How to protect yourself from double taxation? We clarify the uncertainties regarding tax residency.

Position of the tax authorities

On 16 February of this year, the Director of the National Tax Information issued interpretation no. 0112-KDIL2-1.4011.928.2020.2.MKA. The case concerned a Polish citizen employed in the United Kingdom. The applicant would come to Poland for a few weeks’ holiday. He had a registered business here involving the rental of two premises. According to the applicant, however, his centre of vital interests had been in the United Kingdom for years. He claimed that the income he earned in the UK was not subject to taxation in Poland. The Director of the National Tax Information stated that since the applicant lives permanently and works in the UK, moved there from Poland with his whole family, and has owned a house there since 2012, the condition of having a place of residence on the territory of Poland, as mentioned in Article 3(1a) of the Personal Income Tax Act, was not met.

The new interpretation is good news for all Poles whose centre of vital interests is abroad, but who for various reasons earn some income in Poland.

How to determine tax residence?

In order to be subject to unlimited tax liability (Polish tax residence), a person must have their centre of personal or economic interests on Polish territory, or the person’s stay in Poland must exceed 183 days during the tax year. Fulfilment of either of these conditions results in the individual being recognised as having a place of residence on the territory of the Republic of Poland within the meaning of Article 3(1a) of the above-mentioned Personal Income Tax Act.

Pursuant to Article 3(2a) of the said Act, individuals who do not have a place of residence on the territory of the Republic of Poland are subject to tax liability only on income (revenue) earned on the territory of the Republic of Poland (limited tax liability).

Conditions for the centre of vital interests

From the facts presented, it follows that the applicant, together with his wife, has been living permanently and working in the United Kingdom since xx June 2010. Since 2012, the applicant has owned a house in the UK and has been repaying a loan taken out for that house. This house is the applicant’s permanent place of residence. From the beginning of his stay in the UK, the applicant lived there with his wife and three sons. Currently, the applicant lives with his wife and one of his sons. The applicant has been visiting Poland for 2 or 3 weeks a year since 2010. On xx April 2019, the applicant was granted UK resident status. Since that date, the applicant has been recognised as a UK resident for tax purposes as well. The applicant is employed in the UK under a full-time contract.

Accordingly, in this case the applicant cannot be considered a Polish tax resident, and therefore the applicant will not be obliged to pay tax in Poland on income earned from work carried out in the United Kingdom.