New Ways of Working

Explore and keep track of key legal and compliance considerations for multinational employers as new ways of working become increasingly embedded as the pandemic begins to recede. Learn more about the response taken in specific countries or build your own report to compare approaches taken around the world.

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05. What potential issues and risks arise for employers in the context of cross-border remote-working arrangements?

05. What potential issues and risks arise for employers in the context of cross-border remote-working arrangements?

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Argentina

  • at MBB Balado Bevilacqua
  • at MBB Balado Bevilacqua
  • at MBB Balado Bevilacqua

The potential issue that employers may have regarding cross-border remote-working arrangements is that Argentine labour law is mandatory and it establishes minimum rights that may not be waived, even by agreement of the parties. Therefore, if a multinational company wants to impose its home office framework in all jurisdictions where it has offices, it will face considerable legal exposure if it does not follow Argentine remote work regulations.

In this regard, for cross-border provision of services, the regulation that applies will be the one in force in the jurisdiction where the services are being rendered or the applicable law where the employer is based, depending on which is more favourable to employees.

Also, when hiring foreign nationals who do not reside in Argentina, the home office framework establishes that prior authorisation must be requested from the Ministry of Labour (ML). Moreover, considering the particular situation of each activity, applicable CBAs must establish a maximum limit for these types of hires (this last aspect is pending regulation).

Last updated on 21/09/2021

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Australia

  • at People + Culture Strategies

For many international employers and their workforces, the experience of remote working during the covid-19 pandemic has been positive and will likely become part of the “new normal” in the employment landscape. However, employers are now presented with the challenge of reconciling this with their obligations under laws that regulate employment and the practicalities of managing a remote workforce, and tax issues.

Working hours is a key regulatory issue for employers as remote working can make it difficult for employers to monitor and control when an employee is working, when and if they are taking breaks, and if they are working overtime. In respect of monitoring employee performance and conduct, many employers have legitimate concerns about employees working remotely being less productive and not taking their employment obligations and responsibilities seriously.

We are aware of employers introducing software for employees to record their working time and adopting measures to ensure they have some level of “visibility” over employees who work remotely. For international employers, it is difficult to do this in real-time, although there is now technology available to bridge time differences including software that automatically monitors employee activity, including by periodically taking screenshots of employees’ work computers, tracking keystrokes, mouse movements and logging websites that employees have visited. We have seen several “hours of work clauses” and “availability” provisions in employment agreements that introduce a requirement for an employee to be available and responsive to the employer at times that are outside of the employee’s normal daylight working hours in their country of residence.

However, most Australian-based organisations with international employers are not rolling out monitoring systems with universal effect as regulatory frameworks can differ significantly between jurisdictions and a “one size fits all” approach could be problematic as a monitoring system that is permissible in one country may infringe privacy protections in another (for example, whereas Australia and New Zealand have a more relaxed “principles-based” framework to promote and protect the privacy of individuals, other countries’ constitutions explicitly protect workers’ privacy as an inviolable right).

Last updated on 21/09/2021

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Austria

  • at Littler
  • at Littler
  • at Littler

Labour Law:

The essential issue regarding labour law is the question of which labour law should apply. Often, employers will want to apply a uniform labour law to all employees. However, this becomes impossible if in cross-border remote-working arrangements the labour law of the state of residence provides certain overriding mandatory rules and minimum standards (eg, in wage dumping and working time). Additionally, it may prove difficult for employers to keep track of the ever-changing legal landscape in various jurisdictions. Allowing for cross-border remote-working arrangements will oftentimes lead either to higher staffing requirements in the in-house legal department or increased recourse to local external partners. Both are associated with costs. There is also the question of work permits, depending on the applicable local law. 

Social Security Law:
 

While temporary covid-related work at home in other EU or EEA countries (and Switzerland) should not lead to any change in social security responsibilities, the corresponding provision in Austria was limited until 31 December 2021 and restricted to pandemic-related work at home. According to the information provided by the Austrian social insurance institution, covid-related work at home should not have any social insurance and tax law implications. Apart from an exceptional situation such as this, for workers who are working in more than one member state, working or earning more than 25% of the working time or remuneration in the country of residence leads to a change of the applicable social security regulations there. This is naturally associated with (sometimes) considerable administrative effort. The corresponding declarations must be made, and the payment of contributions must be ensured.

From the employer’s point of view, especially regarding accident insurance protection, it is important to note that the exact location of the remote workplace must be specified individually.

