Remote working could have tax and social security implications

With the ongoing pandemic swathing the world, many businesses have adapted to a reality with flexible and remote working as a new norm. While employees can work from home, or practically from anywhere in the world, businesses are posed with new challenges when team members choose to work from overseas. “This raises a lot of questions regarding where taxes and social security charges should be paid and which social security system your employees should be covered by. Immigration, employment law, and insurances are all issues businesses should be aware of when employees are working from overseas,” says Joel Uddenäs, International Tax Manager, at SCC member firm Moore Global US Tax Services Limited.

Moore Global US Tax Services Limited specialises in US tax services including compliance, tax return preparation advisory and consulting work. The London practice is part of the US parent company’s International Services Group which consist of roughly 40 professionals across offices in London, Zurich and the US. The company belongs to a larger network (Moore) operating in 110 countries around the world. “Even though we only work with US tax law, our network has the capacity to provide services in basically any country in the world,” Joel explains.

Consider tax and compliance issues
Employees working from overseas during the pandemic have, according to Joel, become a more common sight, especially in London, with businesses employing people from all over the world. “A lot of people have decided to return to their home countries and stay close to family and friends during the lockdown. This is understandable but may create tax and compliance issues. With people working outside their employment country, a lot of queries arise surrounding which jurisdiction has rights tax and social security amongst many other issues such as corporate obligations and regulatory issues.”

Subject to ‘transfer pricing’
Businesses should be aware that they might be considered to have created a permanent establishment or branch in the country where their employees are working, which could require them to complete local filings and pay corporate tax or payroll taxes.“ Entities might also be subject to what we call ‘transfer pricing’ – in short, this is international agreements stating that because you work in X jurisdiction and a portion of your companies profits are attributed that that jurisdiction and should be taxed as such,” Joel says and continues: “It doesn’t necessarily mean that there will be problems, but if you let your employees stay in a country for a little bit too long, that definitely generates issues that companies should be aware of, especially now as the pandemic is somewhat easing up.”

More flexible workplace arrangements
Going forward, Joel believes we will see more businesses offering employees flexible workplace arrangements, and even letting employees work from overseas on a permanent basis. “I believe that this pandemic has shown that with today’s technology, it is actually very possible to work from home. And when we say work from home, in this kind of global world we are living in, it doesn’t necessarily mean that you’re working from the country of employment. The tech industry is way ahead of traditional business when it comes to this, but I think that more companies will see the benefits of offering this flexibility.” Apart from the opportunity to source talent from a wider pool and help employees with their work-life balance, Joel thinks this could be an opportunity to decrease the amount of office space and cut costs at the same time.

Global workplace with the right tax set up
Having an international workforce might indeed raise a lot of questions, but Joel is confident that with the right set up, businesses can offer employees a global workplace. “I would not discourage companies to have their employees working from their preferred location. It is just important to consider is that every country has different rules and plan in advance of implementing such a policy. If you already have employees working from overseas, you should definitely seek advice and start discussing with advisors that can provide you with global tax and social security advice. Non-compliance can result in large penalties and if it always beneficial for the company to resolve them before the local authority takes things into their own hands.”