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Legal & Tax implications

Legal & Tax implications

With the rise of remote work, it is very likely that the tax and immigration authorities will increasingly be sharing information between them, raising the likelihood that remote workers and their employers will find themselves in the spotlight.
Pulse Remote helps companies and their employees to determine how much time have been spent in different countries and to assess risk exposures proactively. We also provide qualitative insights to remain compliant locally and internationally.

Social security

Personal income tax

If an employee carries out an activity in his/her country of residence and in the country of residence of the employer, he/she is, in principle, taxable in both countries depending on the proportion of work he/she carries out in each country (from the very first day of work in the other country). Double tax treaties are in place to avoid double taxation. Under these tax treaties, the employees are generally taxed in the country where they carry out their job.

Regulatory aspects

For supervised entities in the financial sector, further requirements may apply in relation to remote work. E.g., the CSSF in Luxembourg has recently issued a circular (21/769) about governance and security requirements for supervised entities to perform tasks or activities through telework (post pandemic).

Employment law

The protective rules of local employment law may apply in a cross-border environment, and in some cases, these rules may interfere with the legal provisions in force in the country of employment (such as minimum wage, legal working hours, duration of paid annual leave, public holidays, termination, etc). If an employee predominately works from another country (e.g., country of residence), the local legislation should apply.

Permanent Establishment risk

Working regularly from a country where the employer does not have a permanent establishment (PE) give rise to the risk establishing a PE in the host country. The host country could be the country of residence of the employee or a country visited by the employee during an overseas business travel. This might have considerable tax implications for the company and the employees working in the host country.

Business travellers

Most of the tax treaties includes the so called 183-days rule. Basically, this rule means that as long as you do not spend more than 183 days in the other country, you are not taxable in that country but...this rule is not only about counting days.
Overseas business travellers potentially trigger multiple legal and tax obligations, which can impact at either, or both the individual and the corporate level. Broadly all traveling employees making more than just an occasional annual visit increase these exposures.

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