Avoiding Double Taxation
Poland–Ukraine Treaty and Rules

Introduction: Must You Pay Taxes in Both Countries?

Individuals and entrepreneurs working simultaneously in Poland and Ukraine can encounter the problem of double taxation — paying taxes on the same income in both countries. In certain situations, this can mean losing more than half your earnings.

Fortunately, Polish and Ukrainian tax regulations contain solutions. Both countries have signed an international treaty that determines taxation rules and allows avoiding such situations.

What is the Treaty on Avoidance of Double Taxation?

The treaty between Poland and Ukraine was signed in Kyiv, January 12, 1993. It is an international agreement that determines:

Main Principles of the PL–UA Treaty

• Tax Jurisdiction Delineation: Determines which country should tax the income
• Tax Credit: Allows deducting tax paid in one country from tax in the other
• Information Exchange: Enables tax authorities of both countries to exchange taxpayer information
• Anti-Avoidance: Prevents artificial schemes designed to avoid taxation

Which Incomes Are Covered by the PL–UA Treaty?

The treaty covers a wide range of income types:

Income Types Covered by the Treaty

How Tax Credit Works in Practice

If income is taxed in both countries, the taxpayer can apply a credit. Here's how it works step by step:

Example 1: Ukrainian Working in Poland

Annual income: 60,000 PLN (employment in Poland)

Step 1: Tax payment in Poland — Gross: 60,000 PLN, PIT (~12% + insurance): ~15,000 PLN, Net: 45,000 PLN

Step 2: Tax obligation in Ukraine — Income recognized: 60,000 PLN, Ukrainian tax (18%): ~10,800 PLN

Step 3: Apply credit — Tax paid in Poland: 15,000 PLN, Credit limit (18% × 60,000): 10,800 PLN. Since 15,000 > 10,800, no additional Ukrainian tax. Polish tax covers Ukrainian obligation.

Result: Total tax = 15,000 PLN. Without credit: 15,000 + 10,800 = 25,800 PLN (loss of 10,800 PLN)

Example 2: Polish Entrepreneur in Ukraine

Annual revenue: 200,000 PLN from business in Ukraine

Step 1: Tax in Ukraine — Revenue: 200,000 PLN, Operating costs: 100,000 PLN, Taxable income: 100,000 PLN, Ukrainian CIT (18%): 18,000 PLN

Step 2: Obligation in Poland — Must report income in PIT/CIT, Income: 100,000 PLN, Polish CIT (19%): 19,000 PLN

Step 3: Tax credit — Tax paid in Ukraine: 18,000 PLN, Credit limit (19% × 100,000): 19,000 PLN. Since 18,000 < 19,000, must pay Poland: 19,000 - 18,000 = 1,000 PLN

Result: Total tax = 18,000 + 1,000 = 19,000 PLN (higher Polish rate). Without credit: 18,000 + 19,000 = 37,000 PLN

Procedure to Obtain Tax Credit

To apply the credit, the taxpayer must follow specific procedures in each country.

Steps for Ukrainian Working in Poland

1. Obtain Polish Tax Certificate — Request from Polish tax authority a certificate confirming PIT payment
2. File Declaration in Ukraine — File annual income declaration with Ukrainian Tax Service (DFS) noting foreign income
3. Attach Supporting Documents — Polish certificate, employment contract copies, bank statements proving payments
4. Await Verification — Ukrainian Tax Service verifies documents (usually 20–30 days)
5. Receive Confirmation or Refund — If Polish tax was higher, no additional Ukrainian tax. Refund may be possible if difference exists.

Required Documents

• Certificate of tax payment in Poland (in Polish and Ukrainian)
• PIT-36 declaration from Poland
• Employment or civil contract (translation)
• Proof of residence in Ukraine
• Passport and identification number
• Tax residency statement (Ukrainian Tax Service form)

Practical Challenges in Applying the Treaty

Although the treaty exists, its practical application can be difficult:

Practical Tips for PL–UA Taxpayers

Before Signing or Leaving Employment

• Verify whether you'll be taxed in Poland or Ukraine
• Ensure employer correctly calculates and withholds taxes
• Request written confirmation of tax jurisdiction

Financial Record Keeping

• Keep all tax payment proofs
• Save contract and salary payment copies
• Maintain income register by country of origin

Annual Settlements

• File declarations in both countries annually
• Request tax payment certificate from first country
• Claim tax credit in second country

FAQ: Frequently Asked Questions

Can I apply credit if I worked less than a year?

Yes. Credit is applied proportionally to working days. If you worked 6 months, calculate credit from 50% of income.

Does credit also apply to VAT?

No. The treaty covers income taxes (PIT, CIT) and property taxes, but not VAT, which has separate international rules.

What if I'm a Polish tax resident but work in Ukraine?

Your tax residency status determines where you pay taxes. As a Polish resident, you must tax worldwide income in Poland, then apply credit for Ukrainian taxes paid.

Is the PL–UA treaty applied automatically?

No. You must actively file a request in the second country. The treaty doesn't work without your initiative.

Can I avoid taxes in both countries?

No. The treaty minimizes double taxation effects but doesn't eliminate taxes. You always pay tax in the country where you earn income.

What if I don't apply for credit?

Without a credit request, you may pay taxes in both countries simultaneously — resulting in high effective rates. Refunds may be possible retroactively (usually 3–5 years) but require formal request.