I am considering becoming tax-resident in Poland. As I receive rental income from a property in the UK, the tax situation isn't completely clear to me. As I understand it:
- I would continue to be liable for income tax in the UK because rental income is always taxed in the jurisdiction in which it was earned. As a UK citizen, I would be entitled to keep my personal allowance even though resident elsewhere.
- Owing to the double-taxation treaty between the UK and Poland, I would not then be liable to pay income tax again in Poland.
However, since the rental income falls below the personal tax allowance threhold, I will not actually pay any UK tax. How would this then be treated by the Polish tax authorities? Will they simply ignore it on the basis that I have fulfilled my UK obligations? Or will they consider the fact that I didn't make an actual payment grounds to impose Polish income tax?
Usually you pay taxes in the country where you are residing, where you declare your world income. However, some countries have tax reporting requirements based on citizenship (e.g., US), so you have to do it in both countries if you are residing outside of the US.
You need to check with the tax agency in the country you are leaving, be sure you understand what is you status as a non-resident. You can also as them if they tax the income as earned for non-residents (some countries do it).
If you move tax residency out of the UK, the tenants in you UK property should start paying the witholding tax on the UK rental income direct to HMRC and send you the balance. You'll still be liable for tax in the UK on any earnings above the UK personal allowance and because of the dual taxation treaty this can be used to offset Polish tax. However it may not do you much good because as a tax resident in Poland it's the Polish personal allowance that counts and this is significantly lower than in the UK.
I'd talk to a Polish accountant to get an idea of what expenses you can claim here that you can't in the UK, and also to do an example calculation for you - it may be worth hanging on to your UK tax residency for as long as you can.
@inkrakow Thanks for your detailed answer. In the end I got hold of a piece of software for calculating Polish tax and played around with some numbers. Although there was a section for providing information about foreign rental income, this had no effect on the tax payable in Poland. This fits with my provisional understanding of the relevant parts of the double taxation treaty which says that tax on rental income is payable in the country where it is earned, but not being any kind of expert, I wasn't sure that it was only payable there. My conclusion now is that that is the case.
I will add, that if you are formally a non-resident (of UK) you are not entitled to any UK tax allowance. You will be entitled to the measly personal allowance offered in Poland. Double and triple check what costs you can offset against any income earned.
Yes, you are correct about the UK personal allowance, but this only applies up to the point in which GB is a member of the EU. After that - different rules will apply.
Hello, this is a message directed to Ziutek, I also have a property in the UK that I rent out. I am resident in Poland and have now had a letter from the Urzad Skarbowy wanting more details going back to 2015 for some reason. I submit a tax return to the UK but generally do not pay tax as it is under the personal allowance. I understood that as it is income earned in the UK it is taxed in the UK, but perhaps this is not the case. Have no been able to obtain clarity? Nobody seems to know. I would add that this property in the UK is owned not by me but by my mother although I receive rent and pay the required tax. For some reason the Polish tax authorities are very insistent on knowing if I own the property. Anyone else familiar with this issue?
In general, tax is paid in the country in which you are resident. There are a few cases where it is paid in the country in which the money is earned, rental income being one of these. I am not an expert, but my reading of the UK-Poland double taxation treaty is that the other country does not have the right to tax that income at all, meaning that if you have a tax allowance in the country where the property is, you get to keep it. I tested this by downloading some Polish tax-declaration software and trying some imaginary scenarios and it although I was required to declare the UK income, it did not affect the amount of tax payable. I wasn't asked how much tax I had paid in the UK so that the Urząd Skarbowy could use that as an allowance against tax payable in Poland for example. Since I am still officially UK resident, I have not tested this conclusion in real life.
However, it seems to me that your situation is different since it is not you, but your mother who is earning the income from the property. The fact that you are receiving the money means she is passing it on as a gift. I don't know if there is any special treatment for gifts, but I would guess that they count as normal income, which would be liable for taxation in Poland.
