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TAX RESIDENCY

2024-12-20

Tax residency is one type of foreign residency; it is more complicated and more regulated than residency or e-residency. What is tax residency? What conditions must be met to obtain a tax resident status in another country? First of all, the tax residency in another country is granted to persons staying in the country in question for more than 183 days, whose centre of vital interests is located in that country.

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Income tax settlement vs. tax residency

As a rule, a person residing in the territory of Poland is obliged to settle their tax on all their income in Poland, regardless of whether it was earned domestically or abroad. So how does tax settlement relate to tax residency? It is worth knowing that Poland has concluded many international agreements aimed at avoiding double taxation. The concluded agreements provide for the use of one of the following methods: exemption with progression or proportional deduction.

The proportional deduction method is much less beneficial for the taxpayer. However, until now, the abolition relief, which was introduced in 2008, has allowed the income tax for both methods to be equalised.

In practice, this meant that a person earning income from a foreign employment relationship with no domestic income had a zero tax burden in Poland.

The recently amended Act on PIT introduces a limitation of the abolition relief to the equivalent of the tax-free amount, i.e. PLN 1360, which in practice means that if the amount of tax paid abroad on income is lower than the tax calculated on the same amount in Poland by more than PLN 1360, the taxpayer will be obliged to pay an additional tax in Poland. In other words, the Polish tax resident will be forced to pay the difference.

In addition, persons performing work or services outside the inland territory of countries (e.g. seafarers, offshore workers) will not be able to take advantage of the relief.

However, those who do not have permanent residence in Poland will only pay tax on income earned in our country.

However, those who do not have permanent residence in Poland will only pay tax on income earned in our country.

Some individuals working abroad who met the conditions for changing their tax residency decided against the change, often due to fear of formalities or lack of relevant knowledge. Now, when their tax burden will increase significantly, many will analyse their tax residency and the possibility to formally change it.

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    What conditions must be met for a change in tax residency to be possible?

    To have tax residency in a country other than Poland, you need to:

    Have a place of residence in a given country – for a successful change of tax residency, you must spend more than 183 days in a tax year outside Poland. This does not mean that in order to become a tax resident, you must be continuously present in the territory of the other country for more than 183 days. However, what counts is the sum of all days that the tax resident spent physically in the territory of the other country in a given tax yea

    OR

    Have a centre of personal interests abroad, i.e. a place with which the tax resident has close personal ties, e.g. where his/her spouse, partner or minor children reside. Moving abroad with the family means, in most cases, moving the centre of one’s personal interests abroad. Keeping the taxpayer’s family within the territory of Poland generally means keeping the centre of personal interests in Poland. For those living independently, it is important where the tax resident participates in social, cultural or political life.

    AND

    Have a centre of economic interest – this means a place where the tax resident has close economic ties. When determining tax residency, it is crucial where the taxpayer has a place of business, carries out activities, has investments, movable and immovable property, has loans and a bank account.

    Tax residency may be changed during the year if the taxpayer’s centre of personal and economic interest changes.

    Choose a foreign residence for yourself

    E-RESIDENCY
    RESIDENCY
    RESIDENCY
    RESIDENCY
    ELECTRONIC SIGNATURE
    IDENTIFICATION DOCUMENT

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    RESIDENCE REGISTRATION DOCUMENT

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    BANK ACCOUNT FOR RESIDENTS

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    POSSIBILITY OF TAKING UP EMPLOYMENT

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    LOCAL DRIVER'S LICENSE

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    TAX SETTLEMENTS

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    NECESSITY TO STAY FOR A CERTAIN PERIOD OF TIME

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