Tax residency of Ukrainian refugees: Overview of rules in Europe | Infographic

No exemption after overstaying 183 days in the country

According to the Czech tax legislation, an individual is considered a Czech tax resident if they have a permanent home in the Czech Republic in which they intend to stay permanently or stay for at least 183 days or more in the Czech Republic continuously or intermittently in a calendar year. A permanent home means an apartment, either owned or rented, which is available to the individual at any time.

If an individual would also be considered a tax resident of Ukraine according to Ukrainian regulations, then the determination of tax residence is based on the criteria set out in the Double taxation avoidance agreement between the Czech Republic and Ukraine (hereinafter “DTAA”).

The first decisive factor is the existence of a permanent home. If the person has a permanent home in both contracting states, the criterion of the center of vital interests is used to determine the state of tax residence. In practice, it therefore depends on where the family lives or where the person performs his economic activities. If it would not be possible to determine tax residence even on the basis of the center of vital interests, then the criteria of habitual abode (staying over 183 days), citizenship and agreement between contracting states are decisive.

Currently, many citizens of Ukraine have been staying on the territory of the Czech Republic for more than 183 days. Based on local legislations, they are still considered tax residents of Ukraine. Tax residence in such a case can only be determined according to the above mentioned criteria stated in the DTAA. In practice, however, it is difficult to assess whether an Ukrainian refugee has a permanent home in the territory of the Czech Republic, as it is often a temporary accommodation. Furthermore, the refugee often has social and economic ties in Ukraine where their family and/or employer stays i.e. work is performed remotely in the Czech Republic.

Some countries have already introduced exceptions for Ukrainian refugees working for their employers remotely i.e. Poland. The Czech tax authorities have not issued any information regarding the procedure or introduced exceptions for taxation of Ukrainian refugees.

There is currently no exception for Ukrainian refugees. It is necessary to proceed according to the above mentioned regulations i.e. according to local regulations, especially the Czech Act on Income Taxes and the DTAA. If the refugee is considered a Czech tax resident, then they are obliged to declare and tax their worldwide income in the Czech Republic. Should they be considered a Czech tax non-resident, only income from sources in the Czech Republic are subject to taxation in the Czech Republic to the extent allowed by the DTAA, e.g. employment income for the work performed physically in the Czech Republic when the individual is here more than 183 days is taxable here.

In addition, according to the Czech Act on Income Taxes, the foreign employer becomes a taxpayer if they have a permanent establishment in the Czech Republic or employs employees in the territory of the Czech Republic for more than 183 days. This means that Ukrainian employers will be obliged to register as a taxpayer in the Czech Republic and meet all obligations of a taxpayer i.e. pay tax advances according to Czech legislations. Liabilities in the area of social security and health insurance should be reviewed as well.

No exemption after overstaying 183 days in the country

In Hungary, Ukrainian refugees are considered as tax residents when they stay longer than 183 days in the country and therefore they are obliged to pay taxes in Hungary. However, upon granted a refugee status, Ukrainian citizens do not need a work permit to work in Hungary and companies hiring them receive support from the Hungarian government.

Exemption after overstaying 183 days in the country

The Polish PIT Act prescribes the application of double taxation treaty provisions to determine the taxpayer’s tax residence. According to the Polish-Ukrainian Double Tax Treaty, if an individual is considered the tax resident of both countries, their status is first determined according to their permanent place of residence.

The permanent place of residence is where the person has a fixed and permanent home, which has been arranged and reserved for their use. If there is no such place, the place of residence where the taxpayer has a centre of vital interests is decisive. If it were impossible to establish the taxpayer’s centre of vital interests, the country of habitual residence should be defined and then the citizenship.

Each case must be analysed separately based on the double taxation treaty. For example, if the work is performed in Poland for a Ukrainian employer and the stay in Poland exceeded 183 days and the remuneration is not borne by a permanent establishment of the Ukrainian employer in Poland, the income should be taxed in Poland.

Due to the outbreak of the war in Ukraine, in April 2022, Poland introduced a retroactive provision to the PIT Act on tax residence in Poland for Ukrainian citizens. This provision allows the taxpayer who is a citizen of Ukraine to confirm the transfer of the centre of vital interests by submitting a statement to the employer or another payer, which means that from the first day of their arrival in Poland they will be considered a resident of Poland.

No exemption after overstaying 183 days in the country

In Romania, there have been no amendments to the rules, therefore Ukrainian refugees are obliged to pay taxes in Romania when the stay longer than 183 days in the country.

No exemption after overstaying 183 days in the country

According to the local Slovak legislation, if a person from Ukraine has a permanent residence in Slovakia or a real domicile in Slovakia, or habitual abode in Slovakia*, they are considered a tax resident of Slovakia. In case of conflicts between countries, when a person is considered tax resident also in other country according to the country’s local legislation, they shall proceed according to the tie-breaker rules defined in the international tax agreement between these two countries, if it was concluded. Such agreement between Slovakia and Ukraine is concluded (i.e., double tax treaty between Slovakia and Ukraine). Therefore, when considering whether such person is or is not a tax resident of Slovakia or Ukraine, such agreement shall be considered in case of the conflict (Article 4/2).

*A natural person has his habitual abode in Slovakia, if they are present in Slovakia for at least 183 days in the respective calendar year, continuously or in several periods (except individuals who stay there for the purposes of studying or receiving medical treatment); every day, including the first day of the stay, is included in the period.

The mentioned Article 4/2 of the agreement specifies the following tie-breaker rules: if the natural person is a resident of both Contracting States, the person’s status shall be determined as follows:

• They shall be deemed to be a resident only of the Contracting State in which they have a permanent home available to them; if they have a permanent home available to them in both States, they shall be deemed to be a resident only of the State with which their personal and economic relations are closer (centre of vital interests);
• if the State in which they have their centre of vital interests cannot be determined, or if they do not have a permanent home available to them in either State, they shall be deemed to be a resident only of the State in which they have a habitual abode;
• if they have a habitual abode in both States or in neither of them, they shall be deemed to be a resident only of the State of which they are a state citizen,
• if they are a state citizen of both States or of neither of them, the competent authorities of the Contracting States shall settle the question by mutual agreement.