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Many employees are now requesting to work remotely in locations outside of their home country. Additionally, many employers are seeking talented individuals from across the globe and hiring them to work from home in foreign countries.
GTN can help clarify the tax and social security implications for all remote worker cases and ensure that both the individual and the employer are compliant with global regulations. We can work with you to guarantee compliance and minimise tax and compliance burdens so your employees can concentrate on their work and take advantage of the benefits of a location-independent lifestyle.
For further information or to find out how we can help you, please get in touch with our Client Support team on 0207 100 2126 or complete our contact form.
Key Issues for Remote Workers
One of the biggest issues with remote workers is they are often “discovered” versus planned, without consideration for the compliance requirements, costs and tracking needed. The questions that HR will then need to ask include:
- Which countries do you currently have remote workers in?
- How many days have those workers spent in each overseas country?
- What percentage of working days have remote workers spent in each overseas country?
- Does the home county entity have a branch, subsidiary or parent company in the overseas countries?
- Are there any Covid-19 government policies that may protect the employer from overseas tax and social security and for what periods are these in place?
- Are there any immigration issues and does the remote worker have the right to work in the overseas country without a work permit or visa?
- What is the role of the remote worker and are they creating a taxable presence of Permanent Establishment in the overseas country?
Social Security Compliance
A critical issue often missed is remote workers’ impact on employer social security compliance and costs. For example, allowing a UK employee to work remotely in an EU country may trigger social security locally if the remote worker is habitually resident and spends more than 25% of their EU working time there. The impact of this could be a requirement to register as a foreign employer, establish a payroll, and pay social security in the host country, often at substantially higher rates than in the UK.
In some countries, this is easier said than done. In Spain, for example, obtaining a payroll reference for an overseas employer with no entity there can take a significant amount of time and become very expensive for the UK employer. Additional challenges include the need to obtain a local company bank account in order to remit payments, which can take several months. In countries such as Portugal, it is not possible to backdate social security without establishing a branch, and in Norway, there are strict company registration requirements for any foreign employer before any local payroll applications can even be considered.
An employer needs to decide whether or not they are prepared to undertake the overseas compliance required (and potentially incur any additional cost) or whether they need to limit the amount of time in the overseas country to avoid triggering any local payments and update their policies to reflect this.
At GTN, our tax advisers have specialist expertise in navigating social security compliance challenges for employers worldwide. Our experts can guide you through the complexities of registering as a foreign employer, establishing a payroll, and managing social security obligations in various jurisdictions. With our specialised expertise, we can help you ensure that you meet all your social security obligations while keeping your business running smoothly.
Tax Responsibility
In addition to social security, there are also tax issues to consider.
Where a remote worker spends 183 days or more in an overseas country (assuming a tax treaty is in place with the home location), there are likely to be tax issues in the host country. For some countries, the residence may be triggered well before 183 days, such as in Italy, where this will also depend on whether the remote worker has registered in the local town hall or not. In most cases, it will be the responsibility of the employee to register, file and pay the appropriate taxes in the host country and reclaim any tax in the home country (as far as possible). However, this can vary between countries and may depend on whether the employer has a fixed presence in the overseas country or not.
From a company perspective, it is also essential to consider the role of the remote worker and whether they may be creating a permanent establishment or “taxable presence” in the overseas country. If so, the employer may need to register an overseas branch or subsidiary and could be liable for additional corporation tax and filings. In many cases, this will be unlikely, and the remote worker may be based at home and only provide a support function to the employer. Still, reviewing this in line with the applicable local law will be necessary.
At GTN, our team of global tax specialists is well-equipped with the expertise to help remote workers and their employers navigate the complexities of tax compliance. We will ensure that you adhere to tax regulations and minimise the tax and compliance burdens often associated with this modern working method.
Other Remote Employee Issues
An employer will also need to consider whether any immigration issues need addressing. For example, a UK employer working remotely in the EU post Brexit will now have limitations on the number of days they can spend in the overseas country without a work permit. There may also be employment law issues if the UK contract does not comply with local legislation on sickness, annual leave, insurance, mandatory pension/other benefits, and potential fines for the employer if these are not met.
Remote Worker Tax Solutions
At GTN, we have assisted many employers with reviewing their remote workers in numerous countries in conjunction with our overseas partner firms. We have significant and specialist experience in assessing compliance requirements and associated risk and providing solutions for short-term and long-term arrangements, including technology tools for monitoring, tracking and alerting employers of risks and key dates.
For further information or to find out how we can help you, please get in touch with our Client Support team on 0207 100 2126 or complete our contact form.