While insurance coverage in the home office is expressly clarified, the details concerning remote work in general are still controversial. These uncertainties are exacerbated in cross-border situations.

Tax Law:

If remote work is carried out across borders, this can have (potentially negative) effects on taxation. First, it must be considered that a domestic employer may employ workers who carry out their work both domestically and, for example, in a home office abroad. This may result in the establishment of a foreign permanent establishment through that home office. This would lead to a limited tax liability for the domestic employer abroad. A limited tax liability may also be accompanied by the obligation to deduct income tax via PAYE (pay as you earn). Since national legislation must be considered, this can lead to a considerable administrative effort.

In general, employees should not stay abroad for more than 183 days per year as otherwise they will be taxed in the country in which they are active. Finally, it must be considered whether there are taxation agreements between the countries and how these are structured.

Last updated on 31/01/2022

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Belgium

  • at Van Olmen & Wynant

There are many issues at stake, as the foreign states could apply their public order labour law provisions, require a work visa, apply their social security scheme (and contributions) and their income tax obligations. This usually depends on whether these states are part of the EU or EEA (or if they have bilateral treaties with Belgium) and the duration of the cross-border work; if it lasts long enough to lose its temporary nature, the full scope of the foreign legal system may become applicable.

For foreign nationals coming to Belgium, Belgium will apply almost all of its labour law provisions immediately to the remote worker, except for rules concerning the conclusion and termination of employment contracts, including non-compete clauses laid down in the Employment Contracts Act. After 12 months, rules concerning the general obligations of employers and employees, the liability of employers for the actions of their employees and the suspension of employment contracts will also apply.

Last updated on 21/09/2021

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Brazil

  • at Pinheiro Neto
  • at Pinheiro Neto Advogados

Although cross-border remote-working arrangements have become increasingly popular – especially during the pandemic –, up to now there is no specific rule in the Brazilian migratory or labour legislation governing that scenario. From a labour perspective, there is no clarity as to whether employees transferred to work abroad on a remote-working model would still be covered by Brazilian legislation and thus entitled to Brazilian rights and benefits, or by that of the country where they have been transferred to. From a tax and social security perspectives, it is necessary to identify if the workers are deemed as tax residents in Brazil in order to determine the correct taxation on compensation amounts paid in Brazil / by a Brazilian source or paid abroad. There are also potential mechanisms to avoid double taxation on income in International Treaties. Furthermore, there are international agreements specifically for social security purposes, which, under certain situations, prevent Brazilian companies from having to collect social security charges.

Last updated on 21/09/2021

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France

  • at Proskauer Rose
  • at Proskauer Rose
  • at Proskauer Rose

Cross-border remote working can accentuate some of the problems caused by teleworking or create new ones.

Among the existing problems, the loss of social ties is accentuated if the teleworker decides to work from another country. Indeed, the employee abroad will never physically see his colleagues, which will create a distance between the employee working from abroad and other employees.

Similarly, employers must ensure the protection of the health and safety of workers (article L. 4121-1 labour code). This is a difficult obligation to meet in teleworking, especially because employers do not have access to remote employees’ workplaces. It is even more difficult if the employee works from another country because the sanitary, electrical and other standards are different and potentially less protective than French rules.

As for social security law, in principle, the employee depends on the social security system of the country where they work. The employee can only continue to benefit from the French social security system if they are in a secondment situation. Moreover, this is only a temporary solution because the secondment implies a temporary mission. The employer will therefore have to register the employee with the social security system of the country where they are working, which will cause problems in terms of social contributions.

Another question that may arise is whether an employer should accept a work stoppage prescribed by a foreign doctor.

Finally, another problem that may arise is the employee's right to disconnect. Indeed, the employer and the employee must agree on a time slot during which the employee can not be contacted to respect his private life as much as possible.[4] It can be difficult to establish a time slot that suits both the employee and the employer in case of major time zone discrepancies.


[4] National agreement of November 26, 2020

Last updated on 21/09/2021

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Germany

  • at CMS Hasche Sigle

There can be potential issues and risks concerning the taxation of salaries, social security coverage (eg, Regulation (EC) No 883/2004) and the applicable labour law for employers in the context of cross-border remote-working agreements (eg, article 8 Rome I Regulation).

For employees who live in a different country than where the employer is based, special regulations in double-tax treaties for cross-border commuters might normally apply.

