In this month’s newsletter we cover:
- 5 Things to Consider When Building a Workation Policy:
- Are Tax Authorities Finally Starting To Catch Up To International Remote Work?
- Remotely Interesting with John
- Product updates with Donal
- Mel’s Tip of the Day
5 Things to Consider When Building a Workation Policy
In an increasingly connected world, the idea of working from anywhere (WFA) has gained immense popularity. Companies are now reimagining their work policies to allow employees to work remotely, whether they are at home, on workation in the Alps, or a cozy café in Lisbon. While the benefits of such a policy are undeniable, creating a comprehensive and effective WFA policy can be a bit more complex than it seems.
Beyond the obvious compliance risks (tax, social security, employment law, etc.) that we talk about so often, here are five crucial things to consider when building a WFA policy.
Are Tax Authorities Finally Starting To Catch Up To International Remote Work?
The month of October was full of action but one particular development might have slipped below the radar of many.
This is the announcement that the UN Model Tax treaty is potentially being rethought to adapt to the world we now live in, one where international remote work is the norm rather than the exception. You can find more about this development here.
The key highlights are:
- The proposals are still in the early stages and so there is a lot of water to fall under the bridge just yet, however the fact the subject is getting such discussion shows how high up on the agenda it is for many countries
- Even if the proposed amendments are incorporated into the UN Model, how quickly these changes get adopted will depend on whether they are broadly neutral from a tax inflow/outflow perspective or whether they are non-neutral
- Based on the existing proposals, it would seem they grant additional taxing rights to the employer’s State of residence which on the surface would be more beneficial to more developed countries
We’re still awaiting further developments from the OECD, but there is no doubt there is already plenty of background work going on to try and find commonalities around how to deal with the challenges presented by international remote work.
What does this all mean for companies and those who work in global mobility, international payroll and corporate tax?
We’ll have to wait and see, but the significance of this cannot be underestimated.
From what we have seen so far in 2023, it’s clear that tax authorities around the world have failed to converge on a common standard around how to tackle international remote work.
While there is broad acceptance, for example, that somebody extending their work trip by a few days workation is unlikely to trigger major permanent establishment risks, the lines start getting much greyer and more blurred if somebody wants to spend an extended period of a few weeks or months caring for sick parents for example, especially if they are in a role that performs activities that are high risk for permanent establishment.
We have been working in the background with tax authorities and companies around the world to try to tease out how countries can tackle the challenges of international remote work. For example, in October, a white paper was published by a Portuguese tax inspector and PhD candidate, Marisa Ouro, on the impact of digital nomadism and permanent establishment. This included the following quote by John:
When a digital nomad works off-site, for example, at home or in a coworking
space, it can lead to the company being considered a PE. John Lee points out the dangers
of this: “If your company misses your individual payroll tax withholding, that might cost them a few thousand dollars, but if they trigger Permanent Establishment this could mean hundreds of thousands of dollars or more in additional corporation taxes and penalties, so this is one not to be messed with. When we surveyed over 100+ companies employing 1.7m people this was by far the biggest risk for companies.”
This is a few weeks after Irish tax authority leaders were in attendance at the Chartered Accountants Ireland virtual CPD conference in Ireland which anyone can access here.
What’s clear is that there is a long way to go before even different regions of the world start to converge around a common framework for international remote work, but the UN Model working group is something that shows how seriously different countries are taking this.
Asynchronous Communication: Not Just For Work
Sharing is Caring! And a Mini-Break After Our Last Product Sprint 😅
We released some HUGE changes last month with our new look compliance checklist focused product release. If this is news to you, then take a look at that newsletter to find out about the revamped platform we implemented.
So now it’s time to make our innovative platform more accessible to as many people as possible by making our pricing more affordable for companies, both big and small.
We’ve listened to your feedback and thought long and hard about this decision. Given our latest product changes, now is the perfect time to split out our platform across two different product lines. This modular pricing recognises that some of our customers may have a greater need for either Work From Anywhere (workation compliance) versus Hire From Anywhere (distributed talent acquisition compliance).
This structure also recognises that start-ups and scale-ups are likely more focused on their hiring strategy as they try to sustainably grow their businesses, giving them affordable access to our Hire From Anywhere platform which delivers an ROI after their very first search! What’s not to love?
That’s not to say we’re not working on more exciting new features for you. We’re still busy bees working on decision-making and analysis dashboards as well as the ability to more easily share our reports within your organisation. All going well, these changes should be released in the next few weeks.