The typical situation: self-employed in Ukraine, apartment in the EU

A self-employed person is registered in Ukraine before the move. Clients are mostly Ukrainian, payments go to a Ukrainian account, accounting and unified tax are paid as before. But the person running this self-employed business now works daily from a rented apartment in another EU country — for months, and sometimes years.

This is where a question arises that is rarely asked at the start: which country has the right to tax this income at all? Intuitively, it seems that since the self-employed person is registered in Ukraine and pays tax there, the question is closed. This is not true: a person's tax residency and the place where the business is registered are two different things, and the country of residence may consider that part or all of the income falls under its jurisdiction, regardless of where the self-employed status was registered.

This does not mean that double taxation cannot be avoided. Between Ukraine and most EU countries, bilateral conventions on the avoidance of double taxation are in force — that is exactly what they exist for. But a convention does not work automatically: it only works when the situation has been correctly qualified from the start, documents have been collected, and filed within the deadline. A mistake at any step leaves a person face to face with two tax authorities simultaneously.

How a convention divides the right to tax profit

Bilateral conventions on the avoidance of double taxation that Ukraine has concluded with EU countries are mostly structured according to logic close to the OECD model convention. One of the key provisions is the article on profit from business activities. The general principle is simple: profit is taxed in the state of which the entrepreneur is a resident, unless they carry out business in another state through a permanent establishment.

That is, the starting point is taxation where the self-employed status is registered and where the entrepreneur is a tax resident. But the rule only works as long as no exception arises. And it is not a rare case for "business with branches" — it is the situation of practically every self-employed person who lives and actually works from another country for longer than a certain time.

There is another layer that precedes the article on profit: the convention determines who is considered a resident of which state if both Ukraine and the country of residence claim this status simultaneously. The presence of permanent accommodation, centre of vital interests, habitual place of residence and citizenship are considered in sequence. Living in a rented apartment for most of the year is itself a strong argument in favour of residency in the country of residence — and this should be clarified before discussing the profit of the self-employed.

Support for a self-employed person living abroad is described in more detail on the page for business support for Ukrainians — about combining Ukrainian accounting with the requirements of the country of residence.

Permanent establishment: why an apartment is not a minor detail

This is probably the most widely misunderstood point in the entire topic. The term "permanent establishment" sounds as if it is about an office or hired employees abroad. In fact, conventions define it much more broadly: any permanent place of business through which an enterprise carries on business. A place from which a person systematically, for months on end, performs work — consulting clients, writing code, managing projects — fits this definition, even if it is an ordinary rented apartment with no sign on the door.

The logic of the country of residence is simple: if real economic activity occurs on its territory, it has the right to tax that part of the profit that relates to this activity — regardless of where the self-employed status is registered. Registration in Ukraine determines where the entrepreneur reports under Ukrainian law. It does not automatically determine which country has the right to tax under the convention.

A nuance that gives false sense of security: not every job with a laptop abroad creates a permanent establishment. The question is individual and depends on the length and regularity of stay, the nature of the activity, whether the apartment has become essentially a permanent workplace. It is impossible to give a definitive answer in advance — a specific situation needs to be analyzed, not based on the guideline "my acquaintances do the same and everything is fine".

Lawyer's note. If you work from abroad for longer than a few months in a row, do not rely on the assumption "I am not renting an office, so there is no permanent establishment". Permanent establishment is a question of facts, not the name of the premises, and it is most often the basis for reassessments when the tax authority reviews the movement of funds in the account.

If a permanent establishment has arisen, this is not an automatic disaster — it means that the part of the profit relating to activities in the country of residence needs to be reported there as well, coordinated with the credit mechanism discussed below.

Does the convention apply to the unified tax

This is the second issue on which self-employed owners widely make mistakes, and there is no straightforward "yes" or "no" answer here. Most Ukrainian self-employed pay not the classical profit tax, but unified tax — a simplified system with its own logic for calculating the tax base. Conventions, however, are mostly written with an orientation towards standard income and profit taxes listed in the relevant article of each agreement.

Whether the wording of a specific convention covers the unified tax itself depends on the text of the agreement with the specific country and how the tax authorities of both sides interpret this in practice. In some cases the position is established, in others — a subject of discussion or requires separate confirmation. There is no universal answer of "always applies" or "never applies" — the decision is made separately for each pair of countries, so generalizations from forums or acquaintances from another country are particularly unreliable here.

Practical consequence: before building a strategy on the assumption that "the convention will protect anyway", it is worth checking specifically for the country of residence whether there are grounds to apply the convention mechanisms to the unified tax, or whether the situation needs to be considered differently.

Tax credit for amounts paid in Ukraine

When the right to tax income is recognized for the country of residence, this does not yet mean that tax will have to be paid twice in full. Most conventions provide for a credit method: tax actually paid in Ukraine on certain income is credited against the obligation in the country of residence for the same income.

In practice, this does not work automatically. It is necessary to document the amount of tax actually paid in Ukraine, correctly determine which income the credit applies to, and apply it according to the rules of the country where the tax return is filed — and the rules differ: in Spain, local tax systems like gestoria-managed business accounting follow different credit rules than other countries; in some places the credit is limited to the amount that the country itself would charge on this income, elsewhere other restrictions apply by time or type of income.

A point often overlooked: the credit relates to tax actually paid, not income declared. If the amount of tax paid in Ukraine is small compared to what the country of residence would charge on that income, the difference will still have to be paid there. Credit eliminates double payment on one amount — it does not guarantee the same overall tax burden.

Certificates and automatic exchange of information

To apply the convention and credit, each of the two tax authorities requires its own set of confirmations — and the order in which they are obtained matters.

