first-instance court pointed out that the Act does not specify detailed procedures for applying for wage subsidies for employees subject to economic downtime or reduced working hours. No direct reference to the comprehensive regulation of the Code of Administrative Procedure (Journal of Laws 2020, item 256, as amended; hereinafter: k.p.a.) was found.

The WSA noted that jurisprudence has developed the concept of so-called hybrid proceedings or legal situations, where the first stage is administrative in nature and the actions taken at this stage are subject to appeal in administrative courts, with a positive outcome leading to the conclusion of a civil law contract. However, it stressed that the law governing a particular institution should provide grounds for inferring such a two-stage process of granting subsidies, e.g., foreseeing that the first stage ends with a positive or negative qualification (e.g., inclusion on a list of subsidised entities or refusal to qualify), while the second stage consists of entering into a civil law contract.

According to the WSA, wage subsidies are granted entirely through concluding a civil law contract. The entrepreneur submits a signed contract with the application electronically to the competent voivodeship labour office, and payments are made based on the contract concluded between the director of the labour office and the entrepreneur. Administrative courts are not competent to adjudicate on the correctness of civil law contracts.

The company filed a cassation complaint against the WSA’s ruling.

Ruling of the Supreme Administrative Court

The NSA overturned the WSA ruling. The Court reasoned that the funds come from the Guaranteed Employee Benefits Fund; thus, this is not a typical civil law relationship, but an administrative law construction connected with the adoption of an administrative act. If the director decides (issues a ruling) to allocate funds to a beneficiary, he requests the fund manager to grant an expenditure limit for paying benefits financed under the Act, and upon receiving the limit, concludes an agreement with the beneficiary. This refusal to conclude an agreement in writing constitutes an act of administrative authority. The decision that an entity does not meet the conditions for concluding a contract entitling it to support is an act referred to in the p.p.s.a. The director’s written refusal to conclude a benefit payment agreement under Article 9(2) of the Act of 11 October 2013 in connection with Article 15g(1) and (17) of the COVID-19 Act is therefore an administrative decision affecting the legal situation of the applicant and is subject to challenge in administrative court.

Essentially, contrary to the WSA’s position, the Court confirmed the two-stage nature of the subsidy procedure: the first stage is administrative, the second stage is civil law.

The NSA held that since the director may grant a subsidy by contract, the authority assesses the conditions for granting the subsidy and creates the legal relationship rather than merely implementing a legal obligation, which would be a material-technical act. This is a different type of act, not a material-technical action.

In short, contrary to the WSA, the process has two stages: an administrative stage followed by a civil law stage.

What does this mean for entrepreneurs applying for subsidies?

In case of refusal to conclude an agreement with the labour office for the granting of a benefit from the Guaranteed Employee Benefits Fund, as in this case, the applicant may challenge the director’s decision before an administrative court. Such a decision is an administrative act subject to judicial review.

The Polish Deal (“Polski Ład”) imposes a range of new obligations on domestic entrepreneurs, including those related to contributions settlement, reporting requirements, and maintaining an electronic revenue and expense ledger. The changes have been staggered over time. Some are announced for 2023, while others will require implementation this year or early next year.

Changes in taxes

The first change, planned for January 2022, concerns the health insurance contribution, which will be calculated based on income and be no less than 9% of the minimum wage.

From 1 January 2022, entrepreneurs will also be required to indicate the basis for the health insurance contribution monthly (submitting the relevant information to the Social Insurance Institution – ZUS). Additionally, for 2023, there is another obligation planned – submitting the JPK (the Standard Audit File for Tax) for income tax. This means that the tax office will have up-to-date information on revenues and costs, and will also be able to preliminarily determine the amount of income tax advance payment.

Entrepreneurs settling accounts via simplified methods – lump-sum tax (ryczałt), tax card, or flat tax – will pay the health insurance contribution at the revised rates. Those previously using the flat tax will pay 4.9%. For those using the lump-sum tax, thresholds will be introduced:

• enterprises with revenues up to PLN 60,000 per year – 60% of the average salary;
• companies with revenues from PLN 60,000 to PLN 300,000 per year – 100% of the average salary;
• enterprises with revenues exceeding PLN 300,000 – 180% of the average salary.

