Tax residence, what is it?

The concept of tax residence is an important determinant of determining the tax obligation of a foreign employee. The determination of tax residence indicates in which Country the employee is subject to unlimited tax liability and what type of foreign income will be subject to taxation in that Country (in this case, Poland).

Pursuant to Polish law, the concept of tax residence of a natural person is a situation in which an employee has his place of residence in the territory of Poland, regardless of where he or she comes from or what is his source of income.

Indication of the place of residence in the territory of Poland is possible if two aspects are taken into account:

  • Are you in the country for more than 183 days in a given tax year?
  • Do you have a center of vital or economic interests in the territory of the country?

In order to be able to clearly indicate a tax residence, you do not have to meet the two conditions above – it is enough to qualify for one of them.

Center of vital interests

To be a tax resident, you must have a canter of vital interest or a center of economic interest in that country. The “center of vital interests” is understood as such circumstances as: family and social ties of the taxpayer (spouse, children, real estate), address of residence, registration or social activity.

A center of economic interest is a place with which a person has economic ties. The term “center of economic interest” covers all economic links of a natural person with a given country, such as: performing gainful activity, main sources of income for the taxpayer, investments, movable and immovable property, loans taken, bank accounts and the place from which the person manages his property.

Stay in Poland for more than 183 days in a tax year

The criterion of the length of stay is considered to be met when the number of days of stay of 183 days in a given calendar year is exceeded. The condition of staying in the territory of Poland for more than 183 days does not have to mean uninterrupted stay.

The criterion of 183 days can be problematic to define, due to the rather unclear definition of whether the calculation should include full days or days defined also as a short stay, e.g. a few hours’ stay. In Poland, all tax authorities recognize that the calculation should take into account all days on which the foreign person stayed on the territory of Poland.

If you determine tax residence, you should carefully study the types of income you are receiving. When obtaining income from various sources, the taxpayer should check whether these sources are reflected in the double taxation agreements (it depends on the country).

Below is a diagram that will help you determine if you are a tax resident in Poland:

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