World news has been dominated in recent weeks by the consequences of the dangerous COVID-19 virus. In the era of globalization, the rapid spread of a virus brings about a number of consequences, not only for medicine and broadly defined public health. The consequences will also be felt by employers and employees, and some of them will have a tax aspect.
COVID-19 and the global economy
Recently, there has been a lot of talk of measures taken around the world to limit the effects of the spread of a dangerous virus, commonly known as the coronavirus. The business world has reacted to the threat by restricting the movement of people, cancelling fairs, congresses and conferences. Limiting direct contact and increased importance of mobile communication are some popular ways of preventing the spread of the virus. Employees are often directed to home office.
What can the tax consequences of these measures be for employees and employers?
Changes in employee mobility
Some countries have imposed restrictions on mobility, and quarantine periods, for those returning from countries where coronavirus cases have been confirmed.
Thus, an employee's stay in another country may become longer. This fact may give rise to significant tax consequences, e.g. by exceeding 183 days stay in another country, which in most cases will result in the obligation to have income earned there taxed in accordance with local law. However, there will also be several possible consequences for the Polish company, such as the obligation to register abroad for tax and social security purposes.
A different scenario is also possible. Forced quarantine may delay the intended secondment of an employee abroad or make a person employed on a foreign contract decide to return to Poland for disease prevention reasons. In this case, work for a foreign employer will be performed from Poland. This may result in the taxation employee’s income in Poland, as well – in some cases – arising permanent establishment. Each case should of course be analysed on its own merits.
Moreover, employees who are not on a business trip will receive additional income, e.g. due to the provision by the employer of accommodation, transport or other benefits at the place of the employee’s (forced) stay.
Disease prevention impact on taxes
The employer may refer an employee who is suspected of being infected with the virus (e.g. after returning from a country where it has been confirmed) to preventive health checkups to confirm or exclude the infection. There have been queries about the possibility of performing these checkups on terms similar to occupational medicine checkups, i.e. at the employer's expense.
Employees may also be told to work from home (if the nature of their work allows it). In this case, the employer may pay the employee a cash equivalent for the use in performing the work of tools, materials or equipment owned by the employee. Consideration should be given to the tax consequences of paying a cash equivalent.
Employers, in turn, will face increased costs of having to adapt to the new reality. It will be necessary to develop operating procedures and controls in view of the increased number of cases of remote work and the reduction in the number of events requiring the simultaneous presence of large numbers of people.
What that means to me
You should be ready for exceptional conditions arising from the global consequences of coronavirus prevention.
Appropriate procedures, policies and regulations, as well as the provision of appropriate facilities for assessing the tax implications, e.g. for persons staying abroad, will help companies operate during the current and possible future crises. It will also make it possible to effectively build your branding of a responsible employer.