Tax residency is not such a simple matter!
When we hear the term "tax residency," most people immediately think of the number 183 days. If you spend more than half a year in one country, you're a resident; if you spend less, you're in another. Simple, right? Unfortunately, no. In practice, it's much more complicated.
People constantly come to me who have tried to count the days themselves or received legal opinions based on very rigid frameworks. Then it turns out that tax authorities in different countries see things completely differently. And that's when the problems begin... double taxation, requests for clarification, and sometimes even clawbacks of tax reliefs.
Recently, Ms. Klaudia came to me. She owns a house in Poland, works as a caregiver in Ireland, and receives a substantial pension from the UK after her British husband. She had previously consulted a well-known tax law professor in Poland, who provided an opinion stating she was a Polish tax resident. The problem is that... the Irish authorities considered her a resident of Ireland. So, who should she believe?
Where is my residency?
Klaudia is Polish, but for several years, she has spent most of her time in Ireland. She works there as an elderly caregiver, and her job involves living with clients for several months, then returning to Poland for a break or traveling elsewhere. In Poland, she owns a house and an apartment that she is preparing for rent. Additionally, she receives a pension from the UK after her husband, who worked in London for many years.
At first glance, one might say: "a house in Poland, a bank account in Poland, her mother in Poland – so surely Polish tax residency." This is exactly what the lawyers from Warsaw, whom Klaudia consulted for an opinion, concluded. The matter seemed settled because the law professor, an authority, clearly stated: "You are a Polish tax resident."
Except that... at the same time the Irish tax authority issued a completely different position. According to Ireland, Klaudia is their resident. And suddenly, a problem arose... two countries, two different opinions, and entirely different tax implications.
Where the residency problem arose
When Klaudia saw that she held two conflicting documents: one from Polish advisors and another from the Irish authorities, she felt completely lost. On one hand, the law professor wrote in his opinion: "You have a house in Poland, you have a bank account in Poland, so your center of vital interests is in Poland". On the other hand, officials in Ireland officially recognized her as their tax resident and even reversed the tax previously assessed against her.
Klaudia began to wonder: who was right? Should she listen to Polish experts, who base their opinions on national regulations and court rulings in Poland? Or rather the Irish tax authorities, who consider her actual life and work?
The problem was not merely theoretical. Where her tax residency actually lay determined where she would declare all her income: her salary from Ireland and her pension from the UK. This meant thousands of euros in difference and the risk of double taxation.
Analysis of the professor's opinion
The opinion Klaudia received in Poland was very carefully written, full of regulations and references to case law. The problem was that the professor focused mainly on the issue from a Polish perspective. In his reasoning, the most important factor was that Klaudia owns a house, an apartment, and a bank account in Poland, and also earns rental income from properties there. This, according to the professor, determined that the center of her vital interests was in Poland.
However, in my opinion, this approach was one-sided. The professor practically overlooked the fact that Klaudia spends most of the year in Ireland, where she earns her income, does her daily shopping, and where her professional life truly unfolds. He also did not take into account Irish tax law or international agreements, which clearly state:
if someone spends more time and conducts their activities in another country, the mere fact of owning property in Poland does not necessarily mean that tax residency is in Poland.
As a result, Klaudia received an opinion that could prove very risky for her in practice, because if she only adopted the Polish interpretation, she might be forced to pay taxes twice. And that is precisely why double taxation treaties exist, to help individuals like Klaudia.
DTTs - How to interpret them?
Tax residency is not a simple equation like: "if you have a house in Poland, you are a resident in Poland." The matter is much more complex.
International law and double taxation treaties include what are known as “residency tie-breaker rules” (tie-breaker rules).
These are further questions that need to be asked to UNEQUIVOCALLY determine in which country someone should actually be considered a resident.
The first question is: do you have a permanent home available to you? And it doesn't have to be your own house; any place where you can genuinely live is sufficient, even if the apartment is rented or provided by your employer.
The second question: where is your center of vital interests, meaning where you work, where you earn money, where you spend money, and where your closest personal ties are.
If there are still doubts, we move on to the next question: where do you habitually reside, meaning where you spend more days of the year. And only as a last resort, when all else fails, is citizenship considered.
This test is applied by all countries based on OECD principles. And this is precisely how Klaudia's case should be assessed – not just through the lens of her owning property and a bank account in Poland, but because she lives and works in Ireland most of the time.
How I helped Klaudia determine her tax residency
When Klaudia came to me with a professor's opinion and a decision from the Irish office, the first thing I did was sit down with her and analyze the facts step by step.
Instead of focusing solely on Polish law, we took a broader look at the regulations of the Republic of Ireland and, most importantly, at the tie-breaker rules (so-called tie-breaker rules) contained in the double taxation avoidance agreement.
It became clear: in 2024, Klaudia spent more time in Ireland than in Poland; she worked there, earned her income there, and her daily life unfolded there. While she does own a house and an apartment in Poland, and even earns rental income, this alone does not determine tax residency if most of her activities and presence are in another country.
Therefore, my recommendation was to obtain an official tax residency certificate from Ireland. This document is the best proof in discussions with the Polish tax office and in the UK; it clearly demonstrates that Ireland is entitled to her tax residency for 2024. This allowed Klaudia to avoid double taxation and calmly settle all her income where she actually lives.
Tax Residency – Not So Simple, Even for a Professor!
Klaudia's story highlights something very important. Tax residency isn't simple math or a quick "yes" or "no" answer. It's a set of rules that must be applied step by step, considering not only Polish regulations but also the laws of the country where one lives and works, as well as international agreements.
Had Klaudia stopped at the professor's initial opinion, she might have ended up paying taxes in Poland on all her income, while the Irish office would still have considered her a resident. The result? A real risk of double taxation and a lot of stress associated with confronting the Irish office.
That's why it's crucial to look at the problem holistically.
Where one truly lives, where one works, where daily life unfolds. Owning a home or a bank account in Poland is important, but not always decisive. We might own a house in Poland, but rent or have employer-provided accommodation available to us in another country, and that will be what counts. A bank account, on the other hand, can be in Poland, but transactions can physically be made in Ireland. For me, this story is further proof that legal knowledge must be combined with practice and experience; otherwise, misinterpretation is easy.
To TaxOne people often come who don't know where to pay taxes, where to pay contributions, and sometimes wonder if, for example, they should declare tax on a gift received from Poland. And although tax issues vary, for us, the most important thing is always the individual and their specific situation.
Therefore, even with the slightest doubt, we consult on matters with our partners in Poland or with the relevant authorities in other countries.
