EU Tax Residency 2023: How Not to Pay Taxes Twice (And Will a Certificate from Ukraine Save You?)

A year of full-scale war has passed. Millions of Ukrainians have found themselves in Europe, and while you may have settled safety issues, the financial question is now ticking like a time bomb. The “honeymoon” period of European tax loyalty is coming to an end.

In February 2023, we at LBA are seeing a massive influx of queries: “I live in Poland, Germany, or Spain, and work remotely for a Ukrainian LLC or as a Sole Proprietor (FOP). Where should I pay taxes?”. Most people hope that Temporary Protection status is an indulgence from tax authorities.

This is a dangerous illusion. European tax systems are not like the Ukrainian Tax Service, where you can “make a deal” or get lost in the database. Algorithms work here. If you have lived in an EU country for more than 183 days, the local tax authority already considers you their “client”. And they do not care that you patriotically pay taxes to the Ukrainian budget.

183 Days of Stay: Myths and Reality of the Center of Vital Interests

Everyone knows the “183-day” rule. Stayed for six months — became a resident. But in practice, this is a trap of simplified perception. European tax authorities look deeper. They use the concept of the “Center of Vital Interests”.

Imagine a situation: you have lived in Berlin for 200 days, but your wife and children remained in Kyiv, you have an apartment there, and your only income is from a Ukrainian business. Have you become a German tax resident?

• The German inspector will say: “You live here, you use our infrastructure — pay up.”
• The Ukrainian tax authority will say: “You have a family and real estate in Ukraine — you are our resident.”

This is where a conflict arises, called Dual Residence. And this is the worst-case scenario because each country pulls the blanket over itself, wanting to tax your global income.

The logic of the European fiscal officer is simple: “The person consumes our benefits, their children go to our schools. Why do taxes go to Ukraine? We have a right to a share.”

Legal Hack #1: The “Tie-Breaker” Test

Double Taxation Avoidance Conventions (which Ukraine has with most EU countries) have a clear hierarchy of criteria, the so-called Tie-breaker rules.

How we use this to protect the client:

1. Housing: Where do you have permanent housing? (If you rent in the EU long-term, this is a minus for the Ukrainian position).
2. Center of Vital Interests: Where is the family, where is the business? (This is our main trump card).
3. Habitual Abode: Where do you actually spend your time?
4. Citizenship: The final argument.

If the first points are debatable, we at LBA prepare an evidentiary base specifically for point #2. We gather evidence that your “economic and social anchor” remained in Kyiv, despite your physical absence.

Pitfalls for IT Sole Proprietors and Remote Workers

The biggest pain point right now is for 3rd group Sole Proprietors (FOP). You are used to paying 5% (or 2% under the preferential wartime rate) and sleeping soundly. Such rates do not exist in Europe. In Poland, the tax can reach 12-32%, in Spain — up to 47% on a progressive scale.

If the Polish tax authority recognizes you as a resident, they will want the difference. Did you pay 2% in Ukraine? Great, pay another 30% to the Polish treasury.

Legal Hack #2: Obtaining a Certificate of Ukrainian Residency

This is a bureaucratic tool, but effective. You can obtain a Certificate confirming the status of a tax resident of Ukraine from the Ukrainian tax authority. The procedure is regulated by the relevant Order of the Ministry of Finance.

This document is your shield in a dispute with a foreign bank or tax authority. It officially states: “This person pays taxes in Ukraine in accordance with the Convention.”

But be careful: Ukrainian tax officials are currently reluctant to issue such certificates to those who left long ago. They also need grounds. We help to correctly form the package of documents so that the State Tax Service has no grounds for refusal.

Information Exchange: CRS as a Sword of Damocles

Many think: “I receive money on Payoneer or Wise, no one will find out.” This is naive. Ukraine joined the Multilateral Competent Authority Agreement on CRS (MCAA CRS) back in August 2022. This means that the launch of the automatic exchange of tax information is a matter of time.

The logic of the Ukrainian fiscal officer: “We will find your foreign accounts later and charge fines retroactively.”

European banks are already asking you for a TIN (Tax Identification Number). If you provide a Ukrainian TIN, information about your turnover is potentially available to Ukrainian authorities. If you opened an account as a local resident, you have “exposed” yourself to the local tax authority.

Asset Structuring (Legal Hack #3)

If you plan to stay in the EU for a long time, do not just “wait it out”. You need to make a strategic decision:

• Either business legalization in the EU (full relocation).
• Or rigid fixation of Ukrainian residency through evidence of the center of vital interests.

Half-measures (“I am here, but taxes are there”) in 2023 no longer work as they did in 2022. The risks of fines exceed the savings on rates.

To protect assets, we recommend that clients conduct a Legal Due Diligence of their own status. We analyze: where you spend time, where your assets are, where children study, and model a tax audit scenario in both jurisdictions.

FAQ: Relevant as of February 2023

 

Does Temporary Protection status exempt me from paying taxes in the EU?

No, it does not exempt you by itself. Some countries (like Ireland or Lithuania) made statements about loyalty, but there is no general EU rule “not to touch Ukrainians” in tax terms. Always analyze local legislation.

If I continue to work for a Ukrainian company, do I have to register with the local tax authority?

It depends on the length of stay. After 183 days, there is a high risk of a declaration obligation. Local authorities may interpret your work from home as creating a “Permanent Establishment” for your company in their country. This sounds absurd, but legally, it is possible.

How to avoid double taxation of salary?

You need to apply the Convention. You pay tax in the country of residency, and in the other country, you credit the amount paid (tax credit). Unfortunately, military levies and social contributions (ESV) often do not fall under the conventions and must be paid separately.

Conclusions

Europe’s year of tolerance is over. Now begins the year of bureaucracy and fiscal control. Do not wait until you receive a “letter of happiness” from a Polish or German tax officer demanding to declare income for 2022.

If you have assets and business in Ukraine, but are physically in Europe, you are in the risk zone. Protect your money in advance.

---