Tax Supervisor at RSM Poland
Entrepreneurs from German-speaking regions are more frequently asking us about getting A1 certificates for their employees. Let us remind you that an A1 certificate is issued to confirm the social security legislation that applies to its holder. Therefore, this certificate is very important for all those who travel around the European Union, European Economic Area or Switzerland because of their professional commitments, e.g. expats.
A1 certificate: when and for what?
A1 certificates are issued with due consideration for Regulation (EC) No 883/2004 of the European Parliament and of the Council of 29 April 2004 on the coordination of social security systems (hereinafter referred to as Regulation (EC) No 883/2004), as well as the provisions of the Regulation (EC) No 987/2009 of the European Parliament and of the Council of 16 September 2009 laying down the procedure for implementing Regulation (C) No 883/2004 on the coordination of social security systems (hereinafter referred to as Implementing Regulation (EC) No 987/2009). In Poland, A1 certificates are issued by the Social Insurance Institution, which verifies whether a given person is covered by the Polish social security system in a given case. This regards both Polish nationals who are pursuing their professional activities abroad and citizens of other countries who are pursuing their professional activities on the territory of Poland.
As more and more people have been travelling for work or performing their professional duties outside their home country (which is guaranteed by the freedom of movement of persons laid down in the European Union Treaties), the A1 certificate has taken on even more importance. It is also the result of a wave of inspections that hit businesses, in particular those from France, Austria and Switzerland.
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That is what theory says...
However, the practice shows that when it comes to A1 certificates issued by the Social Insurance Institution, things are far from being simple and straightforward.
Let us imagine the following scenario: company X seated in Germany expects that the A1 certificate will be issued e.g. to its employee (a Polish national residing in Poland) who performs his or her professional duties on the territory of Poland as a rule, and travels to other European Union countries only occasionally for short business trips. It turns out that in such circumstances the A1 certificate is denied (yet, it does not necessarily mean that the Polish social security legislation is not going to apply to this person).
This is provided for under Regulation (EC) No 883/2004 and Implementing Regulation (EC) No 987/2009 that employed persons receive A1 certificates in the following cases:
- if an employed person is posted to another Member State do perform work on behalf of the employer, provided that the anticipated duration of such work does not exceed 24 months and this person is not sent to replace another posted person;
- if he or she normally pursues an activity as an employed person in two or more Member States.
Normal pursuit of activity as an employed person vs. posting and business trip
It should be noted at this point that marginal work is not taken into account when deciding if it is scenario 2 we are dealing with, i.e. when a given person “normally pursues an activity as an employed person in two or more Member States”. As the Social Insurance Institution has put it in their explanations: “marginal work is employment where the work load, scope of duties (nature of the work performed) and remuneration are negligible in comparison with the parallel paid employment. If we identify that marginal work is performed in a given country, this person shall be covered by the scheme of another Member State and not the one in which marginal work is performed. The country, in which the work was found to be marginal, shall not be taken into account when determining the applicable legislation, as if the work has not been performed there at all.”
As regards case 1, there may be doubts, as well, because not every trip of an employee to perform professional duties means that he or she is being posted within the meaning of the aforementioned Regulation (incidental and short-term trips are rather business trips referred to in Article 77(5) of the Polish Labour Code). In the case of business trips, the Social Insurance Institution does not have grounds to issue A1 certificate.
If, for various reasons, such certificate is nevertheless issued to an employee going on a business trip, this may negatively affect the remuneration (per diems) paid out on business trips. For example, in its ruling of 13 January 2015 (case no. II UK 205/13) the Supreme Court stated that if the Social Insurance Institution certified that the Polish social security scheme applies on E-101 form (now: A1 certificate), the employee concerned cannot be found to be on a business trip abroad. As a result, the preferential treatment of per diems on business trips shall not apply to additional remuneration for work abroad (i.e. these amounts shall be included in the base for calculating personal income tax and social security contributions)
Implications for employers
What does all this mean for employers? Well, employers sending their employees to work abroad should correctly determine the legal category of the professional activity that will be performed. This applies both to Polish entrepreneurs who post their employees abroad and entities seated in another country who direct their employees to work in Poland. The tax and social security obligations applicable to additional remuneration paid for being posted to work abroad will differ from those that apply to per diems on business trips abroad.
As there are many uncertainties related to the above obligations, the RSM Poland expert team offer their support in determining the correct insurance status of employees performing their professional duties outside the country where the employer is seated, along with the related tax consequences.
At the same time, we would like to make it clear that in this post we have discussed A1 certificates issued to employees only. It is worth noting that Regulation (EC) No 883/2004 regulates the competence of social security legislation also in other cases, e.g. pursuing self-employment abroad.
Should you have any questions or doubts concerning the above topic, we encourage you to contact us at: email@example.com.
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