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Are your people working from other jurisdictions?

The implications of remote and virtual workers

Kenny Law, Senior Manager, Global Mobility Services
27/08/2021
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Since the pandemic there have been significant changes in working arrangements within professional firms. More and more return to work conversations are uncovering cross border elements, which could have potentially far reaching implications for the firm, the partners and employees.

In recent months, firms are seeing a boom in requests from its people to work all or part of their time remotely, from outside the country of their employment and on an extended or permanent basis. Much of this remote working was transient and a direct result of the travel restrictions imposed by the pandemic or returning to a country of origin in order to care for family members.

What issues could arise?

There are without doubt many positives brought about by remote and virtual work arrangements:

  • better work/family life balance for people
  • productivity gains for some firms
  • potential access to global talent pools outside physical office locations.

However, the regulatory and HR related issues may not be straight forward. Remote and virtual workers potentially gives rise to issues across a number of areas including:

  • payroll operation and reporting
  • income tax liabilities in differing jurisdictions
  • social security entitlement and liabilities in differing jurisdictions
  • corporate taxation/permanent establishment risk
  • immigration rules and right to work (or not!) in a different jurisdiction
  • customer/client viability
  • local employment law
  • HR risk
  • culture, values and impact on teams
  • compensation and benefits.

Case study

Pierre is a lawyer employed by ABC LLP, a UK based law firm with no presence or offices outside the UK. He is a French national who has lived and worked in the UK.

In March 2020, with the worsening COVID-19 situation, he moved to France to be with his parents and started working remotely from his parents’ home in France.

Pierre did not think it was necessary to make his line manager aware of his change in circumstances.

In August 2021 the firm started to have conversations with their people regarding their thoughts on returning to the office.

As a result of this exercise:

  • the firm discovers that Pierre has been working from France for over a year already
  • Pierre requests approval from the firm to make this a permanent arrangement under the firm’s flexible working policy.  
Risk area What are the issues? 
Income tax 

Has Pierre broken his UK tax resident status?
Is Pierre now tax resident in France?
Is Pierre liable to French tax on his earnings?

Payroll Will the firm need to operate French withholding taxes on payments made to Pierre? 
Social security  Are French social security contributions payable by Pierre and the firm? 
Corporate tax 

Has Pierre created a branch presence for the firm in France?
Is the firm exposed to French corporate tax liabilities and reporting obligations?

Labour law  Are there any French employment laws that will protect Pierre in the future? 
Business people standing

Actions to take

First and foremost, firms need to put in place a process to establish where their people are based and for what period. Only then will the firm be able to work out what if any actions need to be taken.

Firms will be able to take advantage of the positives from their people working remotely, but at the same time manage and minimise the risks.

For more information on the issues outlined in this article or to discuss your firm’s position, get in touch with us today.

Related insights

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We assess the tax implications as many who have been working from home return to their offices.
Assessable profits will now be those arising in the tax year, which will impact firms who do not have a 31 March/5 April year end.
New IR35 rules mean the obligation of determining the tax status will now be the employing firms responsibility.
Tax for international employees can be complex, make sure you know what needs to be covered.

Contact us

Dinesh Jangra
Dinesh Jangra
Partner, Head of Global Mobility
London