For an individual residing both in Poland and abroad, determining tax residency is a key issue. It determines whether they will be subject to unlimited tax liability in Poland (on all income, regardless of where it is earned) or limited tax liability (only on income earned in Poland). The basic criteria in this respect are regulated by Article 3 of the PIT Act. The content of this provision is subject to interpretations by the tax authorities and we would like to look at one such interpretation in this article.
In an individual interpretation of 5 September 2024 (mark: 0112-KDWL.4011.85.2024.1.WS), the Director of the National Tax Information (hereinafter: ‘DNTI’) shared the position of the applicant as to how to determine the correct tax residence and indicated the key areas for determining tax residence.
Factual situation
The applicant, a Polish citizen, had a problem determining in which country he was tax resident – Poland or Norway. The issue was important because it depended on whether he would have to pay tax on the sale of the property he had inherited. In Poland, he would be exempt from this tax, so establishing the correct tax residence was important. In 2023, the applicant spent 174 days in Norway and 191 days in Poland. In Poland, he owned property, studied, maintained relations with his family and friends, and was socially active. He was in Norway because of his wife’s work. In 2023, he also received income from his work exclusively in Norway. According to the applicant, he believed that he was a Polish tax resident and had unlimited tax liability in Poland.
Tax authority’s position
DNTI agreed with the applicant and confirmed that he was a Polish tax resident in 2023. This was because the applicant had spent more than 183 days in Poland (one of the criteria) and had the centre of his personal and economic interests here. Significant links to Poland included, inter alia, the presence of family here, ownership of real estate and involvement in society. At the same time, DNTI noted the need to take into account the double taxation treaty (DTT) between Poland and Norway when determining tax residency. The applicant had a residence in both Norway and Poland, but it was in Poland that he stayed longer (191 days in Poland versus 174 days in Norway). Therefore, the closer personal and economic ties to Poland were the decisive factor.
Role of the OECD Model Convention
The tax authority in the interpretation also highlighted the supporting role of the so-called „home-focal” criterion in determining tax residence. According to the Commentary to the OECD Model Convention, having a permanent home-focus means that an individual has organised and maintains such a place intended for permanent use. This is a key aspect in the determination of domicile, as it is not merely a temporary residence, but a place that the individual considers to be his or her permanent centre of life. In the applicant’s case, although he also had a residence in Norway, it was Poland that was his main home base. He did everything possible to have access to it on a continuous basis, which indicates its permanent nature. As a result, even with two places of residence, Poland was the country with which the applicant had stronger personal and economic ties. This ultimately prevailed in concluding that the applicant’s tax residence was in Poland and not in Norway.
Summary
In case of doubts related to the issue of tax residency, it is worth applying for an individual interpretation. However, it should be borne in mind that in similar cases, one cannot limit oneself only to an interpretation from the Polish perspective, as the other country concerned may come to different conclusions as to the tax residence of a given person. In such a case, it is particularly important to seek the assistance of an adviser who is competent and has contacts with advisers from different countries. At Nexia Advicero, due to our membership in the Nexia international network of advisory firms, we provide our clients with a comprehensive service, also from an international and local perspective in different countries.