However, due to the pandemic many cross-border commuters stay at home and work remotely. As such, they no longer meet the conditions to be considered cross-border commuters and the double-tax treaties cease to apply. To avoid a change in the previous tax treatment because of temporary remote working, bilateral agreements have been reached, for example with Austria, Switzerland, France, Belgium, and Luxembourg. Pandemic-related home working days are deemed to be performed in the country of employment. The agreements are extended until June 30, 2022.

Last updated on 14/04/2022

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Greece

  • at Kyriakides Georgopoulos Law Firm
  • at Kyriakides Georgopoulos Law Firm
  • at Kyriakides Georgopoulos Law Firm

From a Greek employment law perspective, if employees are permanently working remotely in Greece, the application of certain provisions of Greek labour legislation that constitute mandatory law (ie, the payment of severance in case of termination, overtime payment, annual leave entitlements etc) may apply, if more favourable for the employee.

From a Greek social security law perspective, in general, employees will be insured and therefore pay social security contributions to the Social Security Fund of the country where they provide their work. However, there is no specific legal provision regarding payment of social security contributions for remote working (ie, in cases where an employee is working physically from a country where the company has no legal entity). According to the guidelines of the Ministry of Labour, in case of such remote-working arrangements, an employee would be insured and therefore pay social security contributions to the Social Security Fund of the country where the company has its legal entity and from which the employee is paid through its payroll system.

From a Greek tax law perspective, as well as under the double-tax treaties signed by Greece, if an individual is in a dependent employment relationship with a non-Greek employer and provides his or her services remotely from Greece permanently (ie, for more than six months) while using as a fixed place his or her home, there might be a permanent establishment (PE) risk in Greece for the non-Greek employer, to the extent the services rendered from Greece constitute the core business of the foreign company and are not limited to auxiliary or preparatory activities.

Also, if a non-Greek company signs an independent services agreement with an individual (contractor) and the contractor is authorised to conclude binding contracts on behalf of the non-Greek employer in Greece with Greek clients, a dependent agent PE risk for the non-Greek company may also arise.

Furthermore, irrespective of the  PE risk, based on domestic law if an individual provides employment services from Greece (to a Greek or non-Greek employer), his or her employment income is considered Greek sourced. Thus, it should trigger local tax reporting and tax compliance liabilities for the non-Greek employer, who should be registered with the Greek tax authorities to withhold  Greek personal income tax and special solidarity contribution (if any) corresponding to the employment income of the employee every month. It is noted that such a tax registration, reporting, or compliance liability does not apply for the non-Greek company in case of an independent services agreement with a contractor.

Lastly, from the individual’s point of view, if he or she works from Greece for more than 183 days per year, it might create a tax residence issue under the domestic tax rules, in which case he or she should be subject to regular Greek taxation and should be taxed in Greece for his or her worldwide income according to the relevant domestic income tax rules.

Last updated on 21/09/2021

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Hong Kong

  • at Lewis Silkin
  • at Lewis Silkin
  • at Lewis Silkin

Salaries tax

In Hong Kong, employees are responsible for paying tax on their employment income; this is called salaries tax. Whether and how much salaries tax is payable by employees temporarily working abroad will depend on whether their employment is considered “Hong Kong employment” or “non-Hong Kong employment”. The Inland Revenue Department will consider various factors when determining if employment is Hong Kong or non-Hong Kong, such as where the employment contract is negotiated, concluded and enforceable; where the central management and control of the employer is; and where the employee’s remuneration is paid.

Employees with Hong Kong employment will generally remain subject to salaries tax in Hong Kong if they temporarily work outside of Hong Kong for part of the tax year (beginning of April to end of March the following year). If the employee works outside of Hong Kong for the full tax year, then they will not be subject to salaries tax in Hong Kong. Employees with non-Hong Kong employment who work outside of Hong Kong temporarily will generally not be subject to salaries tax in Hong Kong.

Social security

Hong Kong does not have a comprehensive social security system similar to other countries, but most employers and employees in the city are required to make contributions to a mandatory provident fund (MPF), which is a regulated privately managed retirement fund.

Where mandatory contributions are being made to the MPF, the fact that an employee is working temporarily abroad will not affect the contributing obligations of the employer or the employee.

Employment law

Employers would need to be cautious as to whether local employment laws (in the overseas country) would apply to the employee when working remotely from that country. These may include minimum wage restrictions, paid annual holidays, maternity or paternity entitlements and rights on termination.

