Damage Taken As (Shifting)

At this stage, the game checks for Damage Taken As Path of Exile 2 Currency modifiers (aka "Damage Shifting"):
E.g., "40% of Physical Damage Taken As Fire"
Happens before mitigation
Removes the original damage type-so Penetration, for instance, no longer applies

Important: Damage can only be shifted once.

Mitigation

Mitigation is where most defenses kick in:

Damage Immunities

Chaos Inoculation, for example, negates all Chaos Damage.

Damage Avoidance (Type-specific)

E.g., "Chance to avoid Elemental Damage from Hits"
Still counts as a Hit, but the damage is negated.

Armor (Physical Mitigation)

Applies to Physical Hits only
Calculates based on Hit size
Additional Physical Damage Reduction stacks with Armor
Armor does not reduce Damage over time, except when explicitly stated

Non-Physical Mitigation

Resistances (Fire, Cold, Lightning, Chaos)
Apply to elemental types
Cannot be penetrated below 0%, though curses and exposure can drop them into Path of Exile 2 Currency for sale negatives
Resistances and Damage Reduction are separate layers, both capped at 90%