On 01 August 2023, the Supreme Administrative court delivered a landmark judgment in case II FSK 270/21 declaring that providing accommodation and travel to workers posted abroad does not bring any revenue to such workers in line with EU law.
The case related to a company rendering services in Member States by using the freedom to provide services within the EU. The company’s employees were seconded to perform their assignments. The secondment took place under memoranda of understanding (annexes) to employment contracts, which temporarily changed the employees’ place of work.
The company applied for an individual ruling to confirm that a free-of-charge provision of accommodation to workers temporarily posted abroad or in a different location in Poland, for the time of posting, in the location they were posted to in relation to performing their duties for the company, would generate revenue for such workers under employment relationship within the meaning of Article 12(1) of the PIT Act (free-of-charge allowances).
The company’s view was not shared by the head of the National Revenue Administration and, subsequently, by the Regional Administrative Court in Kraków, which, by its judgment dated 13 August 2020 (case file I SA/Kr 444/20), dismissed the company’s complaint against the individual ruling.
In the grounds for the judgment, the Court pointed that the sole fact that an employee stays outside their habitual place of residence does not imply that such an employee remains at the disposal of the employer and that they use the accommodation granted for business purposes. In fact, accommodating employees in the place their work duties are performed is not directly linked with rendering work itself, as would be in the case, for example, of preparing a workplace with devices, tools and materials. In other words, accommodation provided is not a “work tool”, the costs of which would be incurred by the employer, but a means to meet employee’s basic needs outside work.
According to the Court, expenses incurred by the employer in relation to providing the employees with accommodation where the work is performed, excluding business travels, should be treated as employees’ revenue in line with Article 12(1) of the PIT Act and as such be subject to income tax on account of which the remitter should collect advance payments pursuant to the rules set forth by Article 32 thereof. Consequently, the value of allowances received by an employee not participating in a business travel, or, as the case may be, the surplus over amount specified by Article 21(1)(19) of the PIT Act, must be added by the employer to employee's remuneration payable in a given month and the total value thereof must be used to calculate, collect and remit an advance tax payment.
The company filed a last resort appeal to the Supreme Administrative Court.
The judgment of the Supreme Administrative Court dated 01 August 2023 (case file II FSK 270/21) did not uphold the position of the first instance court. In the grounds for the judgment, the Supreme Administrative Court noted that the factual circumstances were related to employee assignment and the period it covered. Such short-time assignments were practically identical to business trips.
Under Polish law, especially Article 21(1)(14a) or Article 21(1)(19) of the PIT Act, it should be inferred that both the costs of employee accommodation and travel- if not by bus - should be treated as employee’s revenue. According to the Supreme Administrative Court, in this particular case, however, employees subject to short-time posting by the Polish company should be subject, in principle, to the provisions of Directive 96/71/EC and Directive 2014/67/EC concerning the method of reimbursements for posted workers. The above-referred Directives clearly indicate that the costs of travel and accommodation cannot be treated as constituents of the employee's remuneration. This results in detail from the provisions of the rank of EU regulations, which in the hierarchy of sources of law take precedence over national provisions. Since EU law clearly provides that such costs of travel and accommodation cannot be treated as components of remuneration, they cannot be charged to the employee and - indirectly - to the company as the remitter under the tax law.
This judgment can be considered landmark in terms of treating costs of travel and accommodation of posted workers, because so far, in most cases, the courts have taken the position that such costs should be treated as employee’s revenue.
