This newsletter concerns the issue of workation, which is an increasingly emerging employee benefit that allows employees to work from abroad in favorable holiday conditions.
Due to increasing relocation of the place of work outside the employer’s headquarters, there have been wider opportunities for remote work performed in charming places around the world, which it has thus become possible to visit without using vacation leave.
What should an employer pay attention to when implementing workation benefit? What risks are associated with the introduction of such a form of work to the company? What questions should an employee ask him or herself before going abroad and providing remote work? Is it worth setting a limit on the number of days an employee could spend abroad? Find answers to the most frequently asked questions in the newsletter below.
Note: The following questions and answers do not apply to employees delegated to perform services, but only to cases of remote work outside Poland.
1. Will the introduction of “workation” in the company each time have the same tax/ legal consequences?
Unfortunately, no, this issue is complicated due to risks mainly related to the application of the laws of the country where the work is performed. Therefore, each case requires a detailed analysis taking into account first of all:
- the destination country, including the regulations contatined in the relevant double taxation treaty,
- the planned period of work,
- the type of work,
- the tax residence of the subordinate.
2. In which country will the employee be subject to social insurance when working remotely abroad?
As a rule, in the country where the work is performed, but in the case of temporary work, it is possible to continue paying contributions in Poland.
3. What documents do I need to obtain to maintain the employee’s social security in Poland?
It is necessary to confirm social security with the appropriate A1 certificate issued by the Social Insurance Institution. This document must be obtained before the commencement of work in this form.
4. Is there any risk of a taxable establishment or permanent establishment abroad?
It is impossible to completely exclude the risk of a taxable establishment or permanent establishment for an employer when an employee performs remote work abroad. The level of risk will depend, among other things, on the type of tasks he or she performs, his or her position, as well as the adopted regulations and practices of the authorities operating in the territory of workation. In particular, the risk is high if the employee will be abroad for more than 183 days in a fiscal year or will have the ability to conclude contracts on behalf of the employer. The circumstance of whether this is the only employee performing work remotely from that country or whether we are talking about a larger group of employees will also be significant.
5. Is the employee required to obtain permission to work in another country?
An employee’s stay or performance of work abroad may require obtaining an appropriate permit for its performance. However, this is not necessary in every case. It all depends on the place and the form of work performed. In the case of sanctioned activity, it is possible that such a regulation will apply.
6. Does the employee’s stay abroad need to be reported to local authorities?
If a work permit is not required, it is possible that some regulations of the country of work will nevertheless apply. Competent authorities may require notification of such a person in that country, or they might conduct inspections.
7. Where should personal income tax be paid?
If the employee retains his or her tax residence in the territory of Poland, and the local regulations and practice of the authorities in the place of workation allow it, it is possible to continue paying personal income tax only in the territory of Poland.
8. What documents should I have as an employer?
The employer should ensure reliable and credible recording of the time spent outside Poland, so as to confirm that the period of 183 days was not exceeded. In addition, the employer should prepare appropriate regulations setting forth the rules of workation, and obtain statement form the employee confirming that he or she has fulfilled a number of conditions related to work outside Poland, including, among others, confirmation that remote work abroad is not related to either secondment or business travel.
9. What if Poland has not signed a double taxation treaty with the country in question?
In such a case, it is necessary to analyse the tax consequences of work performed in that country based on the laws of that country. It may turn out that income from work performed in that county (including even from the first day) is taxable there and, for example, that the Polish employer must register and act as a tax remitter there.
Want to implement workation into your company’s structures, but don’t know where to start and how to protect yourself? Find out practical information, as well as the potential benefits and risks of this solution by looking at our brochure “Practical information for an employer implementing a workation employee benefit” or contact us directly for more information in this regard:
Katarzyna Klimkiewicz-Deplano (Managing Partner, Tax Advisor): firstname.lastname@example.org
Paulina Marcula-Kurek (Supervisor Employer Solutions): email@example.com
Katarzyna Kochańska (Senior Tax Consultant): firstname.lastname@example.org
Paulina Gławnicka (Senior Tax Consultant): email@example.com