Millions of Ukrainians who fled the country in 2022 because of the war face many challenges. Among them is the taxation of income.

Taxes in Ukraine and the country of actual residence, registration with tax authorities, and peculiarities of tax residency – we cover these and many other issues in a series of guides on the taxation of Ukrainians' income after relocation abroad.

The jurisdictions covered by the series include the countries where the most significant number of Ukrainians have relocated because of the war: Poland, Slovakia, Czechia, Germany, and Spain.

The series is a free-of-charge, pro bono product of INTEGRITES, which we have developed for Ukrainians who need preliminary legal advice.

We express our sincere gratitude to our colleagues in the law firms from the abovementioned jurisdictions for the joint efforts to elaborate the series.

 

How to use these guides?

Step 1. Click on the banner of the country you are residing in.

Step 2. Define a country where you are a tax resident – read section 1.1 of the guide. Skip to the next step if you already know the answer.

Step 3. Read sections 1.2 – 1.4 and find out what tax obligations you may be responsible for in Ukraine and abroad (tax registration, banking account, tax return and payment).

Step 4. In section 2, choose what kind of income you receive and find out what tax consequences arise for you.

All calculations and conclusions are relevant as of the publication date of the guide (December 2022).

At the same time, we would like to emphasize that the situation of each individual is unique, therefore we may not assume a responsibility if you make specific decisions based on the information provided in the guide.

 
Poland
1. Tax residency and tax obligations in Ukraine and Poland
1.1. Tax residency

Tax residency is a status defined based on the level of connections of an individual with a particular country which shows in which country an individual is subject to taxation on his/her worldwide income (unless country of tax residence taxes only locally earned income). An individual may be tax resident of only one country. If an individual is considered as a tax resident by two or more countries, his/her tax residency status should be defined based on a Double Tax Treaty (if present).

For tax residents of Poland, all income earned by them is taxed in Poland. In the case of non-Polish tax residents, only income earned from Polish sources is taxed in Poland. Similarly, for tax residents of Ukraine, all income earned by them is taxed in Ukraine. In the case of non-Ukrainian tax residents, only income earned from Ukrainian sources is taxed in Ukraine.

Under Polish law, an individual will be considered a tax resident of Poland if at least one of the following conditions is met:
- an individual has a centre of vital (personal or business) interest in Poland; or
- an individual lives in Poland more than 183 days in a year.

At the same time, most Ukrainian were tax residents of Ukraine before they moved to Poland due to war. Therefore, if any of the above Polish criteria is met, tax residency of those Ukrainians should be defined based on the Double Tax Treaty between Ukraine and Poland (DTT).

The following criteria should be applied step-by-step under the DTT (each subsequent criterion is applied if it is impossible to determine tax residency on the basis of the previous criterion): (i) permanent home (dwelling available for permanent living irrespective of how long individual stays in this permanent home); (ii) if permanent home is available in both states, then centre of vital interests (family location, business location, employment, etc.); (iii) if centre of vital interest cannot be identified or permanent home is absent, then habitual abode (depends on regularity and duration of individual's stays); and (iv) if an individual has habitual abode in both states / does not have in any state, then citizenship.

As clarified by the Ministry of Finance of Poland in the letter to BRDO dated 6 July 2022, Poland does not deny that Ukrainians may preserve centre of vital interests in Ukraine during a period when they live in Poland. However, this letter does not establish any special approach and each situation should still be assessed on a case-by-case basis, considering all relevant circumstances.

Poland also introduced special tax treatment for Ukrainians which is available for Ukrainians who entered Poland from 24 February 2022 and applies until 31 December in 2022. According to this treatment, Ukrainians may request in writing that they moved their centre of vital interests to Poland; upon confirmation by Polish tax authorities, such Ukrainians become Polish tax residents in 2022 and must pay income taxes in Poland as Polish tax residents in 2022.

We also note that all humanitarian aid and donations received to counter the effects of hostilities in Ukraine received between February and December 2022 are exempt from taxation in Poland. Such aid (donations) provided in 2022-2023 at expenses of Polish budget funds to Ukrainians who applied for a temporary protection in Poland is also exempt from taxation by personal income tax (PIT) in Ukraine.

