More and more Polish citizens are deciding to take up employment abroad while at the same time maintaining ties with Poland. One of the key tax issues in the context of relocation is determining the place of residence for tax purposes, which decides whether the taxpayer is obliged to account in Poland for all of their worldwide income, or only for income earned in Poland.
The judgment of the Provincial Administrative Court (WSA) in Gliwice of 6th February 2025 (I SA/Gl 535/24) confirms that the mere presence of family in Poland does not in itself determine Polish tax residency.
What is the „center of vital interests” for tax purposes?
According to Polish regulations (Article 3(1a) of the Personal Income Tax Act), an individual is regarded as having their place of residence in the territory of the Republic of Poland if they meet one of the two criteria:
- They have in the territory of the Republic of Poland the center of their personal or economic interests (also referred to as the „center of vital interests”), or
- They stay in the territory of the Republic of Poland for more than 183 days in the tax year.
The notions of „center of personal interests” and „center of economic interests” are not clearly defined in the Act, but practice and case law have developed their meaning:
- The center of personal interests usually refers to the country in which the taxpayer’s closest family resides (spouse, partner, minor children), as well as their cultural, linguistic and civic ties, social, political, cultural and civic activity, membership in organisations or clubs, and hobbies.
- The center of economic interests is above all the country where the main source of income is located, as well as investments, real estate, savings, bank accounts, and the place from which the person manages their assets.
So far, in line with the Tax Explanations of the Ministry of Finance of 2021, family ties have been indicated as the first and most important criterion for determining the center of personal interests. This meant that in many cases taking up work abroad while leaving the family in Poland resulted in maintaining Polish tax residency.
Are you a Polish tax resident?
This issue becomes particularly important where a Polish citizen moves their professional life abroad but leaves their family in Poland – as in the case of the taxpayer concerned by the judgment discussed.
The taxpayer, a Polish citizen, was a Polish tax resident until January 2023. In that month he took up employment for an indefinite period in the United Arab Emirates (UAE) and from February 2023 he has resided there permanently. In the UAE:
- his permanent place of work and sole center of income was located,
- he rented an apartment,
- he holds a residence visa,
- he opened a bank account,
- he leads an independent professional and private life.
His closest family (wife and minor children) remained temporarily in Poland, with the intention that they would join the taxpayer in the UAE in the near future. It was precisely this circumstance that became the core of the dispute with the Head of the National Revenue Information (Director of KIS).
Controversial position of the Director of KIS
The Director of KIS held that despite working and residing in the UAE, the taxpayer still remained a Polish tax resident. He stated that the taxpayer met the conditions set out in Article 3(1a)(1) of the PIT Act, because it was in Poland that his closest family resided, which in the Director’s view indicated that the center of his personal interests was in Poland. As a consequence, the Director of KIS found that the taxpayer was subject to unlimited tax liability in Poland and should report income earned in the UAE in his Polish tax return for 2023.
The Director of KIS argued that, although the center of economic interests of the applicant was undoubtedly in the UAE, his center of personal interests in 2023 still remained in Poland due to his family. The authority did not agree to apply the so-called „tie-breaker rules” under the double tax treaty (DTT) with the UAE, claiming that the mere possession of a residence visa in the UAE is not equivalent to recognising the applicant as a tax resident of the UAE.
Groundbreaking judgment of the WSA in Gliwice
The taxpayer lodged a complaint against the interpretation of the Director of KIS with the WSA in Gliwice, alleging a misinterpretation of the provisions. The WSA annulled the interpretation of the Director of KIS in its judgment of 6th February 2025 (case no. I SA/Gl 535/24).
The court held that the tax authority wrongly assumed that the mere fact that the taxpayer’s family resided in Poland was sufficient to find that he was a Polish tax resident. In the WSA’s view, the key element is to determine the so-called center of personal or economic interests in a holistic way, and the fact that the taxpayer holds Polish citizenship and that his family lives in Poland, although indicative of certain ties, is not in itself sufficient to conclude that his center of vital interests is in Poland.
The court also stressed that Poland remains the life center of the taxpayer’s closest family, and accepting the position of the Director of KIS would lead to the absurd conclusion that the family’s life center is actually in the UAE, since that is where the taxpayer resides with the intention of staying long term.
The WSA argued that:
- The center of personal interests is not limited to the relationship with a minor child or spouse. It also includes a broad range of human needs, such as social, political, cultural and civic activity, as well as self-realisation linked to one’s profession.
- Family ties alone do not constitute such a strong bond as to conclude that the taxpayer has his place of residence for tax purposes in Poland, especially where the family plans to join him abroad. The court pointed out that modern technologies allow for practically unlimited online contact with loved ones, which changes the perception of physical proximity.
- When assessing the center of vital interests, one should primarily take into account the personal and economic links of the individual with a given state, including the taxpayer’s intention regarding permanent residence.
This judgment may be seen as a certain departure from the established position of the tax authorities, in which the location of the closest family has been considered one of the most important elements for determining the place of residence for tax purposes. The WSA in Gliwice focused rather on identifying the place of the taxpayer’s intended long-term residence, all the more so as in the near future the applicant’s closest family planned to move out of Poland.
Consequences for taxpayers
The judgment of the WSA in Gliwice is undoubtedly important for individuals who decide to leave Poland for work. It may make it easier for taxpayers in similar situations to settle their tax affairs, offering a more flexible and comprehensive approach to assessing tax residency.
The court emphasised that assessing the center of vital interests requires taking into account all the circumstances of the individual case. This means that taxpayers who move their lives abroad should actively build and document their economic ties, personal ties (social, cultural, civic) and their intention to reside permanently in the new country.
Such an approach by the WSA:
- increases the importance of real-life circumstances,
- opens the door to a more individualised assessment,
- may reduce disputes with tax authorities.
Summary
Correctly determining tax residency is crucial for establishing the scope of tax obligations in Poland. The judgment of the WSA in Gliwice of 6th February 2025 (I SA/Gl 535/24) shows that assessing the center of vital interests requires an individual approach and consideration of all factual circumstances.
If you work or plan to work abroad and want to make sure that your tax residency has been determined correctly, we will be happy to assist you. Our team of experts will analyse your personal and economic situation, identify potential risks and prepare appropriate protective measures, including an application for an individual tax ruling.