Polish Economic Employer Exposure in Intra-Group Secondments

When Poland treats your local subsidiary as the employer and taxes your seconded staff from day one — the OECD test, comparative EU practice, and how to contain the risk.

A guide for foreign investors and multinational groups  |  ATL Law 2026

The risk foreign groups overlook

When a foreign group moves an employee into its Polish subsidiary, the compliance conversation usually centres on posting notification to the National Labour Inspectorate (PIP), the A1 certificate and minimum pay. Those are real obligations — but they are rarely where the largest financial exposure sits. The costlier and more complex risk is that Poland treats the local group company as the seconded worker’s economic employer — with the consequence that the employee’s employment income becomes taxable in Poland from the first day of work, regardless of the 183-day rule.

For a foreign parent this cuts both ways. Second staff into your Polish group company and the Polish company can become the economic employer, triggering Polish PIT withholding from day one. Second Polish staff out to another group entity — in Germany, France or elsewhere — and the receiving-state administration can reach the same conclusion under its own practice. In both directions the receiving company becomes a potential withholding agent for the employee’s income tax, and the formal employer is drawn into a cross-border reconciliation of payroll and filings.

This article explains what the economic employer concept is, the criteria of the OECD substantive-employer test, how Poland applies it as a receiving state, how the two most active EU administrations — Germany and France — enforce it, and how a foreign group can contain the exposure on both sides of a transfer.

Why the risk crystallises in corporate groups

In a classic contract secondment — services supplied to an independent client — the line between the legal employer and the beneficiary of the work stays clear. The worker performs an assigned task, the cost of their work is embedded in the service price, and the business risk of the result normally sits with the service provider. For the host-state tax administration, identifying the employer is straightforward.

Inside a corporate group that line blurs. The employee is directed to another group company, actually works within its structures, under its day-to-day direction, for its benefit. Payroll costs are often recharged between the companies — sometimes with a mark-up, sometimes without, sometimes as a monthly management fee. Tools, workplace and materials are provided by the receiving company; the risk of the work result sits with it too. From the receiving state’s perspective this is the textbook setting for the economic employer test. It is no coincidence that the OECD Commentary illustrates the mechanism with intra-group secondment examples, and that the German, French, Austrian and Dutch administrations apply it most often precisely to corporate groups.

Starting point: the 183-day rule and Article 15 of the treaties

To see why the concept bites, return to the basics of taxing employment income across borders. Poland’s double tax treaties (DTTs) with EU member states follow the OECD Model Convention.

General rule: employment income is taxable in the employee’s state of residence, unless the work is performed in the other state — in which case it may also be taxed in that other state.

Exception: the income stays taxable only in the residence state where three conditions are met cumulatively:

• the employee is present in the state of work for no more than 183 days in a 12-month period (the reference period varies by treaty; sometimes it is the calendar year);
• the remuneration is paid by, or on behalf of, an employer who is not resident in the state of work;
• the remuneration is not borne by a permanent establishment which the employer has in the state of work.

The pressure point is the second condition — it speaks of the “employer,” and the treaties do not define the term. That gap is exactly where the economic employer concept operates.

What the economic employer concept actually is

The term is often misdescribed as a rule of domestic law or a binding treaty provision. Precisely: the economic employer is an interpretive concept drawn from the Commentary on the OECD Model Convention. The Commentary allows states to read the word “employer” through either of two approaches:

• a formal approach — the employer is the entity with which the worker has a formal contract of employment;
• a substantive (economic) approach — the employer, for treaty purposes, is the entity that actually uses the results of the work, bears the associated risk, exercises direction and integrates the worker into its organisation.

OECD states may choose which approach they apply. In practice most of the European destinations to which secondment is common — Germany, Austria, the Netherlands, France, Belgium, Norway, Sweden — apply the substantive approach. Poland’s administrative practice admits both, but the tax authorities increasingly reach for the substantive reading, including where Poland is the receiving state.

One point deserves emphasis: the economic employer concept does not alter the civil-law relationship. The worker remains an employee of the formal sending company as a matter of employment law. Only the tax classification changes — for the purposes of Article 15 of the treaty. This distinction is crucial and a frequent source of confusion.