For taxpayers settled by the tax card, the health contribution will be calculated based on the statutory minimum wage. For general taxation, the basis will be the income earned.
Electronic revenue and expense ledgers and the National e-Invoice System

A change planned to come into effect only in 2023 is the obligation for Polish entrepreneurs to send an electronic version of their revenue and expense ledgers and fixed assets records to the tax authorities. This information will be included in uniform control files (as JPK_PKPIR and JPK_EST respectively).

Moreover, the National e-Invoice System (KSeF) will be established, enabling the issuing and sharing of structured invoices. While the Ministry of Finance praises it as a “modern tool and the next stage of digitising tax services,” taxpayers are concerned about the increasing volume of data reaching tax authorities. Although the system is initially intended to be optional, it may eventually become a permanent and mandatory part of the tax system, which the tax office will use to automate the control process.

The Press Office of the Chancellery of the President of the Republic of Poland has announced that on 19 August this year the President signed the Act on Employee Aid and Loan Funds (kasy zapomogowo-pożyczkowe). The Act regulates the rules for establishing, organising and operating these institutions at employers. It specifies, among other things, the principles of control over such funds at employers where trade unions do not operate.

What are aid and loan funds?

Until now, employee aid and loan funds have operated at employers on the basis of the Regulation of 19 December 1992 on Employee Aid and Loan Funds and Cooperative Savings and Credit Unions in Workplaces. The draft Act prepared by the Ministry of Development, Labour and Technology is largely consistent with the still valid Regulation, and the introduced changes adapt the functioning of these funds to the amendments introduced in the 2018 amendment of the Trade Unions Act and regulate the rules concerning membership in the funds as well as the rights and obligations arising from it. These funds provide employees with support in difficult life situations and constitute an additional form of financial assistance.

Upcoming changes

According to information on the government website, the draft Act on aid and loan funds provides for:

• the possibility of establishing funds by at least 10 persons performing paid work for a given employer (previously this could only be done by at least 10 employees) – this solution will make membership conditions more flexible; in particular, not only employees but also other persons performing paid work, e.g., contractors or persons performing specific tasks, will be able to join,
• rules of control over aid and loan funds at employers where trade unions do not operate – in the absence of a workplace trade union, control over the funds will be exercised by the workers’ council, and if there is no such council – by a representation of persons performing paid work appointed according to the procedure adopted by the employer (currently, control over the funds is exercised by the workplace trade union),
• regulations concerning the continued functioning of aid and loan funds in the event of changes to the employer’s organisational structure (e.g., mergers or divisions) – in such cases, the general meeting of members will have to adopt a resolution adapting the organisational structure and the statute of the funds to the employer’s organisational structure,
• possibilities for the bodies of aid and loan funds to hold meetings using electronic communication means.

Additionally, the draft Act supplements and clarifies provisions regarding, among others:

• the principles of granting loans or aid (e.g., detailed specification of loan guarantee rules),
• covering the costs of operating inter-company aid and loan funds,
• the possibility of passing a resolution on the liquidation of an aid and loan fund on the initiative of the general meeting of members,
• the rules for settling property matters in case of liquidation of an aid and loan fund.

The draft Act will now be forwarded for parliamentary proceedings. The new provisions will come into force 30 days after publication in the Journal of Laws.

Link to the full text of the amendment: http://orka.sejm.gov.pl/proc9.nsf/ustawy/1313_u.htm

As part of the tax changes introduced by the so-called Polish Deal, a new, legally defined category of expenses will be created, which cannot be included as tax-deductible costs under the CIT (corporate income tax). This concerns the content of the new Article 16(1)(15b) of the CIT Act, according to which costs incurred by a taxpayer that is a company in connection with services rendered by an entity directly or indirectly related to the taxpayer, or to a shareholder (or stockholder) of the taxpayer, shall not be deductible if those costs constitute so-called hidden dividends.

