Tax Eye: Short-term accommodation for employees
This article examines the main tax and social security issues connected with the provision of accommodation for employees.
Employees staying in Poland
The taxation implications for employees of company-provided accommodation, such as furnished apartments, are governed by the Personal Income Tax Law of July 26, 1991 as amended. The general rule set out in Article 12 of the Law is that provision of a benefit-in-kind resulting from an employment relationship is taxable in the hands of the recipient. Article 11, paragraph 2A, point 3 provides for the calculation of the benefit of employer-provided accommodation. It is equal to the ground rent (czynsz) that would be due under a lease agreement for the accommodation.
Another possibility is for the employee to claim the daily allowance (dieta) for accommodation in respect of each night spent away from home on business, which amounts to zł.27, where s/he is unable to provide a receipt for hotel costs. This amount is tax and social security (ZUS) free.
There is no limit on the amount of hotel expenses incurred in Poland which can be reimbursed free of tax and ZUS to the employee, on production of a valid invoice.
Employees working abroad
With respect to employees working abroad, there are different solutions available. Article 21, paragraph 21, point 81 of the Law states that the cost of accommodation, provided that the employee does not include it in a subsequent claim under costs of earning income, can be deducted from the taxable amount of income earned by individuals who are temporarily abroad and are earning income there. The cost is capped at the daily maximum tax-free hotel cost issued by the Minister of Labor and Social Policy in the Decree of May 8, 2001 On the Detailed Principles for the Establishment of and the Amount of Payments Due to Employees in Respect of Foreign Business Travel.
This amount must be supported by invoices or similar documentation, otherwise only 25 percent of the maximum capped amount is payable. In either situation no ZUS is due. For example, the current capped rate for a hotel in France is EUR 120 (zł.430).
There is a potential work-around for employees who stay at hotels which are more expensive than this capped amount - the employing company's management board should approve this expenditure in writing, in advance, for justified business reasons - for example, close proximity to a conference center or executive security. Then this enhanced amount will also be exempt from tax and ZUS.
Summing up
In summary there are four conditions to be met: The employee is earning income abroad; the employee is bearing the costs of his/her accommodation; the amount of these expenses is documented by a hotel invoice or equivalent document; and these expenses are not treated as the employee's own cost of earning income.
Any provision of hotel accommodation for employees seconded outside their place of normal residence to work in Poland or abroad should be a cost of earning income for the employer. In the situation where the employer furnished accommodation in Poland to an employee, the full amount of the rental should be a cost of earning income under Article 15 of the Corporate Income Tax Law of February 15, 1992 as amended.
Richard Wernick is managing director of Totalserve (Polska) Sp. z o.o.
He is a chartered tax advisor and registered trust and estate practitioner and has been practicing in Poland since 1997