If an individual becomes a tax resident of Poland in a particular year, then he/she is considered as a Polish tax resident in subsequent periods after satisfying this criterion, not for the whole year in which a residency criterion is satisfied.

1.2. Registration with tax authorities of Poland

Ukrainians must settle income taxes with the Polish tax authorities if they (i) are tax residents of Poland or (ii) obtain income which is subject to tax in Poland, unless tax is withheld by Polish income payer. Only persons who will be tax residents in Poland and they will carry out business activities in Poland are subject to registration with the tax office and obtain NIP (tax number). Non-business persons are not required to register. However, they must settle income tax if they earn income in Poland. For this purpose, it is necessary to obtain PESEL (the Universal Electronic Population Registration System). PESEL may be obtained through registration with municipal authorities.

In case Ukrainians applied for temporary protection in Poland, they are granted PESEL upon approving their application and issuing Polish residency permit. No separate registration is required.

1.3. Tax Return and Payment
1.3.1. For a tax resident of Ukraine
Poland

An individual must file an annual tax return and pay tax in Poland only if he/she obtains income which is subject to taxation in Poland. If tax is withheld by income payer, then individual must only file tax return without paying tax. A return should be filed and tax should be paid by 30 April of the year following the reporting year.

Ukraine

An individual must file an annual tax return and pay tax in Ukraine only if he/she obtains income which is subject to taxation in Ukraine, unless tax is withheld by an income payer (tax agents). A return should be filed by 1 May of the year following the reporting year, while taxes should be paid by 1 August of the same year when the return is filed.

Specific deadlines for tax returns and payments are established for sole traders (private entrepreneurs).

1.3.2. For a tax resident of Poland
Poland

An individual must file an annual tax return only if he/she obtains taxable income during a year.

The return should be filed and tax should be paid by 30 April of the year following the reporting year. In case an individual receives employment income, then his/her tax liability is defined as income tax calculated on gross income less monthly tax instalments paid by the employee (if employed by Ukrainian employer) / the employer (if employed by Polish employer).

There is an option that a tax return is completed by a tax authority based on data supplied by an individual.

Tax should be transferred to individual's tax account. This account can be generated online with use of PESEL or NIP.

Ukraine

An individual may be required to file an annual tax return and pay tax only if he/she obtains income which is subject to taxation in Ukraine, unless tax is withheld by income payer (tax agents). Deadlines are the same as described for tax residents of Ukraine. However, in most cases taxes for non-Ukrainian tax residents are withheld by tax agents or are payable personally before / when implementing certain transactions (when it comes to sale of property) without obligation to submit a tax declaration by a person.

1.3.3. Fines
Poland

Non-submission or late submission of tax returns, as well as non-payment of tax in Poland may result in a penalty ranging from 0,1 to 20 times of minimum wage established in the year when a violation takes place (approximately, from EUR 65 to EUR 13,096). For fiscal offences there may be a fine of up to 720 daily rates (approximately, up to EUR 6.15 million), depending on the unpaid amount and period of non-payment.

Ukraine

In Ukraine non-submission or late submission of a tax return may result in a fine in amount of UAH 340 – 1,020 (approximately from EUR 9 to EUR 29). Incorrect determination of taxes (duties) may result in fine in amount of 10% / 25% / 50% of tax (duty) amount if tax authority finds violation and requires to pay extra tax (duty). Late payment of taxes (duties) may result in fine in amount of 5%-50% of tax (duty) amount plus daily late fee in amount of 120% of a discount rate established by the National Bank of Ukraine.

Specific tax fines may apply to some categories of taxpayers.

1.4. Bank account
Poland

In practice, an individual is required to open a bank account with a Polish bank to receive a salary from a Polish employer. It is not necessary to open local bank account for the sole purpose of transferring tax to individual's tax account, as this transfer is acceptable from foreign bank accounts.

Polish tax authorities can access information about the funds flow on an account opened with a Polish bank only if there is an official investigation of tax offence by Polish authorities (either criminal or other type of investigation).

Ukraine

Individuals must maintain a bank account with Ukrainian bank in order to receive wages from Ukrainian employer.

