August 25, 2022 was the 183rd day of the ongoing armed conflict on Ukrainian territory. This will thus be the 183rd day for refugees, who started arriving in Poland on the very first day of the current conflict. From that point onwards, a person residing in a country is subject to absolute tax liability in the country of residence. This follows from international double taxation treaties, including the convention between Poland and Ukraine.
Refugee as a Polish tax resident
According to the Polish PIT Act, a polish tax resident is a person who:
- Has a centre of personal or economic interest (centre of vital interests) in the territory of the Republic of Poland or
- Stays in the territory of the Republic of Poland for more than 183 days in a tax year.
In order to have an obligation to settle all one’s income with the Polish tax authorities, it is sufficient to fulfil one of the above-mentioned conditions. For some refugees, the first one concerning the centre of vital interests could be fulfilled already on the first day of their stay in Poland. Namely, according to the wording of the PIT Act, which was added to the Act by the Act on Assistance to Citizens of Ukraine, refugees may submit written declarations that they are moving their centre of life interests to Poland. Formally, this could be done from April 15 2022, however, the new provision is retroactive from the first day of the war, i.e. February 24 2022.
It should be noted that if an eligible person has not submitted the aforementioned declaration to date, then the person must pay Polish income tax for the first time by the 20th day of the month following the month in which 183 days were exceeded. Assuming a stay in Poland of more than 183 days, the PIT advance on income earned since the beginning of the year should be paid by September 20, 2022.
The tax implications will vary depending on the type of employment
When a refugee is employed by a Polish employer, a simple mechanism is in place. Advance payments of Polish PIT are levied on their wages. Ukrainians who, while residing in Poland, still work remotely for employers who are based in Ukraine or in another country and whose remuneration is not borne by the permanent establishment of the employer in Poland are in a different position. After exceeding 183 days of stay, they will be obliged to pay income tax in Poland. All remuneration received for work performed from the territory of the Republic of Poland will be taxed. The situation is complicated by the fact that Ukrainian employers settle advance income tax for such persons in Ukraine. If they continue to do so while their employees are in Poland, in practice such individuals may pay tax twice, in both countries. There is no certainty, given the specific circumstances, that such persons will be able to count on a refund of the tax paid to the Ukrainian tax authorities (this possibility arises from the content of the Polish-Ukrainian double taxation treaty).
183 days conclusive on taxation in Poland
Irrespective of whether a person working remotely for a foreign employer declares having a centre of life (e.g. spouse, home) on the territory of Ukraine and a plan to return to the homeland after the war, the fact of staying on the territory of the Republic of Poland for more than 183 days in a tax year becomes crucial. This is directly determined by Article 15 of the Polish-Ukrainian DTT. The conditions that must be fulfilled cumulatively in order for a person who is resident in Ukraine and receives remuneration from paid employment performed in Poland to be able to tax his/her income only in Ukraine are as follows:
- The recipient resides in Poland for a period or periods not exceeding a total of 183 days during a given calendar year, and
- The wages are paid by or on behalf of an employer who is not domiciled in Poland, and
- Salaries are not borne by the permanent establishment of the employer in Poland.
The coming weeks will be a time of increased expert analysis of the income taxation of those who have settled in Poland following the start of the war in Ukraine. We will keep you informed about possible legislative developments in this area, including the facilities under consideration for Ukrainians remaining outside their homeland.