Remote working: how not to get caught out

read timeRead time: 3 mins

New legislation is evolving, as the hybrid and remote working trend continues. Here’s what to look out for.

International Social Security

New legislation continues to evolve as the hybrid and remote working trend continues. Most recently there has been the introduction of a new Framework Agreement for international social security. For more information, see our article which was featured in our September edition of TaxTalk.

International working on the rise

We are seeing an increase in international employee activity as companies reinstate their mobility programmes following COVID. It is important to review existing policies and update them for the current international working environment. If international mobility is new to your company, setting up policies is vital to the smooth delivery of the programme.

Hybrid working: plan carefully

We strongly recommend establishing a hybrid working policy to govern the amount of time, and in which locations, an individual can carry out work. This can be domestically or internationally. There are invariably corporate consequences of employees working from a home location in a different country to that of their employer. Some examples are:

  • The unintentional creation of a permanent establishment of the corporate, which leads to corporate filing requirements such as corporate income tax returns and, potentially, paying corporate income tax
  • The requirement to run a payroll in the country where the employee is working, when this is not the country of corporate residence
  • Different tax and social security arrangements
  • The need to conform to different employment laws and directives.

Contractors’ rules differ

Contractors and IR35 rules continue to be a focus for HMRC, and it is important that companies consider the employment status rules in the location where the contractors are physically working. Although there are similarities, each country has its own specific set of rules.

This is also true of contractors coming to work in the UK. Employment status should be considered under UK rules even if the individual can prove they are considered as a contractor in their home country.

If they are deemed to be an employee under UK rules, the company must add the individual to UK payroll and withhold tax and, potentially, national insurance.

The importance of information sharing

More and more information is being shared between country authorities, particularly in the EEA and the EU. This often provokes the tax authorities to send a letter asking about certain sources of income or residence positions.

In the UK we are seeing HMRC connecting sources of information, such as publicly available company accounts and company payrolls, to evaluate the payroll treatment of non-resident directors.

International travel logs are also being used as a source of valuable information to help determine whether tax is being reported correctly.

Countries search for talent

We are seeing an emerging trend in countries aiming to attract talent and investment by making it easier for people to work internationally and benefit from a relaxation of some of the domestic rules.

Spain, for example, recently introduced their ‘nomad visa’ which is intended to draw international talent and remote workers. Applications are open to non-EU nationals who work remotely for non-Spanish companies, and these can be renewed annually for up to five years.

There are a number of criteria to qualify, including:

  • a university degree or three years’ professional experience.
  • a minimum salary – the threshold is currently 200% of Spain’s monthly minimum wage.
  • that any additional income from work in Spain cannot exceed 20% of your total salary.
  • no criminal record in the past five years, either in Spain or in your home country.
  • health insurance.

Portugal has a similar arrangement. But in order to qualify remote workers must be paid at least four times the minimum wage.

If you would like further information or advice in relation to any of the issues raised in this article, please contact Stephen Kenny