Sole traders are generally allowed to open bank accounts abroad, but for payers of single tax it is important for such an account to be opened as for sole trader (private entrepreneur), not as a private account of individual. In the latter case, there is a risk that income from economic activities will be taxed by PIT (18% rate) and military duty (1,5% rate) instead of single tax.

2. Taxation of wages in Poland and Ukraine
2.1. Taxation of wages received from a Ukrainian employer due to remote work in Poland
2.1.1. For a tax resident of Ukraine
Poland

Due to the DTT these wages are not subject to tax in Poland, provided that (i) a Ukrainian individual stays in Poland not longer than 183 days in a year, (ii) Ukrainian company is a non-Polish tax resident, and (iii) wages are not attributed to Polish permanent establishment of a Ukrainian company. If these criteria are not simultaneously met, then wages from a Ukrainian employer will be considered as having Polish source and the whole amount of wages (earned from the first day of stay in Poland, not only this one earned after 183 days stay) should be taxable in Poland by PIT according to the Tax Scale:

    Income

Rate

PLN 120,000.01 and over
≈ EUR 25,520.01

32%

PLN 30,000.01 - PLN 120,000
≈ EUR 6,380.01 - 25,520

17%

PLN 0 - 30,000
≈ EUR 6,380

0%

Such an individual must submit tax return and pay tax in Poland as described above in section 1.3 for Ukrainian tax residents. Despite the fact that Ukrainian company withholds PIT in Ukraine, this Ukrainian tax cannot be credited against Polish tax because under the DTT Poland has first-priority right to tax this income.

Ukraine

In Ukraine these wages are taxed by PIT at 18% rate and Military duty at 1,5% rate. PIT and Military Duty are withheld by employer, no tax return should be submitted by employees.

If these wages are also subject to taxation in Poland, in practice some difficulties with avoidance of double taxation may occur which can lead to double taxation of wages.

2.1.2. For a tax resident of Poland
Poland

Wages from Ukrainian employer is subject to taxation in Poland under the same Tax Scale (0% / 17% / 30%) and according to the same procedure as described in this section for Ukrainian tax residents, irrespective of the above criteria applicable to Ukrainian tax residents (Criteria for staying in Poland 183+ days, etc.)

    Income

Rate

PLN 120,000.01 and over
≈ EUR 25,520.01

32%

PLN 30,000.01 - PLN 120,000
≈ EUR 6,380.01 - 25,520

17%

PLN 0 - 30,000
≈ EUR 6,380

0%

Additionally, Polish tax residents who derive income more than PLN 1 million (approximately, EUR 212,000) per annum are subject to Solidarity Tax charged at 4% rate from the amount exceeding the said 1 million. For this purpose separate tax return must be filed within the same dealine as an ordinary tax return, i.e. by 30 April of the year following the reporting year. Tax is payable within this deadline as well.

Ukraine

Due to the DTT, these wages should not be subject to taxation in Ukraine.

In practice some difficulties with avoidance of double taxation. Therefore, the risks of double taxation may occur.

2.1.3. Social / health security
Poland

According to Social Security Agreement between Ukraine and Poland (Social Security Agreement), in both cases (i.e., either an individual is Ukrainian or Polish tax resident) Ukrainian who receives wages from Ukrainian employer and his/her employer may be subject to the following rules on social / health security:

  • During first 24 months after Ukrainian employee moved to Poland, he/she is subject to Ukrainian social / health security rules;
  • During next 36 months Ukrainian employee is subject to Ukrainian social / health security rules only subject to providing respective consent by Polish authorities. Otherwise, Polish social / health security rules apply;
  • After expiry of 24 months / subsequent 36 months (if authorised), Polish social / health security rules apply (unless Poland introduces special exemptions for Ukrainians) as was described in section 2.2 of this guide.

Obligations to pay social / health security in Poland when working for Ukrainian employer may be allocated to the employee.

In order to benefit from Social Security Agreement, employer should obtain a certificate from the Ministry of Social Policy of Ukraine confirming that employee is subject to Ukrainian social security. Otherwise, there is a risk that Polish social / health security rules shall apply from the first day of work from Polish territory.

