Following the UK’s exit from the European Union, the options for accounting for foreign income for those working in the UK have changed. You can now no longer deduct National Insurance contributions paid in the UK or donations. What’s more, the way you account for your income will be determined by your tax residency – depending on the specific case, you will settle it at the UK or Polish tax office. How then to settle income from abroad?
Do You Need to Report UK Income in Poland?
People who are residents of Poland are subject to PIT on all their income. This means that income from abroad in such a situation must be settled in Poland. To be a resident of Poland, you must meet one of 2 conditions:
- Have a centre of personal or economic interests in Poland.
- reside in Poland for more than 183 days in a tax year.
People who have relocated their residence to the UK are only liable to the Polish Tax Office in respect of income earned in Poland.
Self-Employed vs foreign income – which taxes will you pay in the UK?
Taxation of the self-employed is defined by The double tax treaty between Poland and the United Kingdom of 20 July 2006. Under its provisions, companies are taxed in the country in which they are operated.
However, if the business has a permanent establishment in another country, profits may also be taxed in that country, but only for the portion attributable to that establishment. So, if you are self-employed and a UK resident, you will pay taxes on your self-employed income in the UK. On the other hand, any income earned from foreign sources, such as Poland, must be reported and taxed in Poland.
How to Report Foreign Income After Brexit?
Entrepreneurs operating in the UK after Brexit face new customs obligations, transport regulations, and tax changes. The way foreign income is taxed has also changed due to adjustments in Polish PIT laws from January 1, 2021. Key changes include the loss of the ability to:
- File joint tax returns with a spouse residing in another EU country (this also applies to single parents).
- Claim tax relief for housing purposes in another EU country.
- Deduct health and social insurance contributions paid in another EU country.
- Claim exemption from tax on gambling winnings in the EU.
- Deduct charitable donations made to organizations in other EU countries.
Despite Brexit, the Double Taxation Agreement between the UK and Poland remains in effect, meaning you won’t face double taxation on the same income. However, changes to the Polish PIT law affect Polish taxpayers working in the UK.
Ensure Correct Reporting of Foreign Income and Avoid Double Taxation!
Brexit has resulted in a number of changes relating to the taxation of your foreign income. So there is a possibility that you do not know whether you are currently calculating your income correctly. It may be costing you too much time and nerves. However, there is another way! Make sure that your taxes are calculated and paid correctly and entrust your accounting to specialists. This way, you will no longer have to worry about which country to declare your income in – our office will do all the formalities for you. And you will have more time to concentrate on developing your business.
