Do you have to pay to exit tax residency?

21.04.2025

• Poland 
• United Kingdom
• Contact our lawyer for more details

In the practice of tax lawyers, the question is often asked: is it possible to change the country of tax residence, how often can it be done and what consequences can be expected?

Some countries provide for a procedure when an individual can increase the tax base and charge additional tax when changing (returning to tax residency). In this article, we will call it conditionally the "tax on leaving tax residency".

The purpose of such a "tax" is to prevent the flight of capital and ensure the taxation of already accumulated income until the termination of residency. 

In this article, the lawyers of REVERA's Private Clients practice have considered the conditions for renouncing the residency of Poland and the United Kingdom of Great Britain and Northern Ireland (hereinafter referred to as the United Kingdom). 

Poland 

The basis for taxation is the change of tax residence of the taxpayer, who is obliged to pay tax in Poland on all his income, as a result of which Poland loses the right to tax income from the sale of an asset owned by the taxpayer.

Taxation is carried out if all the following conditions are met:

1. sale outside Poland of an asset with a market value of more than PLN 4,000,000:
   • aggregate rights and obligations in a partnership that is not a legal entity;
   • shares, shares and other securities, derivative financial instruments and shares in investment funds.
2. the taxpayer has resided in Poland for at least 5 years during the last 10 years before changing tax residency.

Tax rate

• 19% of the tax base – if the tax value of the asset is established;
• 3% of the tax base – if the tax value of the asset is not established. 

 Income from unrealized profits is subject to tax, which is equal to the difference between the market value of the asset at the time of its transfer or change of tax residency and its tax value at the time of the change of tax residence.

The tax value of an asset is the value not previously classified as income costs, which the taxpayer would have taken as an expense when selling it.

An individual is obliged to submit to the tax authority a PIT-NZ declaration on the amount of income from unrealized profits by the 7th day of the month following the month in which the tax liability arose. 

The tax is also paid by the 7th day of the month following the month in which the assets are transferred.

Consequences of failure to submit a tax return and non-payment of tax: 

The tax authorities may initiate an audit if it is established that there has been a change in tax residency and non-compliance with tax obligations. Consequently, this will entail additional accrual of tax payments, fines, penalties. Depending on the amount of unpaid tax, an individual may be held criminally liable. 

United Kingdom

In the United Kingdom, there is a temporary non-residence rule, according to which the income of taxpayers who temporarily leave the country but return within a certain period is subject to taxation. 

Individuals who lose their tax residency status are payers of capital gains tax if the following conditions are met in aggregate: 

• have been tax resident in the United Kingdom for at least 4 of the 7 tax years immediately preceding the year of departure;
• returned to the United Kingdom within 5 years of departure.

Income from the sale of assets acquired before the loss of tax resident status is subject to taxation. 

Examples of assets subject to taxation for temporary non-residents:

• real estate in the United Kingdom;
• shares of companies registered in the United Kingdom; 
• rental income from real estate registered in the United Kingdom;
• capital gains from the sale of a business in the United Kingdom.

For non-real estate income, the tax rate is 10% for the basic taxpayer and 20% for higher incomes. For real estate, the capital gains tax rate can be 28%.

Upon returning to the United Kingdom, an individual is required to submit a declaration in the form: 

• Self-Assessment Tax Return (Form SA100) – the main return.
• Capital Gains Tax Summary (Form SA108) – if there is capital gains (e.g. sale of shares or real estate).
• There may be additional forms (depending on the source of income).

Consequences of failure to submit a tax return and non-payment of tax: the risk of a tax audit by the tax authority, additional accrual of tax payments, fines, penalties.

Author: Yaroslavna Zadesenskaya

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