How should you navigate working in the UK after Brexit? Will the new rules work for you? These are important questions for many individuals working or running businesses in the UK. Brexit has brought significant changes to tax reporting and compliance, removing many of the simplifications and allowances that were previously available. Will it still be possible to avoid double taxation?
What is Double Taxation?
Double taxation occurs when individuals have to pay tax in both Poland and the UK. The situation has changed significantly since the UK left the European Union.
From 1 January 2021, the MLI Convention between Poland and the United Kingdom will enter into force. According to its provisions, individuals who work outside Poland but are tax resident in Poland must file a PIT return with the Polish Tax Office. Prior to this treaty, there was an exemption that allowed expatriates to pay taxes abroad without having to pay additional taxes in Poland.
Avoid double taxation – watch your residency status!
To avoid double taxation, you need to analyse whether you are considered a tax resident in Poland. Remember that tax residency is not the same as citizenship. A person is considered a resident if he or she has a spouse or children in Poland. In the absence of family, residency is determined by higher income or the amount of time spent in a particular country. Therefore, if you travel abroad for a short period of time to work and then return to Poland, you may still be a tax resident in Poland.
How to Report Foreign Income Post-Brexit
Under the agreement between Poland and the UK, income from employment is taxed in the country where the employee carries out the work. The second country cannot tax this income – this is known as the proportional credit method.
This means that if you work in the UK, your salary will be taxed in the UK. If the Polish tax authorities require you to pay PIT, you can reduce your tax liability in Poland by the amount of tax paid in the UK.
Taxation of UK income – what has changed after Brexit?
After leaving the EU, the UK lost the tax privileges it previously had in relation to other member states.
Polish and British residents can no longer file joint tax returns with their spouses. It is also no longer possible to reduce the tax base by the amount of social security contributions paid in another country. Donations made in the UK can no longer be deducted from the PIT base, nor can the housing allowance, which protected against the 19% tax in Poland, be claimed.
In addition, tax exemptions for gambling winnings or attending free palliative care training in the UK are no longer available.
Get professional help and avoid double taxation!
The UK’s exit from the EU has introduced significant changes to tax laws for those working in the UK. It’s no surprise that, like many Poles earning income in the UK, you may have numerous doubts about avoiding double taxation. Each case needs to be assessed individually, and a thorough understanding of both Polish and British laws is required.
Instead of managing this on your own, it’s best to seek tax advice. Our office can help you navigate the current regulations. Entrust your accounting to the right experts and avoid double taxation.
