Foreign employer without permanent establishment (PE) in Poland

Nowadays, more and more companies are hiring employees from other countries. In such case it should be analyzed whether this fact involves the creation of a permanent establishment for this company in the country where the employee is located.  These types of cases have been analyzed  in many rulings, e.g. ruling No 0114-KDIP2-1.4010.131.2020.1.JS z from 26th July 2020.

In the analyzed situation a foreign company hired an IT employee located in Poland. The employee takes part in the creation and maintenance of applications used by his employer’s clients. He performs his professional duties only in Poland, he is a Polish tax resident and taxes in Poland all his income earned from work for the mentioned foreign employer. The employee is registered to Social Security Insurance (ZUS) in Poland and the foreign employer is registered as a payer of Social Security Insurance purposes. 

Details of the employment  have to be always thoroughly analyzed. In this case the employee performs his business duties in his apartment in Poland and the company does not rent any office spaces and in Poland. He is not involved in management tasks of foreign employer business, his activities in Poland are ancillary to the company’s base business, he does not act on behalf of the company nor is he involved in marketing and sale activities as well as any other activities related to customer service department. Additionally the employee remuneration is not dependent on the value of the company sale and he does not carry out activities oriented to generate the profit for the company.

According to the abovementioned ruling employment of an employee in Poland by a foreign employer not established in Poland, does not always create permanent establishment for the employer and consequently does not always trigger obligation to report and pay corporate income tax (CIT) in Poland. In the analyzed case all details of the employment were analyzed by the Polish tax administration and the Director of the National Tax Information determined that all the conditions set in this case do not result in the creation of PE in Poland.

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