According to the proposed Article 16(1d) of the CIT Act, hidden dividends are defined as costs of the company being the taxpayer if:

1. the amount or timing of incurring them is in any way dependent on the taxpayer’s profit or the amount of that profit; or
2. a reasonably acting taxpayer would not have incurred such costs, or would have incurred lower costs, in the case of performing a comparable service by an unrelated entity; or
3. these costs include remuneration for the right to use assets that were the property or co-property of a shareholder (or stockholder) or an entity related to the shareholder (or stockholder) before the taxpayer’s establishment.

It is worth noting that the concept of “services to the shareholder or related entity” has not been further specified, so the tax authorities’ interpretation of this term may be very broad. It cannot be ruled out that all transactions with related parties, even if carried out at market prices, will be subject to scrutiny regarding the above criteria. Although the planned changes primarily aim to prevent unjustified transfers of funds from the company to shareholders and artificial generation of tax costs for the company, they may complicate settlements between related entities within the previously accepted market practices.

The justification for the Act states that the construction responds to “distribution of profits to shareholders carried out in a way that reduces the taxpayer’s income by including such amounts as tax-deductible costs. This leads to an economic distribution of profits, which is formally not classified as dividends.”

According to the draft justification, “hidden dividends may take various forms:
– payments unrelated to conducted business activities,
– transactions of a non-market nature,
– excessive indebtedness of the taxpayer under various titles towards related entities within a capital group,
– use by the taxpayer of assets belonging to a shareholder or related entities, which originally belonged to the taxpayer.”

The draft also includes a provision establishing exceptions from the hidden dividend rule – if the sum of costs incurred in the tax year by the taxpayer classified as “hidden dividends” is lower than the gross profit as understood under accounting regulations, generated in the financial year in which those costs were included in the taxpayer’s financial result.

According to the latest information provided by the Ministry of Finance, the proposed provisions are planned to come into force in 2023. The government reserved the right for their final wording to still change before that date.

Taxpayers fear that expenses such as a company’s rental payments under a lease agreement with a shareholder could be deemed hidden dividends, even if such a transaction has an economic justification. Critics of the draft highlight that excluding from deductible costs rationally justified expenses (due to the broad definition of hidden dividends) could have catastrophic consequences for businesses.

Will the G20 Solve the Problem of Tax Havens?

The Ministry of Finance announced on the government website that on 8 October this year, representatives of the 20 countries with the largest economies in the world issued a joint statement taking action against so-called tax havens—countries that practice harmful tax competition—by approving at the Saturday summit in Venice a new corporate income tax agreement.

The public levy, set to come into effect in 2023, aims to stop large corporations from hiding profits that are lightly or not taxed at all in tax havens.

“Negotiations within the OECD forum were demanding, but we continue to work and want to jointly create a new tax reality worldwide. Poland has been fighting tax havens for years. Many of our proposals are being taken into account in the OECD and EU forums, which we are very pleased about. During the pandemic, Poland and Denmark initiated measures to prevent public funds intended to support businesses during lockdown from reaching tax havens. Now we are closing a stage of work on strengthening the international tax system within the OECD,” said the Minister of Finance, Funds and Regional Policy, Tadeusz Kościński.

This statement is the result of negotiations that have been ongoing since July this year. At that time, 130 countries, including Poland, issued a joint declaration within the Organisation for Economic Co-operation and Development (OECD) framework expressing their willingness to work on reforming international taxation and adapting international tax rules to the challenges of the digital economy.

“These rules will be based on two Pillars. Pillar I covers taxation of around the 100 largest companies that, benefiting from globalisation and digitalisation, sell goods and provide services worldwide. These include not only companies delivering digital content but also the largest enterprises selling services and goods online as well as traditionally. Pillar II, meanwhile, envisages the introduction of a minimum global tax rate of 15% effective tax rate,” explained Deputy Minister Sarnowski.

More information at: https://www.gov.pl/web/finanse/nadchodzi-wielka-reforma-miedzynarodowego-opodatkowania

Basic Obligations

Regardless of whether an employer faces the necessity to send their employees to Germany to provide services for contractors, or sends them to their own business in Germany, they must comply with the German regulations on posted workers, implementing the relevant EU directives. A similar situation occurs when a German company uses the services of a temporary work agency to hire a worker from Poland for work in its business. However, simply meeting local working conditions is sometimes insufficient to ensure full legal compliance with the posting process. This is due to additional administrative obligations imposed on employers related to inspections by customs authorities.

