Double Taxation Agreements With Poland—A Guide for British Expats

Familiarising yourself with the Poland–UK double taxation agreement (DTA) is essential for developing an efficient cross-border tax planning strategy.

In this guide, we will explain how tax treaties work between the UK and Poland, outline the key income types covered by the treaty, and explain how the DTA prevents double taxation.

What Is the UK–Poland Double Taxation Agreement?

A DTA is a contract signed by two countries that serves to alleviate or avoid double taxation by determining taxing rights, providing relief through exemptions, tax credits, or reductions, and resolving residency conflicts by applying tie-breaker rules.

In cases where an individual is considered a tax resident of both the UK and Poland, the DTA between the two countries will prevent their income from being taxed by both countries.

You can take advantage of the double taxation agreement with Poland if you are:

• A retired British expat residing in Poland.
• A remote worker or contractor earning UK-sourced income.
• A property owner with rental income in either country.
• A dual resident of both the UK and Poland.
• A British national selling UK assets while being a tax resident in Poland.

How Does the DTA Prevent Double Taxation?

There are three main methods used to prevent double taxation of UK expats’ income in Poland:

1. Exclusion with progression
2. Tax credit
3. Tax abolition relief

Exclusion With Progression

This regime allows you to pay tax only in the country where the income is earned; income earned abroad would only be taxed abroad. However, your foreign income will affect the tax rate that will apply to your taxable income in Poland.

For instance, if you earn €35,000 abroad and €15,000 in Poland, only the €15,000 will be subject to Polish tax, but the rate that applies to it will be as if your income were €50,000. So, while the foreign income is excluded from Polish tax, it can affect your tax bracket.

Tax Credit

Some DTAs with Poland allow residents to offset the tax paid in one country against the tax paid in Poland. This method also applies if the DTA between Poland and the country where the income is earned does not include any provisions that would allow the income to be excluded, or if a double taxation agreement does not exist.

Tax Abolition Relief

This provision allows Polish residents to apply the exemption method to their foreign income even if the DTA specifies that the credit method should be used. However, since 2021, the annual limit has been reduced to PLN 1,360, and it does not apply to pensions, dividends, or offshore income.

How To Determine Your Tax Residency

To determine whether you’re a UK tax resident for any given tax year, you must complete the Statutory Residence Test (SRT). The test consists of three steps with specific criteria, and it provides a framework for determining your tax liabilities for income, capital gains, inheritance, and corporation tax obligations.

Note that the SRT evaluates each tax year independently, which means that your tax status may change annually.

According to the Personal Income Tax Act, you are considered a tax resident in Poland if one of the following applies:

1. You’ve spent more than 183 days in Poland during a tax year.
2. You have a centre of vital interests in Poland.

If you are a Polish tax resident, you will be subject to tax on your worldwide income. Non-residents are liable for income tax only on the profits earned within the country.

Tie-Breaker Rules Under the Treaty

The difference between domestic legislations combined with the often complex personal circumstances of expats can occasionally result in an individual being considered a tax resident of two countries.

In such cases, tie-breaker provisions override the domestic definitions of residency and determine which country has the taxing rights over your income.

While the wording may differ depending on the treaty, the criteria typically include the following factors:

Income Types Covered by the Treaty

Understanding which income types are covered by the double taxation treaty between Poland and the UK can help you determine your tax obligations and identify tax relief possibilities. The UK–Poland DTA applies to the following income types:

1. UK pensions
2. Employment and self-employment income
3. Dividends, interest, and royalties
4. Rental income from UK or Polish property
5. Capital gains from UK-based assets

UK Pensions

If you receive your UK pension while living in Poland and are considered a Polish tax resident, the pension is generally taxable only in Poland under the UK–Poland DTA. However, 25% pension commencement lump sums remain exempt from Polish tax.

Note that the first PLN 30,000 you receive is tax-free.

This rule applies to:

1. The State pension
2. Workplace pensions—defined benefit and defined contribution
3. Personal pensions

However, if you remain a UK tax resident and choose to withdraw your UK pension as a lump sum, it will be taxed in the UK. The first 25% will still be tax-free, but the remainder will be taxed at your marginal tax rate. Your UK government pension will be taxed only in the UK until you become a Polish national.