Ukraine

In Ukraine standard social security rate is 22% of wages, payable monthly at employer's expense. Basis for accrual of social security may not be lower than one minimum monthly wage (from 1 October 2022 minimum wage is UAH 6 700, which is approximately EUR 185 at official exchange rate) and should not exceed fifteen monthly minimum wages (from 1 October 2022 this amount constitutes UAH 100,500, which is approximately EUR 2,775 at official exchange rate).

During martial law exemption from social contribution in Ukraine is available for private entrepreneurs and some other categories of individuals (employers).

2.2. Taxation of wages received from a Polish employer due to work in Poland
Poland

These wages are subject to taxation by PIT according to the Tax Scale as described above, irrespectively of individual's tax residency:

    Income

Rate

PLN 120,000.01 and over
≈ EUR 25,520.01

32%

PLN 30,000.01 - PLN 120,000
≈ EUR 6,380.01 - 25,520

17%

PLN 0 - 30,000
≈ EUR 6,380

0%

Apart from that, Polish tax residents who derive income more than PLN 1 million (approximately, EUR 212,000) per annum are subject to Solidarity Tax charged at 4% rate from the amount exceeding the said 1 million. For this purpose separate tax return must be filed within the same dealine as an ordinary tax return, i.e. by 30 April of the year following the reporting year. Tax is payable within this deadline as well.

Additionally, these wages are subject to:

  • health insurance contribution at 9% rate of wages, but not less PLN 270,90 (approximately, EUR 57) per month in 2022, payable at employee's expense;
  • social security at gross 13.71% rate of wages, payable at employee's expense;
  • social security at gross 20.48% rate of wages, payable at employer's expense.

Registration of employees for health insurance / social security purposes is made by a Polish employer.

However, wages of young employees of up to 26 years (inclusively) are subject to tax allowance. Namely, first PLN 85,528 (approximately, EUR 18,200) is not subject to tax, while the remainder is taxed according to the Tax Scale (i.e., PLN 85,528.01 – 120,000 is taxed at 17% rate, while PLN 120,000.01 and over is taxed at 32% rate).

Ukraine

If an individual is a tax resident of Ukraine, the wages are subject to taxation in Ukraine by PIT at 18% rate and military duty at 1,5% rate. Social security does not apply. Polish PIT may be credited against Ukrainian PIT which may lead to decrease or absence of PIT in Ukraine. However, Polish PIT cannot be credited against military duty in Ukraine, thus military duty should be payable from foreign wages in any case.

In order to be able for a tax credit against Polish PIT in Ukraine, some formalities for application of the DTT must be met. In particular, an individual must obtain certificate of a tax basis and paid taxes in Poland. Further, an individual must submit a tax return in Ukraine with respective calculations of taxes accompanied with the said certificate

If an individual is a tax resident of Poland, these wages are not subject to taxation in Ukraine.

2.3. Taxation of income of a director of a Ukrainian company
Poland

Director's fee received as a director / member of board of directors is subject to taxation in Poland only if a director is a tax resident of Poland. In this case tax consequences are the same as was described in section 2.1 for Polish tax resident receiving salary from Ukrainian employer (although it is income from a source other than employment), however PIT withheld in Ukraine may be credited against Polish income tax. For this purpose, a director must obtain a certificate of paid taxes in Ukraine and translate it into Polish language with notarial certification of the translation.

At the same time, if a director also exercises ordinary employment function (including day-to-day management), his/her income should be taxed as wages as descried in sections 2.1-2.2 of this guide.

The physical presence of a director of a Ukrainian company in Poland may result in (a) recognition of a permanent establishment of the Company in Poland under the place of management criterion or (b) recognition of the Company as a tax resident of Poland under the place of effective management criterion.

Ukraine

In Ukraine these wages are taxed by PIT at 18% rate and military duty at 1,5% rate. PIT and Military Duty are withheld by employer, no tax return should be submitted by a director.

Social security is payable by employer at its expense at 22% rate of wages (subject to minimum and maximum thresholds as described in section 2.1 of this guide).