Certificates required by each party

The first step is usually a certificate of tax resident status — it establishes which country the person is recognized as a resident in for the purposes of the convention. Next, documents are needed on the amount actually paid in Ukraine as tax for the period, and, if necessary, documents on the nature of the self-employed activity — especially if it becomes necessary to substantiate the permanent establishment. The order is: first residency and status, then amounts of taxes paid, and only then a declaration with a credit. The reverse order means collecting the same documents again.

Automatic exchange of information (CRS)

Tax authorities have long not relied solely on voluntary reporting. Within the framework of CRS (Common Reporting Standard), banks in participating countries automatically transmit to the tax authorities of the account holder's country of residence information about balances and movements on accounts opened in other participating countries. Income to a Ukrainian self-employed account may become known to the tax authority of the country of residence before the person has declared anything themselves — this is the reason not to build a plan on the assumption "they will not find out there". A discrepancy between the movement of funds and what has been declared will very likely sooner or later become a matter of inquiry.

Deadlines within the tax year and the cost of error

Why December is already too late

Most EU countries have a tax year that coincides with the calendar year, and decisions that affect the classification of resident status, the fact of permanent establishment or the right to credit are tied to events during this year — the number of days of stay, the date of the start of systematic work from an apartment. If you start to sort out the question in December, most of the facts that determine the classification have already occurred and cannot be changed retrospectively — you can only correctly document what happened.

That is why the question should be asked not when the first letter from the tax authority or bank has arrived, but at the beginning — when the person is just planning to move or already understands that they will stay there longer. Decisions made in the first few months — where work is actually based, when to request a certificate of residency — determine how difficult it will be to restore the correct picture later.

Consequences of error: reassessments, penalties, questions about the source of funds

If the tax authority of the country of residence establishes that part of the income should have been taxed there, and this was not done, the usual consequence is a reassessment of tax for past periods together with penalties, and in some cases additional sanctions. The amount depends on the specific country, the amount of income and the duration of the discrepancy period — so avoiding an error at the start is always cheaper than fixing it after an audit.

There is a consequence that people rarely think about in advance: undeclared income becomes a problem precisely when money from it is used for something noticeable — purchase of housing, application for a residence permit, obtaining a mortgage. In such procedures, questions are often directly asked about the source of funds, and a discrepancy between declared income and the amount in the account becomes a question not only to accounting, but also to the status of the person in the country.

Lawyer's note. It is never worth considering underreporting or concealing income as a way to "solve" the double taxation issue. This is not a solution to the problem, but a source of a much more serious risk — from reassessments with penalties to questions when applying for status or purchasing housing. The right path is correct classification of the situation and timely application of the convention, not silence.

Lawyer and accountant on both sides of the border

The issue of double taxation of a self-employed person is rarely resolved by a single specialist. A Ukrainian accountant knows how to reflect transactions under Ukrainian law and document the payment of unified tax. An accountant in Slovakia, for example, needs to know the local business tax contributions and requirements alongside credit rules and the practice of the local tax authority regarding the convention. But between these two pictures there is always a gap that neither accountant alone sees completely: whether a permanent establishment has arisen, how to classify the residency status. This is already a legal question, not just an accounting one.

At Dorosh & Partners it works like this: the client describes their situation to a lawyer in plain language — where they actually live, where they work from, how long, with what clients. The lawyer translates this into legal classification, works with the accountant in Ukraine and with the accountant in the country of residence so that the position stated in one country does not contradict what was filed in the other. It is precisely the discrepancy between what was stated in Ukraine and what was shown abroad that most often attracts the attention of the tax authority.

An overview of legal and accounting support for Ukrainians with business is collected on the page for Business in Ukraine, and the entire range of services for Ukrainians — on the page for Ukraine. If the situation already requires analysis — with real dates of move, clients and income, not hypothetical ones — it makes more sense to start with a consultation than with assumptions.

Checklist before the first overseas tax return filing

Questions that self-employed owners ask most often

If a self-employed person is registered in Ukraine and clients are Ukrainian, does it matter where I live at all?

Yes, it does. The right to tax income under the convention is determined not only by where the business is registered or where clients are, but also by where a person is a tax resident and where they actually work from. Permanent residence and systematic work from another country can create grounds for taxation there, even if clients and registration remain Ukrainian.

How many days of stay abroad are "safe" to avoid permanent establishment arising?

There is no universal number of days that guarantees protection against recognition of permanent establishment — what is counted is not only days, but also the regularity and nature of activity. The situation needs to be assessed individually, not based on the guideline "less than half a year — that's fine".

Can I just continue to pay unified tax in Ukraine and declare nothing in the country of residence?

Formally, a self-employed person can report in Ukraine as before, but this does not free them from obligations under the law of the country of residence if the right to tax part of the income is recognized there. Ignoring does not eliminate the risk — it only delays the moment when the discrepancy is discovered, most often through automatic exchange of banking information.

Does the convention work the same way with all EU countries?

No. Each convention is a separate bilateral agreement with its own wording, and how it interprets permanent establishment, credit or coverage of the unified tax needs to be checked specifically for the specific country, not transferred from experience in another state.

When should I seek legal support — before the move or after questions have arisen?

The best time is before the facts have already occurred and cannot be changed: before the move or in the first months of residence abroad. But support makes sense at any stage, including a situation where a letter from the tax authority has already been received — the sooner a lawyer is involved, the wider the range of options remains available.

Double taxation of a self-employed person living in the EU is not a matter of one rule, but a sequence: correctly determined residency, honest assessment of permanent establishment, checking whether the convention covers the unified tax, and timely collection of certificates for credit. A missed step at the beginning almost always costs more than timely consultation — especially when documents are already needed for something more important than a tax return.

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