With the onset of August, Ukrainian refugees in Europe froze in anticipation – the notorious 183 days that lawyers warned about are running out. What does this mean?
Rumors have been circulating for a long time that from August Ukrainians will be forced to pay a double tax – at home and in the host country. “Hour X” comes at the end of August, and there is no clear understanding of the development of events yet. Greece and Ukraine, for example, have a law on the absence of double taxation, but this does not apply to other European countries. In addition, in Greece there is a “trap” lasting 183 days. What is it? Everything is very simple: after 183 days of being in Greece (or another European country), a citizen automatically becomes a tax resident of the host country and is required to pay taxes.
From the end of August, citizens of Ukraine will be recognized as tax residents of European countries where they fled from the war. And this means that, continuing to work remotely in Ukrainian companies, people will be forced to pay double tax. And this doesn’t just apply to remote workers.
European fiscals will also see those who receive transfers to bank cards or unjustifiably spend a lot in a European country. That is, Ukrainians are at risk of falling under indirect control of spending – in the near future and without warning.
Experts have been warning about the problem since the beginning of the war. In July, the European Business Association issued a statement on the threat of double taxation of Ukrainians in Europe and called on the authorities to respond immediately. So what? As always – “and things are still there.”
Meanwhile, Ukrainians who have left for European countries are already reporting questions about taxes. For example, businesswoman Anna Musienko from Kyiv, who now lives in Finland, says:
“I’m a FOP (I have digital marketing), everything is online. I’ve been going to the Finnish tax office for three months now. They shrug. They’ve never encountered this. They say 183 days – and you’re automatically a tax resident.”
Preferential 183 days for those who left Ukraine on the first day of the war, February 24, expire at the end of August. And from that day on, the number of potential European taxpayers will increase every day. Vasily Voskoboynik, head of the All-Ukrainian Association for International Employment, explains:
“It is clear that those who got a job there are obliged to pay taxes in Europe. There are no questions about them at all, they pay from the first month of employment. But there are other categories. Firstly, those Ukrainians who continue to work remotely in Ukraine ( and there are hundreds of thousands of them). They already pay taxes and social contributions in Ukraine, but in theory they can be billed by European tax authorities. True, this will not be immediately, but at the beginning of next year: in the first quarter, citizens are required to fill out declarations and report income for the previous year. That is, there is a risk of double taxation: both in Ukraine and in Europe. Secondly, taxes can be charged even to those refugees who do not work in any EU, nor in Ukraine, but regularly receive money transfers to bank cards (for example, from relatives and friends). And worst of all, they can be withdrawn from social assistance or even forced to return the funds already received.
Even more Ukrainians fall into the second category. After all, almost everyone has issued social assistance in Europe, and many are also paid for social housing. At the same time, the fathers of families or other relatives who remained in Ukraine, whenever possible, try to help their refugees and transfer money to cards.
What threatens, after 183 days, working remotely and receiving money from relatives from Ukraine? We are talking about thousands of citizens. They receive salaries on Ukrainian bank cards and pay taxes on them in their homeland. Employers also deduct social contributions from this money, in particular ERUs. But this does not mean that there can be no questions from the European tax authorities to them.
As soon as 183 days of stay in the EU have passed, it will automatically turn on recognition of tax residency. In the case of Ukrainian refugees, this requirement looks a little strange. After all, they do not live in Europe of their own free will, but are fleeing the war. And many simply cannot work in the EU. But European tax legislation was formed long ago. And the problem of Ukrainian refugees, of course, is not taken into account in it. Theoretically, the conflict can be removed if there were bilateral agreements at the intergovernmental level.
In July, the European Business Association appealed to the Ministry of Finance and the government of Ukraine with a call to urgently resolve the ambiguous tax situation with Europe:
“The obligation to pay taxes and contributions to state insurance may arise in Europe both for the employees themselves and for their Ukrainian employers. Ukraine has social security agreements with some EU countries that give exemption from paying social contributions at home if the Ukrainian employer sends an employee “, for example, on a business trip. But in most cases, the temporary stay of Ukrainians in Europe is not issued in the form of a business trip. This means that there is no procedure for exemption from paying social contributions in the host country.”
