It took a long time, but there it finally is. With effect from 27 November 2020, the Federal Republic of Germany and the Republic of Poland have now also concluded a consultation agreement on the taxation of cross-border workers and public sector employees, which aims to mitigate the consequences of the coronavirus pandemic.
The corona pandemic has turned all our lives upside down and led to numerous restrictions. Hygiene concepts were introduced that forced employees to work from their home offices. Travel restrictions came into force, with the result that people who had actually been working abroad now had to work unexpectedly from their home country – often even from their home office. What results from this are not only personal restrictions in the freedom of movement, but also possibly immense tax consequences.
Two groups of cases are particularly affected – the classic border commuters, but also employees who are “normally” assigned to the neighboring country. Under normal circumstances, both groups work in Poland every working day. The classic border commuter “commutes” every day from Germany to the neighboring country in order to carry out his or her work. The classic assignment, on the other hand, resides in Poland to work there. Both groups are normally taxed in Poland on their income from employment, because they only work there.
Due to the Corona pandemic and the associated travel restrictions or as a result of internal company hygiene concepts, the affected employees can no longer carry out their work at their office workstations in Poland, but are forced to work from their home office in Germany. In many cases, the consequence would be that the right of taxation in terms of the double taxation agreement Germany/Poland would now revert to Germany. Among other things, this would in turn mean that assigned employees in Germany would suddenly be subject to withholding tax again.
In order to prevent the affected employee groups from being placed in a worse tax position “through no fault of their own” and to mitigate the consequences of the corona pandemic in this respect, a mutual agreement has now been concluded between the Federal Republic of Germany and the Republic of Poland (and by analogy also with other countries such as Austria or Switzerland), which interprets the existing provisions of the double taxation agreement to meet the special requirements of the corona pandemic.
According to this, working days for which wages were received and on which employees had to carry out their work from their home office due to measures to combat the corona pandemic are to be considered as if the employee had carried out his work in the country in which he would have carried it out even without the corona pandemic. In short, if an employee had to work from his home office in Germany due to corona, although he would have actually spent these working days in Poland, the days are still to be considered as having been spent in Poland.
Through this so-called fiction of fact, the relapse of the right of taxation to Germany is avoided and the employee continues to be placed in the same position as if he were carrying out his work as originally intended.
This regulation applies analogously to public service employees who work across borders.
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