Technology has made it easier than ever before for businesses to operate with an international and remote workforce. As many businesses are planning what their “new normal” will be after COVID-19, some employers are considering allowing their employees to work remotely from home on a regular or even permanent basis. For some employers, this remote working may extend to employees living and working in a different country from where their employer is based (e.g. an employer based in the UK, but employee working remotely from Spain).
Both employers and employees can benefit from the advantages of remote working. That said, it does lead to some additional tax considerations for the employer when it involves the employee working in a different country to where they are employed. For the purposes of this article, we will refer to this different country as the ‘overseas country’ and the country where they are employed as the ‘home country’.
There are three main tax areas for employers to consider for employees working significantly outside their home country:
- The Personal tax implications for the employee as an individual including: tax residence, income tax, social security and tax filings;
- The Employer obligations to comply with local tax reporting and withholding for that employee in the overseas country; and
- The Corporate considerations for that business and if that employee’s presence in a different country creates a taxable presence, known as a permanent establishment, for the company in that overseas country.
This article looks at some of the general tax considerations for employers in each of these areas. Unfortunately, there is no one-size-fits-all solution for an international workforce and each employee’s situation can be unique and may need to be looked at on a case-by-case basis as local rules vary from country to country.
Fill out the form below to receive this whitepaper