Corporate tax lawyer Cathrine Bryant explains: “Where tax is paid will depend on several factors, but the most important is the employee’s tax residence status. The rules are complicated, but at its simplest, if your employee has been out of the country for longer than 183 days, they have likely established tax residency in the other country. If this is the case, the employee will be liable for tax in the country where they have established tax residency.”
It’s important to remember that each situation is unique to the individual and countries involved and should be treated as such with bespoke advice.
Individual Relocation Support
Sarah Huntridge, global move specialist with BTR International explains: “As the pandemic hit, many assignees returned to their home countries to work remotely.
“No one knew how much time would be involved. Each location has its own safety guidelines and travel requirements. This means that many assignees have spent more time away from their host country than they or their organisation had envisaged.
“As a result, there are tax issues to resolve and companies need to consider how these impact on the assignees and their relocation support.”
Displaced International Assignees and Business Continuity
Global Tax Network (GTN) adds: “If your employee finds themselves stranded outside their home country, you should first consider the domestic tax rules of the non-resident location and second, any international double tax treaties between the home and host countries.”
Having worked through the issues involved via the combination of countries involved, it’s important to plan for business continuity. GTN advises that a business continuity policy should consider aspects such as:
- Can the employee work from their new host location?
- Does this create a corporate tax risk such as a permanent establishment or nexus in the new location?
- Financial services companies may also need to consider registering trading activities with the local authorities to meet local regulatory requirements if their employees will be trading in the new host country.
