The rise of globally remote workers and digital nomads is a lasting legacy of Covid-19 (Coronavirus). Employers are now grappling with how to embrace or at least accommodate the new landscape, not least in order to attract and retain scarce talent. The UK Office of Tax Simplification’s consultation on globally remote work and remote working generally highlights how prevalent this has become.
Employers looking to introduce a globally remote working policy must consider how an organisation in one country can employ an individual based in another country, while at the same time remaining compliant in both countries concerned. Even working from a hotel room for a temporary period may trigger compliance obligations, such as being required to obtain the correct visa or work permit.
When pursuing any option, employers must consider developing a clearly defined policy and process for globally remote workers that has been pre-reviewed by specialists in immigration, employment law and tax in order to highlight any potential issues early on and any areas which may require further specialist advice from overseas advisors.
They should also put in place an agreement with each globally remote worker, setting out the parameters of globally remote work and the employee’s responsibilities such as dealing with any personal tax matters arising from working remotely, and track employees so that the employer knows where they are at all times, helping identify any potential risk areas and ensuring that the employer maintains control over their globally remote workforce.
Employers may also want to monitor and review the position periodically. Legislation and rules overseas change constantly, so it is important that the overall compliance position is re-visited regularly to ensure that the approach is still fit for purpose and to identify any new potential compliance issues.
The compliance obligations of globally remote work are very real, however they are manageable with the right approach and advice. It is likely that we will start seeing greater co-ordination across countries regarding the taxation of globally remote workers.
In August 2022, it was announced that the European Union (EU) and the Organisation for Economic Co-operation and Development are discussing possible changes to international tax rules for teleworkers, building on the recent cooperation seen between EU member states on the taxation of such workers in response to the Covid-19 pandemic.
Over time, as tax systems globally catch up with the new employment landscape and employers become more experienced in this area, the management of globally remote workers should become less confusing and arduous. However, there are unfortunately no silver bullets or solutions that can circumvent the need to consider the compliance obligations.
Lee McIntyre-Hamilton is a tax partner at Keystone Law