2.4. Taxation of income of a freelancer / sole trader in Poland who receives income from clients in Poland / outside Poland
2.4.1. For a tax resident of Ukraine
Poland

An individual's income is subject to taxation in Poland to the extent it is (i) classified as income from "professional services or other independent activities" and (ii) derived due to use of permanently available base in Poland (Articles 14, 21 of the DTT). Place of permanent residence may be considered as such a base. Ukrainian sole trader cannot be recognized as having permanent establishment in Poland and taxed accordingly. Such an individual must submit tax return and pay PIT (according to the Tax Scale) as described in section 1.3 of this guide for Ukrainian tax residents.

However, Ukrainian tax resident can be registered as a sole trader in Poland voluntarily. In this case his/her whole income from business activities is subject to taxation in Poland as described below for Polish tax residents.

Ukraine

An individual's income is subject to taxation in Ukraine as follows:

  • PIT at 18% rate plus military duty at 1,5% rate plus social security calculated on a monthly basis at 22% rate of the profit (subject to minimum and maximum thresholds as described in section 2.1 of this guide) – for individuals registered as sole traders at general tax regime or as independent professionals;
  • Single tax at 2% / 3% / 5% of income plus monthly fixed minimum social security (from 1 October 2022 minimum social security is UAH 1,474, which is approximately EUR 41 at official exchange rate) or at 22% rate of income (subject to minimum and maximum thresholds as described in section 2.1 of this guide) (at individual's choice) calculated on a monthly basis – for individuals registered as a single taxpayers of the 3rd group.
2.4.2. For a tax resident of Poland
Poland

An individual must be registered as a sole trader in Poland. The whole income is subject to taxation in Poland.

Income of a registered freelancer / sole trade may be taxed at one of the following regimes:

  • Tax Scale – income is taxed according to general Tax Scale. Expenses deductions and special reliefs may be allowed. Health insurance contribution is payable at 9% rate of the freelancer's / soletrader's income, but not less PLN 270,90 (approximately, EUR 57) per month in 2022. Social security is payable at gross 13.71% rate from a lump-sum base (60% of average monthly wage officially established in a reporting year).

        Income

    Rate

    PLN 120,000.01 and over
    ≈ EUR 25,520.01

    32%

    PLN 30,000.01 - PLN 120,000
    ≈ EUR 6,380.01 - 25,520

    17%

    PLN 0 - 30,000
    ≈ EUR 6,380

    0%

  • Flat rate – income is taxed at 19% rate irrespective of the income volume. Expenses deductions and special reliefs may be allowed. Health insurance contribution is payable at 4.9% rate of the Consultant's income, but not less PLN 270,90 (approximately, EUR 57) per month in 2022. Social security is payable at gross 13.71% rate from a lump-sum base (60% of average monthly wage officially established in a reporting year). In order to use this form of taxation, written declarations on the choice of this method of taxation must be submitted to the competent head of the tax office by the 20th day of the month following the month in which the first revenue is earned on this account in the tax year, or by the end of the tax year, if the first such revenue is earned in December of that tax year;
  • Lump sum on registered revenue – income is taxed at fixed tax rate (ranging from 3% to 17%) depending on the type of activities. Expenses deductions are not allowed (subject to some limited exceptions). Health insurance contribution in 2022 varies depending on the amount of revenue: PLN 335.94 (approximately, EUR 71) per month for revenue up to PLN 60,000 (approximately, EUR 12 760), PLN 559.89 (approximately, EUR 119) per month for revenue PLN 60,000.01 (approximately, EUR 12 760.01) – 300,000 (approximately, EUR 63,800); PLN 1007.81 (approximately, EUR 214) per month for revenue PLN over 300,000 (approximately, EUR 63,800.01). Social security is payable at gross 13.71% rate from a lump-sum base (60% of average monthly wage officially established in a reporting year). In order to use this form of taxation, written declarations on the choice of this method of taxation must be submitted to the competent head of the tax office by the 20th day of the month following the month in which the first revenue is earned on this account in the tax year, or by the end of the tax year, if the first such revenue is earned in December of that tax year.

Sole traders are also subject to Solidarity Tax, if their income exceed PLN 1 million (approximately, EUR 212,000).

