How to pay taxes in Ukraine while working in Poland. Lawyers ' responses

We continue a series of articles for Ukrainian IT specialists who left for Poland because of the war and are now arranging their lives and work there. This time we will consider a popular question from our readers — whether it is possible to continue paying taxes in Ukraine while working in Poland.

To find out, we talked with Natalia Khitruk, a lawyer and partner at Win Win Law, and Natalia Gaikalova, a tax expert and CEO of Finevolution (by the way, the Finevolution team provides free legal advice for IT specialists during martial law).

Can a Ukrainian pay taxes to Ukraine while working in Poland?

The question of where to pay taxes directly depends on the tax residence of an individual.

According to the tax code of Ukraine, a resident is an individual who has a place of permanent residence in Ukraine. However, the Code provides several modifications to the definition when a person will be considered a tax resident of Ukraine, namely::

If an individual also has a place of residence in a foreign country, he is considered a resident if such a person has a place of permanent residence in Ukraine.If a person has a place of permanent residence also in a foreign country, he is considered a resident if he has closer personal or economic ties (the center of vital interests) in Ukraine.If the state in which an individual has a center of vital interests cannot be determined or if an individual does not have a place of permanent residence in any of the states, he is considered a resident if he stays in Ukraine for at least 183 days (including the day of arrival and departure) during the period or periods of the tax year.A sufficient (but not exclusive) condition for determining the location of the center of vital interests of an individual is the place of permanent residence of his family members or his registration as a business entity.

If it is impossible to determine the resident status of an individual using the previous provisions of this subparagraph, he is considered a resident if he is a citizen of Ukraine.

A sufficient basis for determining a person as a resident is the independent determination of their main place of residence on the territory of Ukraine in accordance with the procedure established by this code, or their registration as a self-employed person.

Thus, if a Ukrainian has an open sole proprietor, this is a criterion for his tax residency in Ukraine, so he pays taxes in Ukraine, even working for a Polish company.

And who does Poland consider its tax residents?

In Poland, a tax resident is a person who has a center of vital interests in Poland or lives for more than 183 days in Poland in a tax year (which is equal to a calendar year).

This means that after 183 days of stay in Poland, a Ukrainian is required to pay taxes in Poland.

What about double taxation?

Poland and Ukraine have a convention for the avoidance of double taxation. The same convention also addresses the issue of recognition of tax residency.

Below is a quote from the convention to make it clearer what it is about:

"The term' resident of one contracting state ' means a person who, under the law of that state, is subject to taxation in it on the basis of his place of residence, permanent place of residence, location of the governing body, place of registration or other similar criterion. This term, however, does not include a person subject to taxation in that state only if that person receives income from sources in that state or in relation to property in it.

In the event that, in accordance with the provisions of Paragraph 1 of this article, an individual is a resident of both Contracting States, his or her position shall be determined in accordance with the following rules:

it is considered to be a resident of the Contracting State where it has permanent housing. If it has a permanent dwelling in both Contracting States, it shall be deemed to be a resident of the state where it has the closest personal and economic ties (centre of vital interests);where the Contracting State in which it has a centre of vital interests cannot be determined, or where it has no permanent dwelling in either of the contracting states, it shall be deemed to be a resident of the Contracting State where it habitually resides;if it habitually resides in both states or when it does not habitually reside in either of them, it shall be deemed to be a resident of the state of which it is a national;if the person is a national of both Contracting States or when it does not if he is a citizen of any of them, the competent authorities of the contracting states shall resolve this issue by mutual consent."

Therefore, you need to pay taxes to Ukraine until you reach 183 days of stay in Poland. Then there is the risk of being recognized as a tax resident of Poland and taxing this income there.

Under what contract should an IT employee be registered at work in order to pay taxes to Ukraine?

If a Ukrainian IT specialist works as a sole proprietor remotely, then he pays taxes to Ukraine as he would pay while in Ukraine.

If a Ukrainian citizen has entered into an employment contract with a foreign company, then he becomes a subject of Labor Relations, to which, among other things, the relevant provisions of the labor and tax legislation of a foreign state apply.

Taking this into account, a foreign company, acting as a tax agent, will pay the corresponding taxes on the amounts of income received by a citizen of Ukraine in its state.

At the same time, such a citizen does not need to re-pay taxes in Ukraine, provided that an agreement for the avoidance of double taxation has been concluded between Ukraine and the foreign state in which the income was received.

In this case, what should I do with taxation?

Further, a Ukrainian can declare this income in Ukraine as foreign and make a netting of taxes paid abroad. This is an obligation if the person is still recognized as a tax resident of Ukraine. If not, you don't need to do anything else.

It is clear from the FLP, but if a Ukrainian specialist is registered in a Ukrainian company under an employment contract?

In the event of a threat of armed aggression, a Ukrainian company may introduce home-based or remote work on the basis of a corresponding order (order) without the mandatory conclusion of an employment contract on remote or home-based work with an employee in writing.

Thus, an employee can be transferred to remote or home-based work and perform it remotely on the territory of a foreign country. In this case, the company will continue to perform the functions of the employee's tax agent and calculate and pay taxes to the budget of Ukraine.

Can a freelancer who has moved to Poland pay taxes in Ukraine?

Regarding the provision of services remotely to a foreign customer, as well as for freelancing, it is necessary to evaluate the relationship that has arisen between the customer and the service provider. Again, if the service provider is a sole proprietor registered in accordance with the legislation of Ukraine and is considered a resident of Ukraine, then it will continue to pay taxes in Ukraine.

Does refugee status affect the payment of taxes?

No, refugee status is a migration issue of allowing you to stay in Poland. But it is not directly related to the payment of taxes. What else would you like to know about living and working conditions in Poland? Write in the comments.