But there is another problem – double taxation can turn on in the opposite direction. In Ukraine, they may require taxes on income that refugees received abroad, including from social assistance. To prevent this from happening, it is necessary to make changes to both European and Ukrainian tax legislation.
Although so far no tax decisions have been made either from Europe or from Ukraine. Nothing is known even about intergovernmental consultations or negotiations. However, in some European countries, they are already trying to fix the tax status of Ukrainian refugees, without waiting for the expiration of 183 days. Signals, for example, are coming from Poland, where Ukrainians are informed about the need to prepare for filling out income declarations and paying taxes.
However, says Vasily Voskoboynik, in fact, the time “H” for Ukrainians will come not even after 183 days from the moment of their stay in Europe, but at the beginning of next year. And even then you will have to answer for possible violations – failure to provide a declaration and concealment of income. He explains:
“Many people think like this: who and where will find out about my income and salary if I don’t go to any tax office myself? But it’s not a problem for European tax authorities to find out about the transfer of funds to Ukrainian bank cards. Plus, in many EU countries there is a system of indirect control income through expenses. That is, if, for example, you pay for a rented apartment or make expensive purchases with your card, you will be asked where the money comes from and whether taxes were paid on it. If you spend your previous savings, you need to present a certificate from the Ukrainian tax and copies of declarations with confirmation of the origin of funds and taxes paid. If they are not, you will have to pay taxes in a new way. It is clear that there is no total control up to checks from restaurants. Plus, it is not known how accurately verification will work on the multi-million army of Ukrainian refugees. If the topic of illegal receiving social assistance, these payments, at best, can be withdrawn, and at worst, they will require everything to be returned, also af pay”.
Economist Mykhailo Kukhar talks about the “tax Rubicon” for millions of Ukrainian migrants and the 183-day trap:
“During August, an irreversible event will occur in the lives of six million Ukrainian women who, together with their children, as refugees or simply labor migrants in the EU. 183 days of their stay in the EU will end, and for most of the 27 countries that gave them asylum, they will become tax residents.This will happen regardless of whether they received refugee status, a humanitarian visa (temporary asylum), a work or business visa or a residence document.Bank secrecy in the EU for tax authorities has not existed for many years.Even in Switzerland. The origin of the funds will have to be explained. Are these your personal savings? Then provide tax returns for previous years from Ukraine for the entire amount of replenishment. And in some banks you will also be asked for customs declarations for the legal import of cash. What will not be covered by the documents will become the amount your first base for taxation in the EU”.
If you replenish cards in cash, within 180 days, banks inform the tax authorities of their countries about these operations. Arguments about the husband’s/father’s/money will not work – they may be asked for their declarations. And the promise to provide them later will not work: pay, and after providing the documents, a recalculation will be made.
If you spend Ukrainian savings, while receiving European social assistance, you can not only withdraw assistance, but also calculate taxes on the approximate amount of spending, which will be determined by the social inspector.
That is, horror stories may well become a reality for millions of Ukrainian refugees. In Europe, there will be no transitional periods and concessions for them. You have to pay, experts say. The only way out is if the annual income is below the established “threshold” from which taxes begin to be taken. In Germany, for example, it is up to 8357 euros per year, in Poland – 30 thousand zlotys, in Italy – up to 15 thousand euros. Many refugees meet these criteria. And incomes received at home, as the hryvnia depreciates, decrease every day in foreign exchange terms.
The nuances, of course, are different in every European country. And while it is difficult to say what will happen in reality. However, “forewarned is forearmed”, that is, the trap of 183 days is worth thinking about right now. At the moment, lawyers say, internally displaced persons have a high risk of tax residency in another country.
It is necessary to look for new solutions, taking into account military realities. Why this topic is not raised by the authorities of Ukraine and whether they will have time to change something by the beginning of the mass transition of Ukrainian refugees to European tax residency – the question remains open, the newspaper writes. “Country”.