Ukraine

  • If an individual is not registered as a sole trader (private entrepreneur) in Ukraine then due to the general rule his / her income is not subject to taxation / social security in Ukraine excluding some income from Ukrainian sources. In addition, such income is not a subject to social security payments in Ukraine.
  • If an individual is registered as a sole trader (private entrepreneur) in Ukraine, his / her business income is formally considered as subject to taxation / social security in Ukraine. It is recommended to cancel registration as a sole trader (private entrepreneur) in Ukraine if an individual becomes tax resident in Poland.

2.4.3. VAT
Poland

If a freelancer / sole trader supplies goods / services which are subject to VAT in Poland, then he / she is obliged to register for VAT and charge VAT if such annual supplies exceed PLN 200,000 (approximately, EUR 42,557). In case of annual supplies below the specified threshold, voluntary VAT registration is available.

Ukraine

If a freelancer / sole trader supplies goods / services which are subject to VAT in Ukraine then due to the general rule he / she is obliged to register for VAT and charge VAT if such annual supplies exceed UAH 1,000,000 (approximately, EUR 26,594 at official exchange rate). In case of annual supplies below the specified threshold, voluntary VAT registration is available. Single taxpayers are not subject to obligatory VAT registration (except for those taxed at 3% rate).

2.4.4. Social / health security

If a freelancer / sole trader does not register as sole trader in Poland and moves such activities to Poland for no longer than 24 months, according to Social Security Agreement he/she is subject to Ukrainian social / health security rules. Otherwise, he/she is subject to Polish social security rules. In the latter case, freelancer / sole trader must register with Polish Social Insurance Institution (ZUS) in order to accrue and pay health insurance and social security. For non-registration with ZUS, non-submission or late submission of health insurance / social security reports, as well as for non-payment of these contributions there may be a penalty ranging from 10 to 20 times of minimum wage established in the year when a violation takes place (approximately, from EUR 6,548 to EUR 13,096).

In order to benefit from Social Security Agreement, sole trader should obtain a certificate from the Ministry of Social Policy of Ukraine confirming that he / she is subject to Ukrainian social security. Otherwise, there is a risk that Polish social / health security rules shall apply from the first day of work in Poland.

3. About the guide
3.1. Authors

INTEGRITES is a full-service law firm with offices in Ukraine and Kazakhstan, representative offices in Germany and the UK.

In 17 years INTEGRITES has served more than 1350 clients from around the globe, including Fortune 500 companies and international financial institutions. The firm’s clients are recognized leaders in various industries: from manufacturing, pharmaceuticals, and retail to agriculture, logistics, and renewables.

INTEGRITES is highly recommended for its cross-border work, whether sophisticated transactions or complex dispute resolution, and for large projects in energy, in particular, renewables.

Alongside the countries of presence, INTEGRITES makes its legal expertise available to clients from other jurisdictions through two foreign desks – teams of qualified lawyers with unique German- and French-speaking competence. The firm closely cooperates with a well-established partner network of over 100 international law firms.

In 2022 INTEGRITES got shortlisted as Law Firm of the Year: Ukraine by Chambers Europe Awards and The Lawyer European Awards.

DZP is the largest of the Polish law firms. For 29 years our experts have advised both Polish and foreign clients from all business sectors. We currently have over 190 experts in various specialisations working in our offices in Warsaw, Poznań and Wrocław.

Despite our numbers and diversifications, what distinguishes us is our engagement, availability and full understanding of our clients’ needs. Working within fourty interdisciplinary groups of specialists, we take a holistic approach to problems. We believe that close relations bring better solutions.

Our efficiency is down to our close cooperation with our clients. We maintain our good reputation and professional prestige thanks to the years’ experience in advising on large complex projects, introducing innovative solutions and working with very demanding clients.

This is also why we have for years taken first place in rankings drawn up by Rzeczpospolita and DGP as well and international specialist rankings, eg. Chambers & Partners, Legal 500.

3.2. Get in touch
Slovakia

This part will be published soon

Czech Republic

This part will be published soon

Germany

This part will be published soon

Spain

This part will be published soon