The OECD substantive-employer test

The 2010 update to the OECD Commentary set out a detailed set of questions the receiving state uses to decide whether the employer functions are in fact performed by the local entity:

• Who bears responsibility and risk for the results of the work? If the risk of the result (quality, timeliness, usefulness) sits with the receiving company, that points to it being the economic employer.
• Who has the right to instruct the worker on how the work is done? Actual managerial direction on the receiving side is one of the strongest indicators.
• Who controls and is responsible for the place of work? Work performed at the receiving company’s premises and on its infrastructure supports its employer role.
• Are the remuneration costs recharged to the receiving company? One of the most significant indicators — if the labour cost is passed to the receiving entity, the risk of it being treated as economic employer rises sharply.
• Who provides the tools and materials? Hardware, software, system access, technical documentation — if the receiving company supplies them, its position as de facto employer strengthens.
• Who decides on the number and qualifications of the workers? Where the receiving company defines the staffing need and accepts specific individuals, that is typical employer behaviour.
• Who has the right to select the worker, to end the secondment, or to impose discipline? The ability to send the worker back to the sending company is a signal to the administration.
• Who sets the work schedule and leave during the secondment? Attendance records and approval of leave requests on the receiving side add to the picture.

The test is not binary — it is a weighing of all factors. In practice the decisive combination is usually actual direction + cost recharge + integration into the receiving company’s structure. That triad is particularly dangerous.

Poland as the receiving state: the foreign group’s primary exposure

This is where a foreign parent’s own transfers land. The scenario: the employee is formally employed by a foreign group company (often the parent, or another EU group entity) and is seconded into the Polish group company. Here the Polish company becomes the potential economic employer, and the consequence is — as a rule — an obligation to withhold Polish PIT advances from the first day of work in Poland, regardless of the 183-day rule.

Polish administrative practice is not as settled here as Germany’s, but the National Revenue Administration (KAS) increasingly applies the economic employer test — especially for highly paid specialists, management staff and technical experts seconded into Polish group companies.

As a potential economic employer, the Polish company must resolve several questions at once: whether a PIT withholding obligation arises at all; under which regime (the tax scale, or the flat non-resident rate under the PIT Act or the applicable treaty); how to coordinate filings with the formal payer abroad; and how to document the worker’s status for a possible audit. For a foreign group this means the Polish entity — not the parent — carries the day-to-day compliance burden and payer liability, and needs to be equipped for it before the transfer begins, not after.

Comparative EU practice: Germany and France

For groups whose mobility also runs between Poland and the two most active EU jurisdictions, the receiving-state practice matters directly — and it shows how far substantive-employer enforcement can go.

Germany — the most formalised approach

Germany has one of Europe’s most developed and formalised approaches. Cost recharge is central: where the remuneration of a seconded worker is borne directly or indirectly by the German company (including intra-group recharge, and cost-plus), the German administration as a rule treats the worker as having a German economic employer. In practice even a symbolic charge to the German company (for example a minimal management fee) counts; conversely, leaving the cost with the sending company does not eliminate the risk but materially weakens it. Alongside recharge, the administration examines genuine integration — work under a manager employed by the German company, in its office, on its equipment, on its projects for its clients — a set of facts that in practice decides the matter.

France — less formalised, increasingly active

The French approach is more case-by-case, but no less rigorous — in recent years the tax administration (DGFiP) has used the mechanism more actively, particularly in audits of IT, consulting and engineering. It focuses on the worker’s genuine functional subordination to the French company (lien de subordination effectif), the degree of integration, intra-group cost recharge (refacturation intragroupe), the length and regularity of presence in France, and whether the work is part of the French company’s core business or outside technical assistance. Treatment as economic employer triggers France’s pay-as-you-earn withholding (prélèvement à la source, PAS, in force since 2019): the French company must withhold and remit income-tax advances on an ongoing basis even though the sending company formally pays the salary — which in practice means standing up a local (or “shadow”) payroll, or engaging a French provider to run it.

For the reverse leg — a German or French employee seconded into the Polish group company — the assessment shifts to Polish practice under Article 15 of the Poland–Germany or Poland–France treaty. Polish application is less settled than the German or French, which is itself a reason to consider an advance ruling in Poland, especially for regular, multi-person transfers from a foreign HQ into a Polish group entity.

Consequences of economic employer treatment

To grasp the scale, it is worth listing what most often materialises when the host state treats the local group company as economic employer:

• Host-state tax from day one. Instead of waiting to cross 183 days, taxation starts on the first day of work — even where the actual presence was meant to be very short.
• A withholding obligation on the receiving company. The receiving company may become a payer, with all that follows (penalties for failure to withhold, liability for miscalculated advances).
• The need for a shadow payroll. If the salary is physically paid by the sending company, the host state still requires a “shadow” payroll to compute and remit the tax.
• Short-term double burden. Until a refund in the residence state or a foreign tax credit comes through, the employee can be effectively taxed in both states at once.
• Penalties and interest. Discovery on audit can bring penalties on the receiving company and interest on arrears.
• Transfer pricing interaction. How an intra-group secondment is treated for economic employer purposes is linked to the group’s transfer pricing policy — inconsistent positions across the two areas are an additional risk.

