Tax payment for expats – divergent positions of tax authorities and courts
Tax authorities are increasingly rejecting payments made from accounts other than that of the expat taxpayer, such as a company account. However, in practice, the institution of a “technical representative” is used, which assumes that the taxpayers pay the required tax but does so with the help of the company they work for. This entity technically transfers the funds for the payment of the tax to the relevant tax authority. Court rulings confirm the validity of this solution. So why are there discrepancies in the interpretation of these regulations, and is it still possible to settle tax on behalf of an expat?
An expat is a highly skilled specialist who has voluntarily left their country to work abroad. They are usually sent by their company for a specific period of time to its foreign branch with the aim of transferring knowledge and skills and, ultimately promoting business development abroad. In Poland, however, the possibility of making tax payments on behalf of expats working in our country has recently become increasingly controversial and questioned.
Company as an intermediary for expat tax payment
Due to the temporary nature of their foreign assignments, expats often remain under local contracts in their home country. In Poland however, they must calculate and pay income tax on their own, as they do not have an employer in Poland acting as a PIT (Personal Income Tax) payer. This poses a major challenge for them, and corporations often assist by providing advisory services and, in many cases, by settling the taxes on behalf of the expat.
The company then does not act as a formal tax payer, but only as an intermediary in transferring the employee’s money to the tax authority. From a legal perspective, these entities simply “assist” employees with the technical process of tax payment.
Tax Authorities rejecting payments made by “Technical Representatives”
Tax authorities are increasingly taking the position that tax payments made by a third party using the taxpayer’s funds are not acceptable. They reject payments made from accounts other than that of the taxpayer (the employee or expat), citing Article 62b of the Tax Ordinance Act of August 29, 1997 (consolidated text: Journal of Laws of 2023, item 2383, as amended):
Article 62b [Tax Payment by Persons Other Than the Taxpayer]
§1. Tax may also be paid by:
1. the taxpayer’s spouse, descendants, ascendants, stepchildren, siblings, stepfather, or stepmother;
2. the current owner of a property subject to compulsory mortgage or fiscal pledge, if the tax is secured by such a mortgage or pledge;
3. another entity, provided the tax amount does not exceed PLN 1,000.
§2. In cases referred to in §1 points 1 and 3, if the payment receipt clearly indicates that the payment is intended to fulfil the taxpayer’s obligation, it is considered that the payment was made with the taxpayer’s funds.
§3. In cases referred to in §1 points 1-3, the provisions concerning tax payments by the taxpayer apply accordingly.
This regulation specifies, among other things, that tax payments by a third party are only allowed up to a limit of PLN 1,000. The key term here is “payment,” as in the case of expat taxes, the expat is still the one paying the liability, only using the technical support of their company or its foreign branch.
It seems that tax authorities are interpreting this regulation too narrowly. The possibility for expats to pay their tax using their own funds, but through a representative should be a valid form of fulfilling the tax obligation, regardless of the amount. Therefore, the provisions of Article 62b §1 point 3 of the Tax Ordinance should not be applied to the institution of technical representation.
It is also worth mentioning that assisting expats with income tax payments is a common practice across Europe and worldwide. International corporations often support their employees in settling tax obligations in the country where they arise. If the current position of Polish tax authorities is maintained, Poland may become an unattractive destination for foreign corporations to send expats.
Court rulings in favour of expat tax payments via representatives
The possibility of paying taxes through a representative has also been the subject of many administrative court rulings. The courts confirm that Article 62b §1 point 3 of the Tax Ordinance applies only to the situation of transferring a liability, and not to the intermediation of its payment.
In its ruling of April 14, 2021 (Case No. II FSK 3305/18), the Supreme Administrative Court stated that “having someone else carry out the task of tax payment is a de facto action not prohibited by tax law.” Therefore, the regulations invoked by tax authorities should not apply to the technical act of paying expat taxes through a representative.
Expat tax payment – Use professional support
In conclusion, expat taxes can be paid by a representative, including their company, branch, or an accounting firm managing the finances of the entity. Tax authorities should adopt a more flexible approach in such cases, as it benefits employees, companies, and the entire tax system. In case of any issues, you can always appeal the tax authority’s decision, especially given the court rulings in similar cases.
If you are facing problems with expat tax payments, feel free to contact us! We will help you settle taxes with the tax authority and represent your company in any further proceedings before tax authorities and courts.
More information about hiring foreigners in Poland can be found on the website: Employment of foreigners in Poland.
If you have any questions regarding this topic or if you are in need for any additional information – please do not hesitate to contact us:
CUSTOMER RELATIONSHIPS DEPARTMENT
ELŻBIETA NARON
Head of Customer Relationships
Department / Senior Manager
getsix® Group
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