In an individual interpretation dated August 13th 2020, mark 0111-KDIB1-1,4010,244,2020.1.ŚS Director of the National Revenue Information System decided that payments for making employees available are subject to WHT and the Company will be obliged to collect a lump-sum income tax – withholding tax.

The facts of the case concerned an applicant belonging to an international capital group who, in connection with its operations, acquires a number of services from foreign entities, i.e. non-residents within the meaning of Art. 3.2 of the CIT Act.

One of the types of payments made to foreign entities are payments for the re-invoicing of costs of employees made available, classified as MF10 services paid to several non-residents.

MF10 services consist in making operational resources (in the form of employees) of other companies in the Group available to the Company. These employees may perform functions related to, among others

  • management and strategy setting
  • controlling
  • production
  • Quality
  • sale
  • logistics

The employees provided are most often qualified and experienced staff, occupying higher positions. Occasionally, the Company is also provided with personnel with lower qualifications (office or production). On the other hand, MF10 services are provided on the basis of contracts concluded between the Company and entities employing Employees (Contractors). If an Employee is made available to the Company, his/her employer loses the right to commission new tasks and control his/her actions. Fees by virtue of MF10 Services are in fact a re-invoice of employee costs related to Employees for the time of their making available.

The fact that the Company acquires MF10 Services is due to the fact that due to the global deployment of the Group’s human resources, it is more profitable for the Company to make available Employees within the Group than for the Company to take independent actions related to the search for, recruitment and subsequent employment of new employees.

Therefore, the question was asked whether the Company is and will be obliged as a payer to collect a lump-sum income tax – withholding tax on payments for MF10 Services in accordance with Article 26(1) in connection with Article 21(1)(1) and (2a) of the CIT Act?

The Director of the National Revenue Information indicated that the key in this case is to determine whether the described services indicated by the Applicant are services of a similar nature to those indicated in art. 21 sec. 1 point 1 and point 2a of the CIT Act. Therefore, when analyzing a specific service from the point of view of “similarity”, it is important to precisely define the essence of that service.

Transferring the above to the grounds of the case under consideration, it should be pointed out that the notions of services which are covered by the subject matter of Article 21 par. 1 point 2a of the CIT Act were not defined in the said Act. Therefore, in the present case it will be important to clarify the meaning of the terms: “advisory services”, “management and control services” and “recruitment and staff acquisition services”.

Considering the above, it should be stated that in the case in question, the services purchased by the Applicant, consisting in providing the Company with employees, are services (benefits) of a similar nature to the services listed in Art. 21.1.2a of the CIT Act, including above all the services purchased have the characteristics of “recruitment and staff acquisition services”.

Personnel acquisition includes a set of deliberately separated and properly configured activities in the area of the company’s personnel function, which are aimed at providing the company with an appropriate number of competent persons providing work. In the opinion. The body does not always have to be an employee, as personnel is a broader concept. Taking into account the rationality of the legislator, it should be stated that obtaining staff constitutes a separate category of service from the employee recruitment service indicated in Article 21(1)(2a) of the UCIT, because otherwise, it would not be necessary to list this type of service alongside the employee recruitment service. The service of posting employees is the acquisition of personnel by the Applicant.

It should be noted that the services indicated in the application are provided, among others, by qualified and experienced personnel occupying higher positions. As explicitly indicated in the description of the case, these employees may perform functions related to, among others: management and strategy setting, controlling: “providing professional advice”, it is difficult to assume that in the reality of economic cooperation, the provision of paid secondment services for employees who, among others, may perform managerial or management functions, is not really connected with providing professional advice from their side based on possible knowledge, experience and business competence. They are provided on the basis of some knowledge, and the effect of providing them is to share this knowledge with the recipient. A different naming in this case should not significantly differentiate these types of services, in the way they are perceived under the provisions of Article 21(1)(2a) of UCIT.

Therefore, the services indicated in the application, in the part concerning qualified and experienced personnel holding higher positions, purchased by the Applicant are in fact management and control services or services of a similar nature to the management and control services referred to in Article 21(1)(2a) of UCIT.

On the other hand, the services purchased by the Company, in the part concerning less qualified personnel (office or production staff), constitute services or services of a similar nature to the services of employee recruitment and staff acquisition referred to in Art. 21 par. 1 item 2a of UCIT.


Author: Izabela Lipka – Tax consultant