Posting an employee as a service and tax obligation

Service-Tax

There are many subsidiaries of foreign companies operating in Poland. International concerns, due to Polish employees, open their production or service enterprises in Poland. The companies in the international group work closely together. In addition, Polish entrepreneurs, as part of their expansion into new markets, also open their plants outside the country. The above causes that employees from Polish plants are delegated to perform services in other enterprises outside Poland. In this article we will try to answer the question whether in such a case the secondment of an employee can be understood as a service within the meaning of the VAT Act, and if so, when is the tax obligation arising in this tax.

What is subject to VAT?

Pursuant to the provision of Art. 5 sec. 1 of the Act of March 11, 2004 on tax on goods and services (i.e. Journal of Laws of 2017, item 1221), hereinafter referred to as the "VAT Act" - taxation of the above-mentioned tax are subject to:

  • paid delivery of goods and paid services within the territory of the country,

  • export of goods,

  • import of goods into the territory of the country,

  • intra-Community acquisition of goods for remuneration within the territory of the country,

  • intra-Community supply of goods.

In the light of Art. 7 sec. 1 of the VAT Act by the delivery of goods referred to in Art. 5 sec. 1 point 1 shall be understood as the transfer of the right to dispose of the goods as the owner.

Under Art. 8 sec. 1 of the VAT Act through the provision of services referred to in Art. 5 sec. 1 point 1 shall be understood as any service provided to a natural person, legal person or organizational unit without legal personality, which does not constitute a supply of goods within the meaning of art. 7.

From the content of the above-mentioned provision of Art. 8 sec. 1 of the VAT Act, it follows that services are all paid services that are not a supply of goods. So the definition of the provision of services is complementary to the definition of the delivery of goods. The above definition is an expression of the principle of the universality of taxation with tax on goods and services for transactions performed by taxpayers as part of their business activities.

In order to be considered a supply for consideration, there must be a legal relationship between the provider and the recipient of the service, and remuneration should be paid in return for the performance of the service. There must therefore be a direct link between the service provided and the remuneration paid for it. This means that the given legal relationship on the basis of which the service is performed must result in a clear, direct benefit for the service provider. Thus, the secondment of an employee is a service subject to VAT, provided that it meets the above conditions.

The moment when the VAT obligation arises

Pursuant to Art. 19a paragraph. 1 of the VAT Act, the tax obligation arises when the goods are delivered or the service is provided, subject to paragraph 5 and 7-11, art. 14 sec. 6, art. 20 and art. 21 sec. 1. In the light of Art. 19a paragraph. 2 of the VAT Act with regard to partially accepted services, the service is also considered to be performed in the case of the performance of a part of the service for which the payment has been determined.

The above provisions regarding the emergence of the tax obligation are complemented by Art. 19a paragraph. 3, according to which the service for which, in connection with its provision, consecutive payment or settlement dates are determined, shall be deemed to have been performed at the end of each period to which these payments or settlements relate, until the provision of this service is completed. A service provided on a continuous basis for a period longer than one year, for which due to its provision in a given year, payment or settlement deadlines do not expire, shall be deemed to have been performed at the end of each tax year until the provision of this service is completed.

The analysis of the above provisions shows that the provision of Art. 19a paragraph. 1 of the VAT Act formulates a general rule, according to which the tax obligation arises upon the delivery of goods or services, which means that the tax becomes chargeable in the settlement for the period in which the delivery of goods or services was made and should be settled for this period.

Employee secondment service - the moment when the tax obligation arises

In order to present the issue of the discussion, we will precede it with an example.

Example 1.

A Polish company dealing in the production of steel containers, which is part of an international corporation, delegates its employees to the company's headquarters in Germany. The secondment of an employee takes approximately four months. The German company pays the domestic company the wages for the posted workers once a month (upon receipt of the invoice). After the return of a group of employees from Germany, the company from Poland delegates more employees to the company's headquarters.

In this case, we are dealing with a continuous service (it should be emphasized that this is the most popular form of posting employees abroad). In this case, the tax obligation arises in accordance with art. 19a paragraph. 3 of the VAT Act.

Summing up, an exemplary service should be considered as a continuous service, for which, in connection with its provision, consecutive settlement dates for the work performed are set with the expiry of each period to which these settlements refer, until the completion of the provision of this service.

The confirmation of the above is the interpretation of the Director of the National Tax Information of March 15, 2017, number 3063-ILPP1-3.4512.19.2017.1.JN, in which we read:

"The circumstances of the case show that the parties agreed, due to the continuous nature of the services provided, that the Applicant's remuneration is / will be settled each time in specific, consecutive monthly settlement periods. In the analyzed case, the settlement period adopted by the parties is each time the calendar month.

Therefore, the Applicant should recognize the tax obligation for the services provided using Art. 19a paragraph. 3 of the Act, recognizing a given service for which, in connection with its provision, consecutive settlement dates are established as performed at the end of each period to which these settlements refer, until the end of the provision of this service.

To sum up, under the VAT Act, the tax obligation for the provision of services of the secondment of the Applicant's employees to other entities from the Group (setting the moment of showing the service in question in the VAT register, VAT declaration and summary information) arises / will be established in accordance with Art. 19a paragraph. 1 in conjunction joke. 19a paragraph. 3 of the Act, ie at the end of each settlement period agreed between the Applicant and a given entity from the Group (i.e. on the last day of a calendar month) ”.

Posting an employee - taxation

The company, delegating its employees to e.g. Germany, should issue an invoice for the above service. In this case, the above service is taxed by the contractor from Germany. According to Art. 28b of the VAT Act, the place of the provision of services in the case of the provision of services to the taxpayer is the place where the taxpayer who is the recipient of the service has its registered office, subject to paragraph 2-4 and art. 28e, art. 28f paragraph. 1 and 1a, art. 28 g of paragraph 1. 1, art. 28i, art. 28j paragraph. 1 and 2 and article. 28n. When issuing the above invoice, the taxpayer should not include VAT.