From this article, you will learn:

  • If free accommodation, as part of the secondment, constitute income for the employee?
  • How taxpayers can use the judgment of the Supreme Administrative Court in disputes with the tax office?

The taxation of free benefits provided to employees by employers has been controversial for years. One of the controversial issues is whether providing accommodation and transport to an employee delegated to work abroad results in the employee generating income that should be taxed. Employers opposed the tax office's plans and its pro-fiscal approach, but the courts ruled quite uniformly in favor of the tax administration authorities - at least until recently. A different position was presented by the Supreme Administrative Court in its judgment of 1 August 2023.


Dispute over the taxation of free accommodation as part of a secondment

The Supreme Administrative Court's judgment, which is interesting from the perspective of taxpayers, concerns a company that provides, among others, services related to the assembly, renovation and maintenance of all types of technological production lines. The entity performs these services primarily in EU countries, to which it sends its Polish employees for this purpose - as part of business transfers. After obtaining a given order, the company selects people suitable to perform the task and signs an annex to the contract with them, according to which the place of work is temporarily changed (for several months). 

The company provides its employees with free accommodation or covers the entire costs of their accommodation (in a place and on terms chosen by the company). 

The Company asked the Director of the National Tax Information whether providing temporarily delegated employees with free accommodation will result in them generating income from the employment relationship within the meaning of Art. 12 (1) of the PIT Act in the form of a free benefit - and, consequently, whether the company must reduce the taxpayers' remuneration by the tax on providing them with free accommodation in the place to which it sent them.

The company was of the opinion that such benefits did not constitute income for employees. The Director of the National Tax Information did not agree with this statement, and his opinion was supported by the Provincial Administrative Court in Cracow, which, in its judgment of 13 August 2020 (reference number I SA/Kr 444/20), dismissed the company's complaint against the interpretation.

According to the Provincial Administrative Court, expenses incurred by the employer to provide accommodation for the employee at the place of work, excluding business trips, constitute income subject to income tax for the employee. The employer is therefore obliged to collect an advance tax on this income. The court found that both accommodation costs and employee transport costs (if the employees do not travel by bus) constitute the employee’s income.

Transport and accommodation of an employee in the light of EU law and the ruling of the Supreme Administrative Court

The Supreme Administrative Court, in the judgment of 1 August 2023, ref. no. II FSK 270/21, ruled that the position of the court of first instance was incorrect.

As follows from the oral justification of the judgment, in the opinion of the Supreme Administrative Court in the case in question, EU regulations should apply to employees delegated by a Polish employer to work abroad, which specify how benefits paid to posted employees should be taxed. According to EU law, transport and accommodation costs incurred by the employer cannot be included in the employee's remuneration. 

Since the provisions of EU regulations take precedence over national regulations, the Supreme Administrative Court found that the provision of transport and accommodation cannot be charged to the employee, i.e. be included in his or her income and, indirectly, the company's income as a payer.


How does the Supreme Administrative Court's judgment change in practice the way in which seconded employees receive free accommodation from the employer? 

The Supreme Administrative Court's judgment is a precedent - so far, administrative courts have treated the costs incurred by employers for accommodation and travel as employees' income.

Taxpayers and tax advisors may treat the Supreme Administrative Court's ruling discussed here as a breakthrough, but it is still worth remembering that - according to the old proverb - one swallow does not make a spring, and the issue of taxation of employer's benefits for employees posted abroad still raises many doubts. It is impossible to predict whether the interpretation of EU regulations used by the Supreme Administrative Court will change the direction of jurisprudence in matters of benefits for employees posted abroad. Each case requires a thorough, individual analysis, and taxpayers must be aware of the possible need for disputes with the tax office

Undoubtedly, if they occur, the Supreme Administrative Court's judgment may prove to be a valuable tip and an argument worth using.