2022-08-10
For many employees, remote working has become the new norm. As a result of the COVID-19 pandemic, working from home has become an option for most employees, with companies catching up and implementing remote work policies.
With the concept of remote work becoming more popular, so has the option to work from anywhere. Now, it is clear that working from anywhere, including working remotely from abroad or as a digital nomad, is here to stay. It is, therefore, important for employers to consider what compliant remote working looks like, to prevent exposing their companies to any risks.
There are various types of remote work. It is essential to define them in order for employers to fully understand the various types of compliance risks they may be exposed to. Overseas remote work is typically defined as any work performed from a location outside of the country or state of the employer’s central workplace where the employee is employed.
The following are variations of the term “remote work,” and some may have slightly different meanings in particular countries or regions:
In some countries, such as Norway, remote working has been banned for all non-residents of Norway, with the exception of EU/EEA citizens. Announced in June 2022 by Norwegian authorities, a residence permit is required when wanting to work remotely from Norway.
It is considered remote work when you work for a Norwegian or foreign employer off-site (e.g. from a hotel, a home or similar). This also applies if you are self-employed in Norway or abroad. Â This is important, as some countries may not allow for remote working.
Therefore, although your employees may request it, an individual assessment of where they intend to work needs to be conducted.
See how to convince your employer to allow you to work remotely.
Remote working raises quite several practical challenges which employers should carefully consider before agreeing to an employee’s request to work overseas. These are often additional challenges to those raised by domestic remote working. They include:
An employer should always take expert local advice on tax, social security, immigration and employment obligations before allowing employees to work remotely.
There are a handful of compliance risks that companies with remote workers need to consider. They can be broken down into three core categories ;
Each of these considerations requires careful review and expert advice is needed in each across any country you have employees working from. The local laws vary from country to country, and it is, therefore, crucial that remote workers fully understand the risks they may expose to by working from a specific location.
Let us break down each consideration in more detail:
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Overseas remote working is permitted in certain countries, and in most cases, employees may work remotely outside of their home jurisdiction provided they meet certain criteria. This may include:
An example of these employment laws can be evaluated by using Ireland as an example. Currently, no employment laws in Ireland regulating remote work or anything similar that can be interpreted to expand to remote work overseas.
Indeed, there is currently no specific employment law in Ireland regulating domestic remote work, nor is there currently a statutory right to request a remote working arrangement in Ireland (although employers should genuinely consider applications to avoid claims of discrimination).
The Irish government is planning to introduce legislation regulating an employee’s right to request remote work and has issued draft legislation. It is unlikely that this will extend to a right to request remote work overseas.
It is, however, for an employment contract to be set out and drafted for the correct jurisdiction. All contracts should be relevant for that entity where most time is spent and where they trigger a tax residency. These contracts should be up-to-date and checked by a local expert.
Employers should know the different rights and obligations governing the employment relationship, including the employee’s rights. For example, contract termination, maternity or paternity leave, annual leave days and many other contractual obligations will vary depending on which country you are hiring in.
If an employee holds immigration permission to work in a specific country, there could be implications for the employee’s immigration status when the employee spends time working overseas. This is because those holding immigration permissions are usually expected to work in said country for at least 183 days ( 6 months) in a full calendar year to be considered employed in that country.
Going back to Ireland as an example, it is required for a sponsored immigrant to work from Ireland for at least 183 days a year to be considered ” employed in Ireland” (this is in line with the requirements of the Revenue Commissioners of Ireland (Revenue) for tax residence. Frequent absences or an extended absence which constitute part of the permit holder’s employment are not considered grounds for revocation of the employment permit.
If an employee works overseas temporarily, the employer should continue deducting income tax under the PAYE system. This matter, however, becomes more complicated when the employee extends their stay or even requests to relocate to this new location indefinitely.
Employers should never forget the standard of 183 days in a country in 12 months; this is generally the tipping point for changing tax residency, often together with employer obligations to operate withholding tax. Contractual changes, entity setups and payroll processes are some of the items that will need to be addressed and solved.
Employers should also consider whether the employee’s stay in the host country (regardless of duration) creates risks of income tax or social security liability in that country or even the risk that the employee has triggered a ”permanent establishment”. This will hold corporation tax consequences for the employer (under the employee’s activities in that host country). To understand the position, it will be necessary to establish the rules in place in the relevant host country.
Suppose the employee does become subject to tax in the country they are working remotely from but are continuously paying tax in their home country. In that case, they remain subject to income tax there and pay tax on their worldwide income in the host country ( where they work remotely from). In some cases, they may obtain credit for some or all of the taxes they pay in the host country.
It is permissible for employees who typically live and are employed by an employer based in another jurisdiction to work in some countries remotely. This will depend on their nationality, how long they intend to work and whether or not those countries have dual taxation agreements.
Continuing with Ireland, it is possible if someone wishes to work remotely from there and it is not their home jurisdiction. They however have to meet the necessary immigration requirements and other approvals in order to do so. The employer may need to comply with any Ireland tax, social security, and employment obligations.
There are specific mandatory employment laws that may apply to employees working in Ireland remotely.
The Disconnect Code introduced by the WRC could extend to overseas remote workers working in Ireland. Its provisions would likely be particularly relevant where there is a time difference from the home country. A failure by an employer to follow the Disconnect Code is not an offence but is admissible in proceedings before the WRC and the Irish courts.
In some cases, European Union nationals are permitted to work from other EU countries for a certain amount of days, without having to apply for a specific visa type. For example, nationals of the EEA, Switzerland and the United Kingdom can work in Ireland without obtaining immigration permission.
All other nationalities need immigration permission if they plan to work in Ireland for more than 14 consecutive calendar days. If an individual is going to work from another country for more than 90 calendar days, immigration permission usually takes the form of an employment permit.
If an overseas employee is working in a country temporarily, their employer should continue to deduct income tax under their local system ( if the country permits remote work of course). Where a stay becomes extended, or even indefinite, matters become more complicated.
Overseas employers should be vigilant of the standard of 183 days in a country in a 12-month period; this is generally the tipping point for tax residency, often coupled with employer obligations to operate withholding tax.
In some countries, such as Norway, remote working for foreign employees is completely banned except for EEA / EU nationals. If an employee intends to work remotely for even one day, they must apply for a business visa or another relevant visa type. Learn more here.
Suppose an employee becomes subject to tax in Ireland but remains tax-resident in their home country. In that case, they remain subject to income tax in their home country on their worldwide income but may be able to obtain credit for some or all the tax they pay in Ireland.
Centuro Global can assist employers with the tax implications of employees working in another jurisdiction and mitigate any risks and costs. Please don’t hesitate to contact us.
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