Employers in Hong Kong also have a statutory and common law duty in respect of the health and safety of their employees. This includes ensuring that the employee has a safe workplace. If an employee suffers a personal injury by accident that “arises out of and in the course of employment”, the employer may be liable to compensate the employee even if the injury was sustained while the employee was working from abroad.

Last updated on 11/10/2021

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India

  • at Nishith Desai
  • at Nishith Desai

Some high-level considerations to be kept in mind by employers in a cross-border remote-working arrangement can be summarised as follows:

Labour law considerations

While a permanent remote-working model from India is not legally tenable for a foreign employer, it must be borne in mind that India has labour laws at national and state levels. Accordingly, and depending on the employee's primary place of work in a remote working arrangement, the employer must consider the state labour laws and compliance.

Please also note that in cases where an employee is working remotely from India, the employee may be able to claim protection under Indian health and safety laws. We are yet to come across such cases in India involving cross-border employees.

Where an employee employed in India is moving to a foreign country to work remotely, the Indian employer will need to comply with applicable Indian labour laws concerning benefits, consultation, flexible work issues, worker health and safety obligations and taxes.

The Employees’ Compensation Act, 1923, which applies to commercial establishments in some jurisdictions and certain categories of employees otherwise, and provides for compensation payable by employers to employees related to any “injury caused to an employee by accident arising out of and in the course of his employment”, has extraterritorial application outside India for employees of Indian companies travelling or working overseas for their employer.

Social Security

Where an employee in India moves out of India to work remotely, subject to the terms of any social security agreement between the concerned foreign country and India, such employee may be treated as an “international worker” under the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952 (EPF Act). Similarly, where foreign nationals are employed with an Indian entity of a foreign employer, subject to any social security agreement between the concerned foreign country and India, such foreign national may be treated as an “international worker” under the EPF Act and be subject to compliance requirements thereto.

Tax considerations

The presence of an employee in India employed with a foreign entity may lead to tax or permanent establishment issues for the concerned foreign entity in India, depending upon the nature of activities carried on by such employee in India. The provisions of any double taxation avoidance agreement between India and the concerned foreign country will also need to be considered in this respect. Similarly, for employees in India moving outside India to work remotely, the employee’s tax residency status will depend on the applicable tax laws in India, the concerned foreign country and other applicable considerations such as foreign exchange control regulations based on which taxes will need to be withheld or paid. Individuals may also be subject to taxation depending on their length of stay in any country.

Last updated on 18/11/2021

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Ireland

Ireland

  • at Littler

Employees working remotely outside Ireland may create expensive tax liabilities for themselves and their employers. It’s important to be aware of these before any long-term decisions are made.

The foreign country in which the employee is working may seek to tax some or all of that employee’s income from the employment. This is based either on the fact that a substantial number of days have been worked in that other country or in some cases on the basis that the employee has become a tax resident there under local law. Further, social security liability may accrue (which is generally assessed separately from income tax).

The main concerns for employers will be whether there is an obligation to operate local payroll withholding and whether local social security rules add significantly to the wage bill. The rules vary widely between countries and, unfortunately, there is no “one size fits all” approach to managing this issue across multiple jurisdictions.

Employers will also need to consider two corporate tax risks. First, an employee working abroad may in some circumstances constitute a permanent establishment of the employer in that other country, exposing part of its profit to corporate taxes there. Second, if an Irish company has directors based abroad, there is a risk of the company also acquiring corporate residence in another country.

Last updated on 21/09/2021

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Italy

  • at Toffoletto De Luca Tamajo

As a rule, it is not prohibited to work remotely abroad.

However, this could give rise to the following issues:

1) Applicable law: although the employment contract is governed by Italian law (or the law chosen by the parties), the mandatory rules of the place in which the work is carried out could apply, including those on working hours, safety at work, etc.

2) Social security contributions: the general rule is that contributions are paid in the country where the work is carried out. At times, bilateral agreements between countries or within the European Union make exceptions to this general rule if specific requirements are met, providing that in the case of short periods of work abroad, the contributions continue to be paid in the country of origin and not in the country where the work is carried out.

3) Accident at work insurance: Insurance problems could arise in connection with this specific method of working and the employer should verify concretely what kind of coverage exists.

4) Taxation: depending on the period spent working abroad, there is a possible risk of being subject to multiple taxes from different jurisdictions.

