When is an expat not an expat? When he's a Pole
Greetings from your new tax correspondent. Peter has (finally) said his last farewell and now you are stuck with me.
For those of you who don't know me, don't be fooled by the name: I'm a Brit, born and brought up in sunny Bristol (not the Hotel), a U.K. solicitor by profession, and I've been in Poland for six years. I arrived in Warsaw in April 1995 as in-house legal counsel, office administrator, translator, negotiator and general dogsbody (in the nicest sense of the word) for Gerald Eve International where I stayed until I heard the call of tax consulting, joining one of the Big Five firms in November 1996.
I would say "that's enough about me," but I won't just yet, as the subject I want to discuss today is one that has always been close to my heart, namely, "am I an expat, or am I a Pole?"
Having been born in the U.K., to all intents and purposes I'm a Brit. I did, however, have Polish parents who arrived in the U.K. more by accident than design during World War II, and stayed. Although naturalized Brits by the time I was born, they never renounced their Polish citizenship. What did this mean for me? Well, in short, it meant that in the eyes of the Polish authorities I was a Pole. I'm perhaps not the best example as I decided pretty well from the get-go that I would move here permanently. I went to the Polish consulate in London, got them to confirm my Polish citizenship, got a Polish passport and on arriving in Poland got myself an ID card (dowod osobisty) as a result of which I pay full tax on all my earnings, with no tax breaks ... great tax planning, eh?
But this doesn't have to be the case for the rest of you in similar circumstances. Polish citizenship does not necessarily make you a Polish tax resident and does not necessarily mean you will be subject to unlimited Polish tax liability.
Let's start at the beginning: When is an expat also a Pole?
If both parents have (or have not renounced) Polish citizenship.
If one parent is Polish, they have the right to choose, at birth, which citizenship the child will take.
If both parents are Polish (abroad) but, due to the problems caused by World War II, there is no documentary evidence of their birth, maintenance or renunciation of citizenship, this could be an issue and will depend on your own intentions and the ultimate decision of the Polish authorities, usually at your local Polish consulate.
Why is this an issue at all? Why can't you just carry on as before with your non-Polish, home-country passport? The answer is simple, if you are Polish, not only do you not require a work permit and visa to allow you to work in Poland, you cannot have one. "So what?" I hear you say. Well, just recently one individual, a U.K. citizen with all the necessary paperwork in order, had his application to renew his work permit rejected. Why? Because his name ends in "-ski," ergo he must be Polish. That is the view of the Warsaw Labor Office and the onus is now on Mr. -ski to prove that he is or is not Polish.
As I mentioned earlier, this can be a major pain: While you are busy trying to prove your citizenship your current work permit has expired, and of course you are not permitted to work in Poland without one unless you are a Pole. You have no paperwork proving you are a Pole, other than the unfortunate "-ski" at the end of your name, which I doubt would convince a labor inspector during a routine check. Worse still, what if your research comes up proof positive that despite the Polish-sounding surname you are not a Pole? If you can afford not to work during this uncertain period, then fine. Otherwise you need something in writing confirming that you are working on the basis that you believe you are a Polish citizen, as indicated by the Labor Office on a given date when they refused to issue/renew a work permit on those very grounds. That way, hopefully, the Labor Office shouldn't have any comeback against you or, more specifically, the person who signed your contract: You've guessed it, it's personal criminal responsibility if it turns out that you are not a Pole after all.
It could also prove to be the proverbial pain from a day-to-day perspective aas, unless you travel in and out of the country on a frequent basis, as a foreigner, sooner or later you will need a visa to allow you to stay in the country for lengthy periods of time, but as a Pole you wouldn't need one at all. This could prove to be a problem if you only possess one passport, i.e. a non-Polish one. Anyone who thinks the life of an expat is one sweet bed of roses, how wrong you can be but does being Polish make things easier? Don't you believe it.
Now to the crux of the matter, if it does turn out that you are a Pole after all, in so far as nationality is concerned, will this affect your tax status in Poland? Here at last is some good news it doesn't have to.
Tax status is determined (fortunately) not simply on nationality but on actual circumstances so that whatever your nationality happens to be, so long as you are in Poland on a "temporary" basis you should be OK. What does "temporary" mean? As with most things, this is nowhere specifically defined in the regulations, but based on the wording in the tax legislation we go to the Civil Code and the closest interpretation we can get and which is currently accepted practice is that an individual is "temporary," so to speak, if he comes and stays in Poland "without the intention to stay permanently." Nice and clear cut? Not.
You might argue that your intentions are your own and that if questioned the authorities would simply have to take your word for it. To a degree this is indeed the starting point. However, the authorities do tend to make a detailed analysis of the surrounding facts and circumstances where is your vital center of economic and other interests? Did you sell up and ship out when coming to Poland? Have you invested heavily in Poland during your stay? Have you bought property in Poland? Do you still have economic ties with a country outside Poland (this does not necessarily have to be your country of origin)? Do you still have a place of residence available to you outside Poland? ... and a thousand other questions as to your personal and family circumstances until they create a general picture of whether you are simply making your life on secondment (be it for six months or 10 years) more bearable, or whether there is an indication that at the moment of inspection there is more evidence in favor of the view that you have no intention to leave Poland and that you have in fact settled here to all intents and purposes.
Before you all rush off and start reinvesting abroad, buying properties and setting up offshore bank accounts, this information is more to put you on notice rather than a red warning flag, at least for the moment. From our experience, the tax authorities are proving remarkably sensible in dealing with such issues (let's hope this practice continues) and are indeed looking realistically at all the facts and circumstances surrounding a given individual's circumstances. They look at why you came to Poland in the first place, whether you still have ties with your home country seconding company (a fixed-term secondment contract or assignment letter is a good thing to have on your personnel file as this underlines the temporary nature of your stay here. An extension or two shouldn't make too much difference if each in turn is for a fixed term).
On that cheerful note I leave you all (and not just those dual nationals among you) to ponder whether your intentions are entirely honorable.
Anna Szymanska is a tax senior manager in the Warsaw office of Arthur Andersen.