Employment and Self-Employment Income

Profits from employment are typically charged in your country of residence unless they are earned in the UK. If you have UK-earned income, it will be charged in the UK, with certain exceptions based on the time you spend in the UK and the residency of your employer.

If the business is conducted through a permanent establishment (PE) in another country, that contracting country has the right to tax the income attributed to the PE.

Income from business activity, including self-employment, is taxed according to one of the following three regimes:

1. The personal income tax scale: It can be either 12% or 32%, depending on your taxable income.
2. A flat 19% rate: This method allows for deductions of certain business expenses but restricts your tax relief options.
3. Lump-sum tax rate: It can range from 2–17%, depending on the type of business you conduct. However, this regime doesn’t allow you to deduct any business costs.

Dividends, Interest, and Royalties

Dividends, interest, and royalties paid by a company of one contracting state to a resident of the other are taxed by the recipient’s country of residence. However, if you are a UK tax resident, the UK can tax these types of income as well, depending on the following:

Note that if you own a registered company in Poland, and that company receives dividends from the UK, holds at least 10% of the paying company’s capital, and has maintained that holding for two years, the dividends will be exempt from withholding tax in the UK.

Rental Income From UK or Polish Property

If you are renting out property in Poland or the UK as a Polish tax resident, the following tax rules apply:

• 8.5% on annual rental income up to PLN 100,000.
• 12.5% on income exceeding PLN 100,000 (PLN 200,000 for jointly filing spouses).

You cannot deduct any costs of earning rental income, such as maintenance, repairs, or utilities. You are taxed on your total private rental income, not just profit.

If you rent your property as part of your registered business activity, you have more taxation options:

• Standard personal income tax rates (12% or 32%).
• Flat 19% rate.
• Other lump-sum rates depending on business classification.

Reporting requirements in Poland:

• File PIT-28 if taxed under the lump-sum regime.
• File PIT-36 if taxed under general income rules.
• Submit annual returns by 30th April of the year following the tax year.
• Quarterly payments are due by the 20th day of the month following each quarter.

Foreign tax credit:

• UK rental income must also be declared in Poland if you are a Polish tax resident.
• You may claim a foreign tax credit for tax already paid in the UK, avoiding double taxation under the Poland–UK DTA.

UK expats renting their property in the UK will be taxed by the UK under the following rates:

If you’re a Polish tax resident, Poland has the right to tax your UK rental income too, which means you are obliged to report it on your Polish personal income tax return. However, you may use the tax credit method to deduct the tax paid in the UK from your Polish tax liability.

Capital Gains From UK-Based Assets

According to the UK and Poland double taxation treaty, gains derived from the sale of any immovable property and PEs in the UK are taxed in the UK. Gains made from selling ships and aircraft used in international travel are taxed in your country of residence.

Gains realised from other types of property are typically taxed in your country of residence, but note that the residence country can tax you if you’ve been a tax resident during the year of the sale or the preceding six years.

For instance, if you sell a UK property in 2024 and relocate to Poland in 2025, both countries will have the right to tax the capital gain made from the sale because it was made within six years of becoming a Polish tax resident.

Gains realised from other types of property are typically taxed in your country of residence, but note that the residence country can tax you if you’ve been a tax resident during the year of the sale or the preceding six years.

If you are considered a Polish tax resident at any point during the year of sale or in the previous five calendar years, Poland may also tax the capital gain.

To avoid double taxation in Poland, you’ll be granted a tax credit for the UK tax paid on that gain.

How To Apply for Tax Relief Under the Treaty

At the end of a tax year, you are required to submit an annual tax declaration—PIT. Typically, you would need to complete PIT-26, as this document serves to report income obtained by employees, retirees, and individuals conducting an economic activity.

For foreign income, you must also include the PIT/ZG annex, where you should indicate the country of origin (UK), declare your gross income, and report the value of taxes paid in the UK (converted into PLN).

The PIT documentation must be submitted to the Polish Tax Office by 30 April of the year following the relevant tax year.