©Toffoletto De Luca Tamajo, ©Ius Laboris

Last updated on 21/09/2021

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Mexico

  • at Marván, González Graf y González Larrazolo
  • at Marván, González Graf y González Larrazolo
  • at Marván, González Graf y González Larrazolo

If employees are hired under Mexican law, they will be entitled to the same mandatory benefits and social security as any other employee in Mexico; therefore, they must be registered with the Mexican Social Security Institute (IMSS) and must comply with employment tax obligations, which include payroll taxes and income tax on their salaries.

Last updated on 21/09/2021

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Netherlands

  • at Rutgers & Posch
  • at Rutgers & Posch

There can be potential issues and risks concerning the taxation of salaries, social security coverage, the applicable labour law for employers in the context of cross-border remote-working agreements (e.g, article 8 Rome I Regulation) and issues related to the applicable court in case of litigation (e.g., EEX or Brussel I Regulation).

Last updated on 08/03/2022

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Poland

  • at Bird & Bird
  • at Bird & Bird

Cross-border remote-working arrangements may expose employers to tax and social risks, especially if employees lose their tax and social security status in Poland by residing and working abroad for a long period of time. In such cases, those employees automatically come under the taxation and social security system of that other country, and the employer must calculate, deduct and pay public dues and fulfil other obligations as required by local law.

Apart from that, cross-border remote-working arrangements may result in risks related to:

  • immigration compliance, including legalisation of the employee’s residence and work rights;
  • employment compliance, including meeting the minimum requirements laid down in local labour law (eg, as to minimum wage, working time (rest periods and local bank holidays) and OHS requirements); and
  • corporate tax and social security consequences, including the creation of a permanent establishment of the employer aboard.

Therefore, it is strongly recommended that employers introduce a hard obligation in their remote-working policies that limits remote work to the territory of Poland only, with any exception requiring the prior explicit consent of the employer.    

Last updated on 21/03/2022

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Portugal

  • at Cuatrecasas
  • at Cuatrecasas

The analysis of potential issues associated with cross-border remote working depend on whether employees are working in Portugal or abroad and if there are one or multiple employers involved and where they are located.

However, cross-border remote-working arrangements mainly raise issues regarding the definition of applicable law. The correct definition of the applicable law allows for compliance with labour and social security obligations that otherwise, if breached, pose significant risks to employers.

Even if there is an agreement through which the parties choose the applicable law, a set of mandatory provisions of Portuguese labour law would still apply if the work is mainly performed in Portugal, namely in key areas such as termination, health and safety obligations, and insurance for workplace accidents. Failure to correctly identify the applicable law may have serious consequences, for instance, employers may be entirely and solely responsible for all liabilities deriving from a work accident.

Furthermore, if in a given case the Portuguese labour law applies to the cross-border remote-working agreement, employers have to bear in mind that there are some difficulties regarding the definition of workplace and work time in connection with remote working, which can raise challenges when implementing these schemes.

Besides the above, cross-border remote working may also raise questions regarding work permits.

Last updated on 21/09/2021

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Qatar

  • at Clyde & Co
  • at Clyde & Co

While there is no explicit prohibition on working abroad, the key areas of concern and risk are as follows:

  • Application of local labour law – employers will need to consider whether the application of the labour law in the host jurisdiction can be excluded.
  • Public policy matters – it is possible that public policy rules in the host jurisdiction may apply to the employment relationship.
  • Health insurance requirements – it is possible that the minimum health insurance requirements in the host jurisdiction may exceed the minimum requirements in Qatar. 
  • Social security and tax – depending on the jurisdiction, an employee may incur liability for personal income tax and social security in the host jurisdiction.
Last updated on 08/11/2021

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Saudi Arabia

  • at Clyde & Co
  • at Clyde & Co

While there is no explicit prohibition on working abroad, the key areas of concern and risk are as follows:

  • Application of local labour law – employers will need to consider whether the application of the labour law in the host jurisdiction can be excluded.
  • Public policy matters – public policy rules in the host jurisdiction may apply to the employment relationship.
  • Health insurance requirements – minimum health insurance requirements in the host jurisdiction may exceed the minimum requirements in the KSA.
  • Social security and tax – depending on the jurisdiction, an employee may incur liability for personal income tax and social security in the host jurisdiction.
Last updated on 29/11/2021

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Spain

  • at Cuatrecasas
  • at Cuatrecasas

Labour law

Under article 8 of Regulation (EC) 593/2008 on the law applicable to contractual obligations, employment contracts should be governed by the law chosen by the parties, but this choice cannot deprive employees of any inalienable protections under the law of the country from which they habitually carry out their work. This, in practice, means that remote-working contracts, regardless of their content, are governed by the law of the country from which the remote workers mostly work.

