“I don’t care where to live – I can work from any country,” is often emphasized by Ukrainian entrepreneurs developing business abroad. This statement inspires with its freedom! But is it really that simple? Sometimes, the tax authorities have their own view on this issue, and more than that – both the Ukrainian and the local foreign tax authorities.

When changing your country of residence, you begin to live under the laws of the new country, including paying taxes and filing reports – you become its tax resident under certain conditions. At the same time, you may remain a tax resident of Ukraine, where you also need to report income and pay taxes.

How to determine where to pay taxes if you live in one country and receive income in another, and how not to fall under penalties and avoid double taxation – we seek answers together with Andriy Danchenko, CEO of the legal company Inexis, in this article.

Tax Residency – What Is It About?

Tax residency is about which country you are obligated to pay taxes in.

A tax resident is a person who must declare and pay taxes in the respective country regardless of where they work and where they receive income. Each country has its own rules for determining tax residency, and they are not always related to citizenship.

A tax resident of Ukraine is considered a person who has a center of vital interests (family, business, or work) in Ukraine, stays in Ukraine for more than 183 days a year in total, or is registered as an individual entrepreneur (FOP). In some cases, even the center of vital interests can be the basis for determining a person as a tax resident of Ukraine. Even if you have left, but your family remained in the country, or you have housing here—the Ukrainian tax authority may consider you a tax resident of Ukraine.

It is important after relocation to clarify your status and establish which country’s tax resident you are, because along with tax residency you acquire tax obligations:

• to comply with currency control rules;
  
• to declare received income and property;
  
• to report on your foreign companies—CFC (where applicable);
  
• to pay taxes on income: you are obligated to pay taxes on all your income, regardless of the country in which it was received.
  

To find out where exactly you will pay taxes, check whether you meet the criteria of a tax resident in the country of stay. Let’s consider this issue using the example of four countries.

What Is Important to Know About Determining Tax Residency in Poland, Portugal, Croatia, and the USA

To determine tax residency, the following criteria are usually taken as a basis: place of permanent residence, time spent in the country, and center of vital interests. But there are countries where, in addition to the generally accepted ones, other requirements are added, or existing criteria are supplemented with certain features, limit terms of stay, etc.

Poland — a tax resident is one who resides in the country for more than 183 days a year in total and has close personal and economic ties.

Portugal — a tax resident is one who lives in the country for more than 183 days a year in total or has housing. The main criterion for determining tax residency according to Portuguese legislation is determining the place of permanent residence of an individual.

Croatia — a tax resident is one who has housing there and uses it for at least 183 days a year— even if they periodically leave. Short-term breaks in residence lasting no longer than one year do not matter for determining the permanent place of residence. Thus, the main criterion for determining tax residency in Croatia is also determining the place of permanent residence of a person.

USA: 183 days over 3 years – already a question

In the USA, even a foreigner can become a tax resident if they have been physically present there for more than 183 days over the last three years (according to a special calculation formula—the substantial presence test):

• 31 days during the current calendar year;
  
• 183 days over a three-year period, which includes the current calendar year and the two calendar years immediately preceding the count:
  
• all days during the current calendar year;
  
• one-third of the days of the previous year;
  
• one-sixth of the days two years before the current.

Different countries define different criteria for tax residency—it is not always 183 days. Familiarize yourself with local tax legislation or agreements on the avoidance of double taxation. It is a mistake to assume that you automatically lost Ukrainian tax residency due to departure and to ignore the criteria of tax residency in the new country of stay.

If you meet the criteria of tax residency in both Ukraine and another country, or want to exit Ukrainian tax residency and/or have income from business abroad and are not sure how to declare it correctly—it is worth consulting a lawyer.

Dual Residency: When Is It Possible

Situations often arise when several countries simultaneously consider a person their tax resident. One country considers you a tax resident if you work and reside on its territory for more than 183 days a year in total, and another— if your family lives there. If you have close economic and personal ties with several countries, you may be considered a tax resident in each of them. Let’s recall the criteria for determining tax residency accepted in most countries: how many days a year you stay in the country; where your center of vital interests is located; your place of permanent residence; citizenship.

The consequence of dual tax residency is paying taxes on the same income in both countries, or double taxation. To prevent this, international agreements on the avoidance of double taxation are applied, which prevail over national legislation. If the countries that consider you a tax resident have signed an agreement on the avoidance of double taxation, then this agreement determines which country has priority in the case of dual tax residency.

Most agreements are based on the OECD Model Convention, where to determine tax residency, a tie-breaker test is used according to the following criteria:

• availability of permanent housing;
  
• availability of close and interpersonal ties;
  
• country of permanent residence, i.e., duration of stay in the jurisdiction;
  
• citizenship.
  

If this test does not reveal unambiguous residency, then the issue is resolved by mutual agreement between the countries.

Therefore, if you are moving to another country, opening a business there, planning to live there from time to time, etc., the issue of determining tax residency is key to avoiding misunderstandings with tax authorities. To correctly determine where exactly you are obligated to pay taxes if you live in one country and receive income in another, it is necessary to thoroughly analyze the legislation of both states.

Determining tax residency is the initial step in the process of implementing a person’s personal long-term plans: in which country and how long they will reside, where they will conduct business, where the family lives, whether there are sources of income in other countries, etc.

“I opened a company in Estonia because an acquaintance did so,”—sometimes this works, but not always. It turns out that the acquaintance’s plans differ from yours, so such a company has to be closed and solutions sought elsewhere. If you are building a long-term strategy for life and business abroad, consult an international lawyer—they know more deeply than a friend or chat GPT (as of 2025, definitely)