Getting to grips with two new regulations

By : Anna Szymańska

   This week I’ve decided to throw caution to the wind with my regular single feature idea, and writes about two topics: The effect of health-insurance regulations that came into force on Sept. 27, and how a new law set to go on the books Jan. 1 could eat into your cash flow next year.

   Regarding the first law, no longer will there be 22 separate pieces of legislation on general health insurance (not to be confused with statutory sickness insurance, which is part of the Social Insurance Administration or ZUS system) – this one is the payment that comes out of an individual’s personal income tax.

   Assuming most of you are expatriates, under the old regulations this would have been of no interest to you – unless you were in Poland on the basis of a permanent residency card or with a temporary residency card issued in accordance with your refugee status.

   Before Sept. 27, most consultants spent months and years trying to explain to payroll staff that they should not be making health-care deductions for non-Polish personnel, because if they did it would result in an effective underpayment of tax, not to mention penalty, if the mistake was not discovered until (as was usually the case) the following April. As of Sept. 27, this is no longer the case, as non-Poles also now qualify for this payment.

   While the change will make no difference to you – only to your payroll staff – it’s worth reminding them of the change and ensuring that what is being deducted from your local salary is being directed to the appropriate funds. Particularly interesting is that the new regulations apply to the whole of your September pay, so unless someone in your accounting department has been on their toes, the September payroll may have to be corrected.

   Now, onto meatier matters that could bite financially next year. Because visa and work permit regulations have changed, effective Jan. 1 you will no longer be granted a business visa. Instead, everyone will be issued a temporary residence card lasting six months to two years; a work permit will be necessary for any non-Polish contract relating to your stay in Poland and a separate permit for any local contract, as well as a permit to perform the duties of a duly appointed board member. So far, not so bad, you might think, but as of Jan. 1 the institutions responsible for issuing work permits will shift from the starosta to the voivod. What does this mean? Let’s say Johnny Foreigner is due to start his new Polish assignment in November 2001. Part of his duties are to be performed on the basis of his being appointed to the board of directors of a local Polish entity, and by separate resolution he is to receive a board fee for the performance of those duties.

   We already know that Mr. Foreigner will require a work permit for that function as of Jan. 1, so let’s apply for it straightaway. Not that simple. The problem is, the starosta, who is operating under the current law, will simply inform you that such a permit is not required. You can’t apply to the local voivod, because he doesn’t take over his new function until Jan. 1.

   OK, so what’s next? Christmas and New Year’s of course, so after you return to Poland in January you will naturally be required to hold a work permit to function (in real terms to earn income) as a board member. You don’t have a permit because you didn’t need one last year. No problem, you simply file your application – the same as dozens of others – and therefore the chances of getting your permit before the end of the month are pretty slim. In practical terms this means you are not entitled to your January pay – ouch! But if you do take your pay, and think you can argue that the administrative fine of zł. 5,000 is rather small and ultimately borne by the company anyway, the person responsible for authorizing your payment, usually someone in HR or a senior payroll individual, is personally liable. Even worse, it’s a criminal offense!

   What’s the answer? No easy one, I’m afraid. The authorities may be lenient in light of the practical difficulties caused by the changes in the regulations, but you shouldn’t rely on this. Apart from gritting your teeth and surviving on stale holiday leftovers until your permit comes through, you could try persuading your boss to authorize the resolution and payment out of the equivalent of your January board fee as an additional board fee payment in December 2001. Failing that, you could take an extended holiday break and come back to Poland when your permit arrives. Good luck.

   Anna Szymańska is a tax senior manager in the Warsaw office of Andersen.