Social security law

Under article 11 of Regulation (EC) 883/2004 on coordinating social security systems (Regulation 883/2004), remote workers will be subject to the social security regulations of the country where they provide their services.

However, under article 12 of Regulation 883/2004, if remote workers are posted by their current employer to another EU member state to perform work on that employer’s behalf, they should continue to be subject to the legislation of their member state of origin, provided that the anticipated duration of such work does not exceed 24 months, and that they are not sent to replace another posted person.

If the remote workers come from a country outside the EU, the bilateral agreement on social security between Spain and that third country, if any, should apply.

Breaching this obligation may result in the Spanish social security authorities claiming any unpaid contributions from the employer (around 30% of the monthly salary, capped at €4,070 per month) for the past four years, plus a 20% surcharge and interest. Additionally, the employer may face administrative fines ranging from €6,250 to €10,000 per employee (as of 1 October 2021, from €3,750 to €12,000 per employee) for failure to register, and ranging from 50% to 150% of unpaid social security contributions, plus a 20% surcharge and interest, for the past four years for defaulting on social security contributions.

Tax law

Remote workers could trigger a Spanish permanent establishment for the foreign employer, if one or more of them can (legally or de facto) enter into legally binding contracts on behalf of the employer (ie, if the employee becomes a dependent agent). A permanent establishment would trigger Spanish corporate income tax liability for the employer on the annual profits attributable to that permanent establishment.

Additionally, depending on the remote worker’s country of tax residence, the tax withholdings the company must make may significantly differ, so workers could receive a net amount higher or lower than they expected. But if the company makes lower tax withholdings than legally required, it may face administrative fines and could be obliged to pay any pending tax withholdings.

Last updated on 21/09/2021

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Sweden

  • at DLA Piper
  • at DLA Piper
  • at DLA Piper

Labour law

Pursuant to the Rome I regulation, the employment relationship will, as a main rule, be governed by the law of the country in which the employee habitually carries out his or her work. If the employee does not habitually carry out the work in one country, the contract is governed by the law of the country of the place of business of the employer. However, if it appears from the circumstances as a whole that the work is more closely connected with another country, the law of that other country shall apply. Notwithstanding the above, it is possible for the employer and employee to agree on which country’s legislation should apply, provided another law does not deprive the employee of the protections that would have been guaranteed by statutory law under the applicable legislation, as per the Rome 1 regulation.

In light of this, cross-border remote-working arrangements may open up questions on applicable legislation. It is advisable to check if there are any such issues before allowing such arrangements. In addition, there may also be tax consequences for both the employer and employee. Furthermore,  a cross-border remote-working arrangement might also mean risk from an insurance perspective. Therefore, employers should ensure their insurance covers employees working remotely from another country.

Social security and tax law

Employers who have employees working remotely from another country should be cautious about the tax effects such an arrangement may trigger. An employee working remotely (eg, from home) in Sweden may trigger a taxable permanent establishment in Sweden, which has the effect that a part of the company’s income would have to be taxed in Sweden. If a permanent establishment is triggered, the company would have to register with the Swedish Tax Agency for corporate income tax purposes. It should also be noted that the Tax Agency can look back up to six calendar years for a reassessment of a permanent establishment. It is thereby possible for a foreign company to carry out activities in Sweden for a long time without being taxed in Sweden and having a full reassessment decision from the Tax Agency for previous years.

Furthermore, the company may also have to register for payroll purposes in Sweden, if the employee’s income would be subject to Swedish income tax and Swedish social security contributions. Income tax and social security contributions are to be reported and paid monthly. However, if the employer does not have a permanent establishment in Sweden, and provided that certain criteria are met, the employee may self-report and pay the social security contributions (but not the tax). Even if such an arrangement can be applied, the employer must still register with the Swedish Tax Agency for filing a statement of earnings and tax deductions and to report and pay income tax on the salary paid to the employee.

If a Swedish company has employees working remotely in another country, the employer may become liable to pay income social security fees and taxes abroad on any income that would be attributable to the work undertaken in that country, and may also have to comply with the registration and reporting requirements of that country.

