Combining Polish business activity with work in Germany requires organizing taxes and ZUS to avoid overpayment. Thanks to the double taxation avoidance agreement, you can use the exemption method with progression – income from work in Germany is not taxed in Poland, but affects the tax rate on income from your company. Key is also obtaining an A1 certificate, which confirms being subject to Polish ZUS and protects you from paying contributions in two countries. In Germany, your employer deducts Lohnsteuer tax, which you cannot avoid, but you can reduce its amount by monitoring your tax class and available reliefs. Through conscious planning of these steps, business activity in Poland and work in Germany will allow you to increase your income without worries about chaos in settlements.
Polish business activity and work in Germany – how not to pay the same taxes twice?
Many people decide to combine Polish business activity with work in Germany because it’s a real chance for better earnings and professional development. The problem appears when you need to settle taxes and fear of double taxation arises. Don’t worry, there are clear rules that protect you from paying tax twice for the same income if you approach the topic properly. Poland and Germany have signed a double taxation avoidance agreement, thanks to which income from work in Germany can be exempt from taxation in Poland, but affects the determination of the tax rate on your Polish business activity.
In practice, this means that your income from business activity in Poland is taxed according to a rate calculated taking into account earnings in Germany, but you pay the tax on employment only in Germany. Based on the double taxation avoidance agreement between Poland and Germany, the so-called exemption method with progression is applied. This means that income obtained from employment in Germany is not subject to taxation in Poland, but is taken into account when calculating the tax rate for Polish income.
That’s exactly why work in Germany and business activity in Poland ZUS and taxes require a strategic plan – if you arrange documents well and choose the right settlement method, you’ll avoid stress and gain certainty that your finances are under control.
Can you work in Germany and run a company in Poland? Check before you go abroad
It’s no secret that many people wonder whether it’s possible to simultaneously run a company in Poland and take up work in Germany. The good news is that this is completely legal, but requires you to organize formalities to avoid unnecessary problems with authorities in both countries. Key is remembering that you tax income from business activity in Poland in our country, and settle income from work in Germany in Germany. However, it’s worth knowing that both these elements influence your tax threshold and tax rate in Poland.
Important is also understanding that business activity in Poland and work in Germany don’t exclude each other in terms of social insurance. To avoid paying contributions in two countries, you must have an A1 certificate, which confirms that you’re subject to the Polish social insurance system during work in Germany. The A1 document is particularly important if you plan temporary cross-border work and want to maintain insurance continuity in ZUS. Remember that submitting an A1 application to ZUS and informing the employer in Germany about having this document will allow you to avoid the situation where you pay double pension and health contributions, which directly affects your finances.
A1, ZUS and German Lohnsteuer – what do you need to handle not to overpay?
Sometimes it may seem that Polish business activity and work in Germany is a combination too complicated to handle, but much depends on proper document preparation and knowledge of procedures. If you have a company in Poland, you must pay ZUS for this activity – and here appears the key role of the A1 certificate. Thanks to it, you confirm that you’re subject to the Polish social insurance system, even if you take up employment in Germany, which exempts you from the obligation to pay social insurance contributions in Germany.
Regardless of having A1, the German employer deducts Lohnsteuer tax for you. You cannot avoid this, but you can properly prepare for annual settlements. If you’re interested in work in Germany and business activity in Poland ZUS, remember that you must settle income in Poland, applying the double taxation avoidance method. Income from Germany can be exempt from taxation in Poland, but will be taken into account when calculating the tax rate for income from your activity. Such an approach allows you to maintain order in settlements and avoid unnecessary nerves, and also ensures that you don’t pay more taxes than necessary.
Business activity in Poland, work in Germany – how to choose the best settlement method?
For many people who run a company in Poland and work in Germany, the biggest challenge is choosing the appropriate tax and insurance settlement method. There’s no one perfect pattern for everyone, but there are proven steps that can make this task easier for you. First of all, you must know that in the case of business activity in Poland and work in Germany, applying the double taxation avoidance agreement is required so you don’t have to pay tax twice for the same income.
In the case of business activity in Poland, you must pay ZUS contributions, but you can use the startup relief or Small ZUS Plus, which allows reducing the contribution amount. If you’re employed in Germany, you won’t avoid Lohnsteuer tax, but you can monitor your tax class and available reliefs, which will allow you to lower monthly advances. Awareness of how Polish business activity and work in Germany function will allow you to make the best tax decisions and avoid chaos in finances.
5 steps that will allow you to combine a company in Poland with work in Germany without tax chaos
Before you decide on such a work model, it’s good to know concrete steps that will help you avoid stress and mess in settlements. First, start by establishing business activity in Poland through CEIDG and choose the appropriate form of taxation and contribution payment in ZUS.
Then submit an application for issuing an A1 document, which allows you to maintain being subject to the Polish social insurance system during work in Germany. The third step is taking up work in Germany and completing formalities related to registration in the tax system and health insurance with the German employer.
When you have already organized basic formalities, remember to submit a PIT declaration in Poland every year using the double taxation avoidance method, and in Germany deliver Steuererklärung or confirmation of Lohnsteuer deduction by the employer. Finally, control deadlines and keep all documents confirming your income, taxes and contributions, to be able to prove the correctness of settlements in case of inspection.
Settlements between Poland and Germany may seem complicated, but they don’t have to be. With our tax settlement app Taxando, you’ll do it quickly, in Polish and without stress – it’s invaluable help if you want to have order in taxes and recover money that belongs to you.
Maciej Wawrzyniak is an experienced entrepreneur whose company prepares more than 40,000 tax returns annually. As co-founder of Taxando, he brings his experience and knowledge in finance, marketing, and tax to the project.
In his private life, Maciej enjoys sporting challenges, playing the guitar, and swimming in the lake. He is also the proud father of three sons.