How to contain the risk: practical recommendations

The economic employer risk cannot be fully eliminated in intra-group secondments — the very nature of this form invites it. It can, however, be materially reduced by consciously calibrating a few elements:

1. Choose the operating model deliberately. Before the secondment, assess realistically who will actually manage the seconded worker’s work. Where possible and commercially justified, keeping direction on the sending side (a reporting line to a sending-company manager) lowers the risk.
2. A secondment agreement that reflects reality. The intra-group document should specify the split of roles between the companies, the recharge model and the scope of direction over the worker — but it is not a “veil”: administrations examine the facts, not the contractual labels.
3. A deliberate recharge decision. Cost recharge is one of the strongest factors in the OECD test. Where the business case allows, consider leaving the cost with the sending company (instead of a cost-plus recharge) — but analyse the transfer pricing consequences, as the two regimes can pull in opposite directions.
4. Limit the length of the secondment. Shorter, more intensive assignments carry less risk than long, continuous presence. If a task can be done in 60 days rather than six months, the economic employer risk falls materially.
5. Case-by-case analysis, not a group template. There is no single “safe” model. Each transfer needs its own assessment against the specific host jurisdiction, the worker’s role and the project structure.
6. An advance ruling in the host state. For more complex situations, consider a binding ruling in the host state. It is an investment, but it delivers certainty on the authority’s position.
7. Budget for the risk. Even with the best structure, the host state may still treat the receiving company as economic employer. Build the cost of possible advisory work, shadow payroll and local settlement into the project budget as a fallback scenario.

Economic employer risk checklist

A practical set of questions to run through before every transfer of an employee between group companies in different states:

Initial assessment

• To which state and which group company is the worker to be seconded?
• Does the host state apply the economic employer test (substantive approach)?
• What is the planned length and expected intensity of the secondment?

The factual set-up

• Who will exercise actual direction over the work during the secondment?
• Will the worker be integrated into the receiving company’s organisation?
• Who will supply the tools, workplace and materials?
• Who will bear the risk of the work result?
• Who will approve leave requests and the work schedule?

The financial model

• Will the remuneration costs be recharged to the receiving company?
• Which recharge model applies (none / cost / cost-plus / management fee)?
• Is the recharge model consistent with the group’s transfer pricing policy?

Documentation and procedure

• Is there an addendum to the employment contract governing the secondment?
• Is there an intra-group secondment agreement setting out the split of roles?
• Has a local tax adviser’s position in the host state been obtained?

Risk-minimisation plan

• Has the option of limiting recharge been analysed?
• Has the option of keeping direction on the sending side been analysed?
• Has an advance ruling in the host state been considered?
• Does the project budget include a reserve for the risk materialising?

Frequently asked questions

Does the economic employer concept follow from Polish statutory law?

No. It is an interpretive concept from the Commentary on the OECD Model Convention, not a statutory institution of Polish tax law. OECD states may apply the substantive or the formal approach when interpreting their treaties. Most EU member states apply the substantive approach — which means a real, material risk for employers seconding staff, in either direction.

Does the risk arise only for long-term secondments?

No. In German and French practice it can materialise even during short presences, if the material conditions are met (actual direction, cost recharge, integration). Length of presence is one factor, not a precondition.

If we don’t recharge costs to the receiving company, is the risk eliminated?

Not recharging materially weakens the case for treating the receiving company as economic employer, but does not eliminate it. The administration may examine other factors (direction, integration, risk of the result). And leaving the cost with the sending company can raise transfer pricing questions.

Does an A1 certificate protect against economic employer treatment?

No. The A1 governs only the applicable social-security legislation. Income tax is a separate matter, decided under the treaty (and the host state’s interpretive practice). Holding an A1 does not switch off the economic employer risk.

About ATL Law

ATL Law is a law firm specialising in comprehensive support for foreign investors in the Polish market. We provide multilingual advice (Polish, English, German) across tax law, corporate law, transfer pricing, and employment and posting law.

We have extensive experience advising international groups on cross-border employee mobility, secondment structuring and the coordination of payroll and tax obligations across jurisdictions — from initial risk assessment, through documentation, to representation before the tax authorities.