In international cross-border working situations, taxation is not only regulated under domestic law but also double taxation treaties. As these rules reflect the special situation between two states and are the result of negotiations between them, it follows that these rules vary from one double taxation treaty to another. Regarding social security, domestic law, EU community regulations and international social security conventions must be taken into account when assessing which country the employee belongs to and what social security contributions are to be paid in that country. Normally, an A1 certificate would have to be obtained for social security purposes; such certificate states which country’s social security insurance system that the employee belongs to.

It is recommended to seek guidance from an independent tax counsel regarding international cross-border work situations to assess the tax consequences in each case.

Last updated on 24/01/2022

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Switzerland

  • at Lenz & Staehelin

Remote working has labour, social security and tax law repercussions for employees whose contractual place of work is Switzerland, but are resident in and work remotely from an EU border country. Issues related to remote working from outside the EU are not discussed.

First, regarding labour law, remote working creates a second place where employees carry out their activity. In the event of a dispute, the Convention on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters provides that employees may initiate proceedings in the state where their employer has their residence or seat, or in the state where they habitually carry out that work. According to EU case law, an employee's residence can be considered their habitual place of work if they carry out 60% or more of their professional activity there. This criterion only can be excluded if it is shown that based on qualitative criteria, another place is the centre of employees' activities. Swiss case law is less specific than EU case law and only refers to the place where the centre of the activity is located.

Furthermore, remote working also can have repercussions on the law applicable to the contract. European Regulation 593/2008 on the law applicable to contractual obligations (Rome I) indicates that the contract is governed by the law chosen by the parties. However, if a case is brought before a court in the EU, this legislation provides that the choice of the parties cannot override the mandatory employee protection rules applicable in the state where the employee habitually work. Therefore, there is a risk that the law applicable to the contract (eg, Swiss law) could be replaced by the law of the state in which an employee lives.

Second, concerning social security law, employees are usually subject to the social security system of the place where the activity is carried out.  Thus, if employees carry out the entirety of their activity in Switzerland, they are subject to Swiss social security. Conversely, if they perform their entire activity in the EU, they are subject to the social security system of that state. According to European Regulation 883/2004 on the coordination of social security systems, if the activity is carried out in multiple states (eg, partly at the employer's Swiss offices and partly in their state of residence), employees are subject to the social security system of the state in which they reside if they carry out a substantial part (25% or more) of their activity there. Otherwise, employees are subject to the Swiss social security system.

Third, remote working also can have an impact on tax law. In general, taxation in Switzerland is based on residence. However, a person who has neither their residence nor a habitual abode in Switzerland nevertheless may be taxed based on an economic connection with Switzerland, such as the exercise of a gainful activity. Thus, employees who carry out their entire professional activity at home by working from home (outside Switzerland) would have to pay taxes in that state, as a condition for carrying out gainful activity in Switzerland is a physical presence in Switzerland. Employees who carry out part of their work abroad are taxed proportionally in Switzerland and the other states.

The covid-19 pandemic led to some derogations from the above principles. 

In terms of labour law, the widespread remote working connected to the covid-19 crisis is considered to be temporary and thus does not provide a basis for an employee’s state of residence to be considered their usual place of work. Consequently, employees who carry out a substantial part, or even all, of their professional activity by working from home due to covid-19 are not deemed to be habitually working from home within the meaning of the EU regulation, provided that this situation remains temporary.

In terms of social security law, the applicable system is not affected by covid-19-related restrictions. Switzerland has agreed with neighbouring countries that an increase in the time spent by employees of a Swiss company in their state of residence due to the increase in remote working shall have no impact on social security. A flexible application of social security rules has been agreed upon with Germany, Italy, Austria and Liechtenstein and is effective until 30 June 2022. For France, this is effective until at least 31 March 2022. For other states, in principle, this also will apply until 30 June 2022.

In terms of tax law, Switzerland also has agreed with certain neighbouring countries that an increase in the time spent by employees of a Swiss company in the territory of their state of residency due to the increase in remote working shall have no tax impact. The agreement with France was signed on 13 May 2020, and the agreement with Germany was signed on 11 June 2020. These agreements remain in force until at least 31 March 2022. The agreement with Italy, dated from June 2020, is still in force and is tacitly extended on a month-to-month basis provided that neither country terminates it.

