What tax payment options will Ukrainian IT specialists working for or employed by entities in Ukraine have, but remotely performing this work from Poland (after these 6 months)?
The rules of the place (state) of paying taxes are rigidly defined by national laws and regulations of international law. This means that even despite noble motives, it is not possible to “choose” the country in which the income tax is paid.
In determining the rules of taxation with income tax, the issue of tax residence, i.e. the state in which a person is taxed on their “global” income, is of key importance. Pursuant to the PIT Act, a Polish tax resident is any natural person who meets one of the following conditions:
- has a center of personal or economic interests in Poland (center of vital interests); or
- stays on the territory of Poland for more than 183 days in a given year.
It is sufficient to meet one of the above-mentioned conditions to be recognized as a Polish tax resident.
Polish regulations indicate, however, that when determining tax residence, apart from the above rules, also the so-called double taxation avoidance agreements to which Poland is a party.
One of them (from 1993) was concluded with Ukraine. It contains provisions (the so-called conflict of law rules) that allow to determine the resident of which country a person who meets the preliminary conditions for being considered a resident both in Poland and in Ukraine is possible. The first element that indicates tax residence is the place of residence / stay of a given person. If such a place is both in Poland and in Ukraine, the way to determine the resident of which country a given person should be treated as a resident is to verify where he or she has a center of life interests (e.g. immediate family, social life, where he or she undertakes social, cultural, etc. activities, etc.). In the vast majority of cases, this is sufficient to resolve doubts about the residence. If, however, it was not possible, the country of habitual residence will be verified in turn, and then citizenship. In the most difficult cases, it is necessary to use the so-called the procedure of mutual agreement of both countries, during which the issue of tax residence is finally resolved.
Determining tax residence allows you to determine in which country a person from Ukraine should be taxed on the basis of business activity or employment. Generally, if a person from Ukraine will be a Polish tax resident, the income tax (PIT) should be paid by them in Poland.
However, in a situation where a person staying for more than 183 days a year is a Ukrainian tax resident (e.g. despite staying in Poland for more than 183 days, he has a center of vital interests in Ukraine) when determining where he should pay income taxes, it is necessary to verify the abovementioned agreement on avoidance double taxation. The rules contained therein are not the same for entrepreneurs and employees. The first of the above-mentioned (persons running a business) who are non-residents in Poland are subject to taxation on their income in Ukraine. The exception to this rule, however, would be a situation in which such a person has the so-called permanent establishment, i.e. a place where the activity in Poland is permanently, fully or partially conducted. A permanent establishment must meet the following conditions:
– an establishment, i.e. premises and, under certain circumstances, machinery and equipment, exists,
– the facility is permanent, i.e. it is established in a specific place with a certain degree of durability,
– you run your business through this facility.
Then the resident from Ukraine is obliged to pay income tax on this activity (performed as part of a permanent establishment) in Poland.
However, in a situation where a person staying for more than 183 days a year is a Ukrainian tax resident (e.g. despite staying in Poland for more than 183 days, he has a center of vital interests in Ukraine) when determining where he should pay income taxes, it is necessary to verify the abovementioned agreement on avoidance double taxation. The rules contained therein are not the same for entrepreneurs and employees. The first of the above-mentioned (persons running a business) who are non-residents in Poland are subject to taxation on their income in Ukraine. The exception to this rule, however, would be a situation in which such a person has the so-called permanent establishment, i.e. a place where the activity in Poland is permanently, fully or partially conducted. A permanent establishment must meet the following conditions:
– an establishment, i.e. premises and, under certain circumstances, machinery and equipment, exists,
– the facility is permanent, i.e. it is established in a specific place with a certain degree of durability,
– you run your business through this facility.
Then the resident from Ukraine is obliged to pay income tax on this activity (performed as part of a permanent establishment) in Poland.
However, referring to a Ukrainian tax resident who is employed by a Ukrainian entity (also being a Ukrainian tax resident) and performs work in the territory of Poland for a period of 183 days or longer, that is, taxed in the country where the work is performed (i.e. in Poland).