How to Properly Settle the PIT for a German Resident Working Partially in Poland?

In the era of remote work becoming increasingly popular, more employees are choosing to perform their duties from various locations around the world. While this type of work brings a range of benefits, it also presents challenges, particularly regarding tax settlements. It is crucial to understand the taxation rules in both countries to avoid issues with double taxation and correctly account for one’s income.

Tax Issues in Remote Work

A tax settlement issue for an employee residing in Germany came up at a Polish company. The situation concerned a remote employee, whose place of employment was the company’s headquarters in Poland and whose residence was in Germany. Due to the nature of the employment, the employee performed their work both in Germany and Poland. In its request for an interpretation, the company addressed issues related to determining the proper place of taxation for the employee’s remuneration. One of the questions was whether the employee should be taxed in Germany or proportionally based on the amount of time worked in both countries.

Tax Interpretation

In an individual ruling issued by the Director of the National Tax Information Office on July 18, 2024 (ref. 0115-KDIT2.4011.271.2024.1.ENB), it was clearly stated that the employee’s remuneration should be taxed proportionally according to the number of days worked in both countries. The justification referred to the provisions of the double taxation avoidance agreement between Poland and the Federal Republic of Germany. According to the agreement, the remuneration of a person residing in Germany is subject to taxation in Germany, unless the work is performed on Polish territory. In such cases, the income can be taxed both in Poland and in the country of residence, Germany. As a result, remuneration for work performed in Poland by an employee residing in Germany would be subject to taxation both in Poland and in Germany. However, remuneration for work performed by this employee in Germany would not be subject to taxation in Poland.

How to Properly Settle PIT?

The key issue is determining the place of taxation, which depends primarily on the tax residency and the place where the work is performed. To correctly settle the PIT, it is necessary to determine the number of days worked in Poland and abroad, and then, based on this information, proportionally calculate and remit the PIT advances.

Summary

For proper PIT settlement, it is crucial to establish the place of taxation, which in the described case depends mainly on the tax residency and the place of work. It is also important to familiarize oneself with the applicable international agreements that outline the rules for avoiding double taxation, especially in the case of working in multiple countries. When calculating PIT advances, the proportion of remuneration to the number of days worked in each country should be taken into account.