A citizen of Ukraine whose stay in Poland in 2022 exceeded 183 days is required to pay Polish income tax on the income earned from work or business activities. This obligation arises regardless of whether or not the Ukrainian citizen has become a Polish tax resident. 

If employed by a Polish employer or registered as a business in Poland, Ukrainian citizens are subject to the same tax obligations in Poland on their income as Polish tax residents.

Performance of a Ukrainian employment contract in Poland

Any Ukrainian citizen who performs work in Poland for a Ukrainian employer and stays in Poland for at least 183 days in a calendar year is required to pay Polish income tax.

This obligation must be fulfilled no later than on the 20th day of the month following the month in which the stay in Poland exceeded the said limit. The first advance income tax payment must be made by this date on the total income earned for work since the beginning of the stay in Poland.

A citizen of Ukraine is required to calculate the advance tax payment on the income converted into Polish zlotys and then pay it to his or her micro tax account generated on the basis of the PESEL number he or she obtained upon entering Poland. 

After exceeding 183 days of residence, monthly income tax advances should be paid by the 20th day of the month following the month in which the income was earned, e.g. by 20 December on income earned in November. A Ukrainian employer is not entitled to make advance payments of Polish income tax on the wages paid to its employees.

In addition to calculating and paying advance income tax payments, a Ukrainian citizen is also required to file an annual tax return and pay the tax representing the difference between the monthly advances and the annual tax liability calculated in the return.

Both obligations must be fulfilled by the end of April of the following tax year. Taking into consideration that a Ukrainian employer cannot issue a PIT-11 form and send it to the relevant tax office, no tax return will be prepared for a Ukrainian citizen in the Your e-PIT service.

In special cases, the tax obligation in Poland may occur even before the elapse of 183 days of residence. This will happen when the Ukrainian employer has established a tax establishment in the territory of Poland within the meaning of the Polish-Ukrainian Double Taxation Treaty (“Treaty”). Such an establishment may arise spontaneously as a result of the conduct of part of the employer's activities in the territory of Poland through its employees who have found refuge here. It is not required to register a branch or representative office in Poland.

In practice, however, the employees themselves may not be aware of the establishment of the employer in Poland and, in practice, the payment of Polish tax only after 183 days spent in Poland should be approved by the Polish tax authorities.

Performing Ukraine-registered business activity in Poland

If a Ukrainian entrepreneur conducts (continues) its activities in Poland for most of the tax year, the Polish tax authorities will most likely consider that it has created a permanent establishment in Poland within the meaning of Polish regulations and the Treaty.

These are the conclusions of an individual tax ruling issued in October this year by the Director of National Treasury Information Service. According to this authority, a permanent establishment is created by the mere fact of permanently carrying out activities in a specific place in the territory of Poland, even when the entrepreneur does not have the legal title to carry out activities there. If a permanent establishment is created, the entrepreneur's income will be subject to taxation in Poland, but only to the extent that it can be attributed to the permanent establishment.

However, since all of the activity has been carried out in Poland for some time, it should be considered that all of the entrepreneur's income is earned by his/her Polish establishment.

In practice, however, a Ukrainian entrepreneur without a sole proprietorship registered with the CEIDG, the Central Business Records and Information Service, may encounter difficulties trying to settle his/her tax liabilities in Poland. 

The identification number for business taxpayers is the NIP number. Ukrainian entrepreneurs do not have such a number and must apply for it themselves and, after obtaining it, generate a micro tax account number. 

It is not entirely clear when a Ukrainian entrepreneur should make the first advance payment of Polish income tax. This is because it is difficult to say unequivocally at what point the establishment in Poland was created. To be safe, it can be assumed that this occurs after half a year of doing business in Poland, and this means that the first advance tax payment should be made by the 20th day of the month following the month in which this period elapsed. 

Another doubt is whether a Ukrainian entrepreneur may apply other tax rules for his/her business income earned in 2022 than the general rules, i.e. progressive taxation. This will also be a problem in future years, as it is unclear whether tax offices will accept declarations of selection of a different tax regime from people who do not conduct business activities registered in Poland. 

Entrepreneurs will also be required to file annual tax returns in Poland by the end of April of the following tax year.
Taking the above into account, Ukrainian entrepreneurs actually doing business in Poland should register it in Poland.

In conclusion

Payment of income tax in Ukraine does not exempt citizens of that country from paying tax in Poland. If they have not become tax residents in Poland, they are entitled to deduct the tax paid in Poland from the tax due in Ukraine in accordance with the provisions of the Treaty.

This may require presentation to Ukrainian tax authorities of a confirmation of tax payment in Poland issued by Polish tax authorities. In practice, it will be possible to obtain such a certificate only after filing an annual tax return in Poland and paying the resulting tax.
 

Find more in the PRO HR November 2022.