Foreign employer without a plant in Poland

Renata Ryzak, Tax Advisor
Hiring an employee in Poland by a foreign employer who does not have its registered office here will not always involve the obligation of establishment of a plant, i.e. the so-called "permanent establishment" for that employer and the obligation to report corporate income tax in Poland.

This is the result of a tax interpretation (ref. 0114-KDIP2-1.4010.131.2020.1.JS of 26 June 2020) issued for a German company which hires an employee in Poland.

IT employee working for a foreign employer

This employee works in the IT area. He/she performs his/her official duties only within the territory of Poland, is a Polish tax resident and all his/her income earned from employment with a German employer is taxed in Poland, in accordance with art. 44 section 1a point 1 of the PIT Act. This employee is also subject to compulsory social insurance in Poland, and the German company is registered in the Social Insurance Institution (ZUS) as a payer of contributions for this insurance.

The employee is responsible under his duties for the development and maintenance of applications used by the clients of his employer, and in addition:

  • he performs his duties while working in his own apartment. The company does not lease office space in Poland or possess any other space under any legal title or without legal title,
  • he is not engaged in the management of his employer's business, has no powers of attorney to act on behalf of the company or sign contracts with its clients,
  • he is not engaged in the marketing and sales activities of the German company, i.e. does not seek or acquire new clients for the company and does not negotiate sales or terms of sales agreements on its behalf,
  • he is not engaged in the activities or work of the customer service department operating within his employer's business,
  • he does not carry out direct profit-oriented activities for the German company, but his work, which is understandable, has an indirect impact on the employer's profits, because, for example, the accessibility and friendliness to use the application created by the employee has a positive impact on the company's development and its market image,
  • his remuneration is not dependent on the sales figures of the German company. In the employment contract, the parties agreed on a fixed amount of remuneration. The only changeable element is the bonus, which is primarily linked to the individual performance of the employee and further to the financial result of the German company,
  • the employee's activity in Poland is ancillary to the company's core business.

In accordance with the above mentioned tax interpretation, the fulfillment of all the above conditions in connection with the employment of an employee in Poland will not result in the establishment of a plant of the German employer in Poland, within the meaning of the provisions of Article 4a(11) of the CIT Act, as well as within the meaning of Article 5 of the Agreement of 14 May 2003 between the Republic of Poland and the Federal Republic of Germany for the avoidance of double taxation with respect to taxes on income and on capital.

The consequence of the lack of a permanent establishment will be the non-taxation of profits of the German company in Poland.


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Agata Nie┼╝ychowska
Agata Nie┼╝ychowska
Tax Director

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