By Tom Harrison, Tax Senior Manager at Johnston Carmichael.
Remote working has transformed the global employment landscape, offering businesses and employees unprecedented flexibility.
The attraction of working from anywhere, coupled with the enticing proposition of hiring talent globally, has unlocked exciting new opportunities. However, this newfound flexibility comes with its own set of tax, legal, and compliance challenges that without pro-active management, can come unravelling ex post facto.
1. Working from anywhere: Individual flexibility and corporate risks
The concept of working from anywhere sounds appealing, but it is far from simple in terms of compliance obligations. While remote work offers freedom, it also means businesses must navigate a complex web of immigration regulations, labour standards, and corporate risks.
When employees work remotely in foreign jurisdictions, businesses may create a ‘permanent establishment’, triggering corporate registration and tax liabilities. Other considerations include social security, income tax, and payroll regulations, which vary significantly per country.
Although a ‘work from anywhere’ model is appealing, businesses should invest in up-front professional advice to ensure compliance and avoid penalties or reputational damage. The costs associated with appropriate legal and tax consultation are far outweighed by the risks of noncompliance.
2. Hiring from anywhere: Expanding talent pool expanding complexity
Hiring from anywhere gives companies access to global talent without requiring physical relocation. However, to do so the employer must navigate the challenges of employment law, payroll tax and reporting requirements in an unfamiliar overseas jurisdiction. For example, differing labour laws can impact employee benefits, working hours and termination rights so requires careful legal guidance.
In addition, payroll compliance presents another challenge. Hiring an individual in an overseas territory can bring about employer obligations such as payroll to account for income tax and social security liabilities, and failure to adhere to local rules can lead to penalties.
3. Working from vessels: An offshore challenge
Remote work isn’t confined to land. Professionals such as engineers and maritime crew often work from vessels in foreign ports or international waters. This scenario introduces unique complexities, as jurisdictional tax rules can vary widely. For example, some countries consider the employee’s residency, while others apply source-based taxation based on where the vessel operates.
4. A proactive approach
To navigate these challenges, employers should take a proactive approach to global mobility tax planning. This includes mapping out where employees are working and understanding the tax and legal implications proactively by engaging with professional advisers to address compliance risks.
While working and hiring from anywhere offer great potential, businesses must carefully negotiate the tax landscape to avoid costly pitfalls and position themselves for success.
For more advice on global mobility, please contact tom.harrison@jcca.co.uk
www.johnstoncarmichael.com