Last updated on 20/01/2022

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Turkey

  • at Gün + Partners
  • at Gün + Partners
  • at Gün + Partners

Theoretically, cross-border remote-working arrangements are possible from an employment law perspective as the law does not provide a clear rule or restriction on this. However, in practice, the Social Security Institution does not consider days worked overseas as workdays subject to social security premiums. Therefore, such arrangements may not be possible.

Employers located in Turkey must consider their data privacy obligations where employees are working in the context of cross-border remote-working arrangements, because the relevant obligations are mostly applicable on a residency basis due to the principle of territoriality. On the other hand, under Turkish legislation, employers must ensure the security of data shared with the relevant employees.

In addition, employers should bear in mind that any data shared with such employees would be an overseas transfer of data. As a result, if the transferred data contains personal data, consent must be obtained for such transfer of data abroad from the data subject, covering the purpose of processing this data unless the employers have permission from the DPA for the relevant international transfer. International transfers of personal data are restricted in Turkey. Unlike GDPR, the DPL does not protect international transfers in the European Economic Area (EEA) as Turkey is not in the EEA and standard contractual clauses do not apply to the transfer of personal data from Turkey to overseas.

Depending on the sector in which employers are engaged, there may be further data-residency and data-localisation requirements. Therefore, before any cross-border remote-working arrangements, employers must evaluate whether they are subject to such requirements and how they should approach the data to be processed by the relevant employees for their duties and assignments on a case-by-case basis.

Last updated on 21/09/2021

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UAE

  • at Clyde & Co
  • at Clyde & Co

While there is no explicit prohibition on working abroad, the key areas of concern and risk are as follows:

  • Application of local labour law – employers will need to consider whether the application of the labour law in the host jurisdiction can be excluded.
  • Public policy matters – it is possible that public policy rules in the host jurisdiction may apply to the employment relationship.
  • Health insurance requirements – it is possible that the minimum health insurance requirements in the host jurisdiction may exceed the minimum requirements in the UAE. 
  • Social security and tax – depending on the jurisdiction, an employee may incur liability for personal income tax and social security in the host jurisdiction.
Last updated on 08/11/2021

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United Kingdom

  • at Littler

Employees working remotely outside the UK may create expensive tax liabilities for themselves and their employers. It’s important to be aware of these before any long-term decisions are made.

The foreign country in which the employee is working may seek to tax some or all of that employee’s income from the employment. This is based either on the fact that a substantial number of days have been worked in that other country or in some cases on the basis that the employee has become a tax resident there under local law. Further, social security liability may accrue (which is generally assessed separately from income tax).

The main concerns for the employer will be whether there is an obligation to operate local payroll withholding and whether local social security rules add significantly to the wage bill. The rules vary widely between countries and, unfortunately, there is no “one size fits all” approach to managing this issue across multiple jurisdictions.

Employers will also need to consider the possibility that a UK employee working abroad may inadvertently create a “permanent establishment” of the UK employer in the other country, which in turn can expose part of the profits of the UK employer to corporate taxes in that other country. What constitutes a “permanent establishment” for corporate tax purposes in another country depends on the specific tax laws of that other country.

In practice, at a high level, most countries adopt a standard definition of a “permanent establishment”, which is derived from the OECD’s Model Tax Convention (being: (1) a fixed place of business in a country; or (2) a dependent agent, such as an employee, who acts on behalf of an employer and has, and habitually exercises, authority to conclude contracts in the name of the employer entity). This always needs to be checked on a case-by-case basis for the relevant countries involved. More information on the OECD convention can be found here.

Last updated on 25/11/2021

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United States

  • at Littler
  • at Littler
  • at Littler

Employees who cross state borders trigger a host of risks for their employer. The obligations of the jurisdiction where the work is performed will generally prevail (depending upon duration).  For example, state law, and even municipal law, control employers’ leave obligations (such as time off to vote, paid family leave, or paid sick leave).  With paid sick leave, this can become very complicated, as each law has different tracking, recordkeeping and accrual requirements. In addition, state withholdings and income tax, as well as insurance (workers compensation), must be considered.  Local ordinances often also control wage-and-hour issues such as how and when an employee must be paid, pay-statement requirements, whether an exemption applies or overtime must be paid, and other nuanced areas such as required employer policies, or notices relating to wages or unemployment insurance.

Up-to-date information on the USA’s response to the pandemic, including State-level news and developments, can be found at Littler’s covid hub here.

Last updated on 21/09/2021