The Directive of the European Parliament and of the Council (EU) 2018/957 of 28 June 2018 amending Directive 96/71/EC places an obligation on the employer to guarantee workers the same employment conditions as those applicable in the host country. These conditions relate primarily to:

• minimum rest periods
• maximum working hours
• minimum amount of paid annual leave
• wages (including all its mandatory components) specified in national law or generally applicable collective agreements
• occupational health and safety
• protective measures for pregnant women, women directly after childbirth, and young workers (under 18 years old)
• equal treatment of women and men
• worker accommodation conditions in the host country, if provided by the employer
• allowances or reimbursement of travel, meal, and accommodation costs when required during the posting period.

If employment conditions in the sending country (i.e., Poland) are more favourable for workers than those applicable in the host country, the more favourable conditions must be maintained during the posting.
If the posting lasts longer than 12 months (or 18 months if the employer submits a justified notification in the sending country), all other employment conditions applicable in the host country must be guaranteed, except for conditions regarding additional pension benefits and termination of the contract.

It should be remembered that if employees work in an industry covered in Germany by generally applicable collective agreements or (in the case of temporary work agencies) collective agreements binding exclusively at the user employer to whom the worker is posted, the working conditions established by the relevant collective agreement must be ensured (and not only those arising from German labour law provisions).

Social Security

Due to differences in social security contribution rates and to simplify settlements, employers often opt to pay employees’ contributions in Poland. To benefit from this, the employer must notify the administration of the sending country and apply for the PD A1 form (the so-called portable A1 document issued in Poland by the Social Insurance Institution, ZUS). The A1 document confirms that the posted worker is registered in the social security system of the sending country and does not have to pay contributions in the host country.

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

Zollamt

However, fulfilling the above obligations alone may prove insufficient. The implementing provisions of Directive 96/71/EC allow Member States to introduce additional requirements for employers posting workers to other Member States, and Germany has made use of this possibility. The additional requirements mainly concern control and record-keeping matters.

Article 9(1) of Directive 2014/67/EU, issued to improve enforcement of the Posted Workers Directive, permits the host Member State to require, prior to posting, the application of the following administrative measures in particular:

• a requirement to submit to the responsible national authorities a regular declaration, no later than at the start of the service provision, containing essential information necessary to enable inspection of the actual situation at the workplace, including:
  1. identification data of the service provider;
  2. the expected number of posted workers, along with data enabling their identification;
  3. contact person details;
  4. the expected duration of the posting, anticipated start and end dates;
  5. address(es) of the workplace(s); and
  6. the nature of the services justifying the posting;
• a requirement to designate a contact person for communication with the competent authorities of the host Member State;
• a requirement to designate a contact person who may act as a representative through whom the relevant social partners may, if necessary, encourage the service provider to commence collective bargaining in the host Member State.

In implementing these powers, German legislators introduced special reporting and documentation obligations monitored by the German Customs Office, i.e., Zollamt. These include registering posted workers with the Zollamt, keeping working time records and other documents translated into German, as well as appointing a special national representative (verantwortlich Handelnder) who acts as the contact person appointed by the employer and available to the control authority to facilitate the inspection procedure. Similar obligations arise for companies in Germany that employ workers hired through an agency based abroad.
The employer is obliged to immediately inform customs authorities of any changes in data, as well as to submit a statement confirming compliance with obligations to provide employees with appropriate working conditions, i.e., those required by the host country regulations (i.e., German law).

The source of these obligations are three separate German labour laws: the Minimum Wage Act (MiLoG), the Posted Workers Act (Arbeitnehmer-Entsendegesetz – AEntG), and the Temporary Employment Act (AÜG). Additional administrative obligations do not apply to all cases of posting (e.g., only certain industries are covered), so each posting case requires individual assessment in this respect.

Further articles will cover requirements for proper documentation and exceptions applicable to some industries, as well as possible consequences of inspections by German customs authorities.