The Russian war against Ukraine caused labour migration and may also lead to the “washing out” of Ukrainian taxpayers who were forced to flee to other countries because of the war. It is critically important for Ukraine that financial flows, despite the war, remain in the state. They form the tax base (that is, revenues to budgets), GDP, and add foreign exchange earnings.
In May, BRDO and the IT Ukraine Association appealed to the Government of Ukraine and the Ministries of Finance of Bulgaria, Germany, the Czech Republic, Hungary, Poland, Romania, and Slovakia with a request not to change the tax residence of refugee entrepreneurs who ended up in these countries. The success of our advocacy is evidenced by the explanation we received from the central executive body of Poland the other day.
In the official letter of the Ministry of Finance of Poland it is stated that Ukrainians may maintain tax residency in Ukraine and not pay taxes in the country of residence. Of course, income from working contracts with Polish counterparts is excluded.
“As a basic rule, we do not exclude the possibility of preserving the center of vital interests of Ukrainians in Ukraine during the war,” it is said in the statement of the Income Tax Department of the Ministry of Finance of Poland.
The step-by-step instruction for Ukrainians wishing to maintain their tax residence in Ukraine will be published shortly.
At this moment, the Polish tax law has no special rules for the immigrants from Ukraine concerning the tax residency, and the general rules apply in this regard.
With this clarification, the neighboring country once again shows solidarity with the Ukrainian people and does not try to interpret in its favor the issue of determining the “center of vital interests” of Ukrainians, even if they will be in Poland for more than 183 days.
To remind, staying in Europe for more than 183 days can create legal uncertainty in the tax residency status of Ukrainian refugees and can lead to the need to pay taxes in the country of temporary stay.
“Today, it is especially important to preserve human capital and taxes in such a way that Ukrainians who temporarily left continue to support the economy of Ukraine. This applies to all industries, but most of all to the creative economy,” says Ihor Samohodskyi, the Head of the IT&Telecom sector of the BRDO.
We express our gratitude to the Polish people and the Polish state, and we also hope that other European countries, where the majority of Ukrainians with temporary protection status reside, will follow its example.
The BRDO team will continue to advocate the issue of maintaining tax residency and paying taxes in Ukraine for our citizens who work remotely in European countries and as sole traders.
Read more on the importance of advocacy on this issue on the BRDO website.
The text of the official appeal of BRDO and the IT Association of Ukraine to the Ukrainian Government can be downloaded here (in Ukrainian).
Disclaimer: Please pay attention that received clarification is not a universal and extensive permit for Ukrainians not to pay taxes in Poland. Determining the center of vital interests and tax residence is a complex judicial task in each case and may need additional consultations with lawyers or state authorities of Poland and/or tax consultations.