With the growing popularity of remote work, more and more employees are choosing to carry out their duties from various places around the world. This form of work brings a number of benefits but also challenges, especially when it comes to tax settlements. It is therefore crucial to understand the tax rules in both countries to avoid problems related to double taxation and to correctly report one’s income.

Tax issues entailed by remote work

A Polish company encountered a problem regarding the personal income tax (PIT) settlement for an employee who is a tax resident of Germany. The situation concerned a remotely employed worker whose place of work was both the company's headquarters in Poland and their place of residence in Germany. Due to the nature of their employment, the employee performed their work in both Germany and Poland. In their interpretation request, the company raised questions concerning a proper determination of the appropriate place of taxation for the employee’s remuneration. One question was whether the employee should be taxed in Germany only or proportionally based on the time spent working in each country.

Tax interpretation

In a private ruling issued on 18 July 2024 (ref. no. 0115-KDIT2.4011.271.2024.1.ENB), the Head of the National Tax Information Service stated unequivocally that an employee's remuneration should be taxed proportionally, in relation to the number of days worked in each country. In giving the grounds, a reference was made to the content of the agreement on the avoidance of double taxation concluded with the Federal Republic of Germany. According to its provisions, the remuneration of a person residing in Germany is taxable in Germany, unless the work is performed on the territory of Poland. In such a case, this income may be taxed both in Poland and in the state of residence, i.e., Germany. Consequently, remuneration for work performed in Poland by an employee residing in Germany was subject to taxation both in Poland and in Germany. However, remuneration for work performed by this employee in Germany was not subject to taxation in Poland.

How to settle the PIT correctly?

The key issue is determining the place of taxation, which in particular depends on the tax residence and the place where work is performed. In order to correctly file a personal income tax return, it is necessary to determine the number of days worked in Poland and abroad, and then on this basis proportionally calculate and pay advance income tax payments.

Summary

In order to correctly calculate personal income tax (PIT), it is crucial to determine the place of taxation. In the present case, this primarily depends on tax residency and the place of work performance. It is also essential to familiarize oneself with the applicable international agreements that define the rules for avoiding double taxation, including in cases of working in several countries. When calculating PIT advance payments, one must consider the proportion of remuneration to the number of days worked in each country.

Patrycja Mieczkowska, Tax Consultant, ATA Tax Sp. z o.o.

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