Why did I receive a letter from the bank asking for information about residency?

Renata recently contacted us after receiving a letter from her bank, requesting information about her tax residency. The letter was sent to her Polish address, an apartment she hasn't lived in for a long time but which is rented out in Poland. Intrigued, she began researching the matter and discovered it was related to something called CRS - Common Reporting Standard, an information exchange system between tax authorities of various countries.

Letter from the bank about CRS

CRS is an international system, introduced by the Organisation for Economic Co-operation and Development (OECD), aimed at preventing tax evasion through the exchange of information between tax authorities regarding bank accounts held by their residents. Under this system, banks and other financial institutions are obligated to identify accounts belonging to individuals who may be liable for taxes in other countries, and to transmit this information to local tax authorities, which then exchange it with the authorities of other states.

Why is the bank asking about my residency?

In Renata's case, having lived in the UK for nearly 15 years but maintaining financial ties in Poland—such as renting out an apartment and a pension that began being paid to her in Poland last year—the Polish bank was obligated to report this information to the Polish tax authority. Subsequently, under international agreements, this information could be transferred to the British HMRC.

Many individuals like Renata are unaware that any income earned in Poland must be declared for tax purposes in their current country of residence—in Renata's case, the UK. HMRC, utilizing data obtained through CRS, can send an inquiry to the taxpayer asking why income earned in Poland has not been taxed in the UK.

During an initial phone conversation with my assistant, Renata realized she had not declared either her rental income or her pension to HMRC. This quickly solved the mystery of the letter she had received.

Do I need to declare Polish income in the UK?

Renata's case is just one of many we've encountered in recent months. This is how authorities are currently trying to plug budget deficits, not by raising taxes, especially before elections, but by collecting them from individuals who haven't paid them in previous years.

It's important to remember that a UK tax resident is obligated to declare all income originating from Poland, regardless of whether tax has already been paid in Poland.

Tax evasion in the UK is subject to penalties of up to 100% of the unpaid tax, and individuals proven by HMRC to have committed deliberate tax fraud may also be placed on the blacklist of deliberate tax defaulters.

Do you have any income in Poland that hasn't been taxed? If so, perhaps it's time to ensure all your tax obligations are up to date.

Tax Residency Declaration for CRS Purposes

Here's an example of the declaration taxpayers with a bank account receive. PKO Bank Polski: