Tax residence question (moving out of Ukraine)

[alexj72]

Hello,

Can anybody explain how does tax residence work? I mean it looks like it is quite clear how to become a tax residence of some country (like stay 183+ days in calendar year), but how to "get rid" of being tax resident?

The context is that I am citizen of Ukraine and (probably) a tax resident in Ukraine. Now I am living in Poland and want to start doing business here as self-employed. Do I owe taxes to Poland AND Ukraine? Or is it just Poland? Considering that Ukraine is on the way to implement CRS reporting (like in 2024 they claim to do exchange for 2023) there is no doubt Ukraine will know about me having account in Poland and doing some business there. What is the proper way to handle that?

 

[Mr Gus]

You pay tax where you live.

 

[Mssquirrel]

Hello,

Can anybody explain how does tax residence work? I mean it looks like it is quite clear how to become a tax residence of some country (like stay 183+ days in calendar year), but how to "get rid" of being tax resident?

The context is that I am citizen of Ukraine and (probably) a tax resident in Ukraine. Now I am living in Poland and want to start doing business here as self-employed. Do I owe taxes to Poland AND Ukraine? Or is it just Poland? Considering that Ukraine is on the way to implement CRS reporting (like in 2024 they claim to do exchange for 2023) there is no doubt Ukraine will know about me having account in Poland and doing some business there. What is the proper way to handle that?

If you are resident in Poland they have to reason to report you anywhere else, reporting for citizenship is only for Americans.

 

[Mr Gus]

There is a tax treaty between Poland and Ukraine. If you live and work in Poland then Ukraine will have no right to tax you.

 

[Dreamy]

If I were you, I wouldn't think about it. I'm not sure that they will report something there for 2023. Now there are many more other problems.

 

[alexj72]

If I were you, I wouldn't think about it. I'm not sure that they will report something there for 2023. Now there are many more other problems.

Many problem for Ukraine - yes, but it is other countries reporting to Ukraine, not Ukraine reporting to others. So for Ukraine it might be even beneficial to get details about all foreign accounts in this tough times to get more taxes collected.

Am I overthinking the problem?

There is a tax treaty between Poland and Ukraine. If you live and work in Poland then Ukraine will have no right to tax you.

That's true, but for self-employed engineer the tax in Poland is 12%, while in Ukraine it is 18+1.5%. And as far as I know the difference have to be paid if more than 5%.

Even that final 19.5% might be lower than in many other EU countries, its still worth understanding beforehand.

 

[Larin]

You pay tax where you live.

This. (the short answer)

The long answer is that it depends on your intentions/actions. For example, if you left the country with your family on the first day of the war, de-registered your business in Ukraine, got yourself off of the draft register, closed bank accounts in Ukraine and moved to Poland with the intention of settling there, you would be considered a Polish tax resident from the first day. On the other hand, if you left alone, with your family still in Ukraine, kept your business there and had full intentions to return as soon as possible you would likely remain a tax resident of Ukraine for quite some time.

With time, however, the picture would become more complicated as you are now finding. You are most likely still running your revenue from the Ukrainian company, possibly still using Ukrainian bank accounts, maybe have property in Ukraine, but have lived in Poland for over 183 days at which point Poland would consider you to be a tax resident there. The longer you stay in Poland (where you have probably registered with the local authorities), the more Poland will have a claim on you being a tax resident there. The ultimate arbiter in this case would be the tax treaty between the two countries which has a series of tie-breakers to determine where you are a tax resident. Article 4 is what you are interested in: Poland - Ukraine Tax Treaty (1993) — Orbitax Tax Hub

Here is a rather detailed article in Ukrainian, which has a nice summary at the bottom of the page: Українські біженці за кордоном: куди та як платити податки ФОПам і найманим працівникам

As per the article below, you should determine where you would like to be a tax resident. Although, in your case, I suspect you are a Polish tax resident already. If Ukraine asks for a tax declaration for 2023, you will be able to send them your Polish tax residency certificate and go from there.

 

[RealDude]

Ask @369.

 

[wellington]

Shouldn't you be remaining to defend the country?

 

[jafo]

So for Ukraine it might be even beneficial to get details about all foreign accounts in this tough times to get more taxes collected.

Am I overthinking the problem?

This man gets it! You are NOT overthinking this AT ALL! This is a feature. Not a bug! All these regulations are NOT for "our" benefit.