For many companies, working from home is becoming the norm. However, several employees wish to seize this opportunity to work from abroad.
The COVID-19 crisis has forced companies to reinvent themselves, both organizationally and in terms of mobilizing their employees. More and more companies are planning a partial return to the office, in hybrid mode, or even full-time telecommuting, so change and flexibility are required from employers.
What about employees considering taking this opportunity to 海外 リモートワーク from another country? How can this affect your business?
Some of your employees may think that telecommuting abroad, while keeping their same job in Canada, will not affect you as an employer, but they are wrong. Such a decision on the part of one of your employees could lead to legal, social security and, certainly, tax obligations for the company.
Procedure and tax obligations
First, it’s important to communicate with your employees and let them know that if they plan to work from another country, you need to be notified. As a company, you can take proactive measures and publish internal directives for your employees working from home and include measures for those wishing to settle abroad.
You must then validate what these impacts will be on your business and what steps you will have to take with the employee and, possibly, with the host country of this employee. Depending on the type of work and the relevant tax treaty, the newly remote employee could create a permanent establishment and thus a taxable presence for the business in the country where they are teleworking.
If you give one of your employees the option of telecommuting outside of Canada, either temporarily or permanently, you must understand that the company is exposed to possible tax repercussions. In this regard, here are some questions you should ask yourself.
Will my business have tax obligations?
- Does my employee’s home office become an establishment in the foreign country?
- Does a tax treaty apply?
- Will new tax obligations for my business arise in the foreign country?
- What are the other forms of taxation in the foreign country: sales taxes? turnover tax?
- Will my employee trigger the application of these taxes?
Will my company have new withholding tax obligations (tax and social charges) in the country where my employee telecommutes?
Does a social security agreement exist between Canada and the host country?
What forms should I file at the end of the year?
What are the compliance obligations for my business?
Since my employee is abroad, does my company also have obligations in Canada?
Other regulations to consider as well:
What labor laws apply and govern the employer-employee relationship?
What does my disability, injury and medical insurance cover outside of Canada?
With new 海外在住 リモートワーク policies coming into force and changing acceptance of teleworking overseas, and as a business, you need to incorporate tax planning into your policy development to ensure that more flexible working arrangements do not create tax complexities and risks. Allowing an employee to telecommute abroad carries a range of risks, both for the employee and for the company.
As an employer, you need to think about these issues and manage the tax and legal implications for an employee working overseas. Tax planning will help avoid unpleasant surprises, and even take advantage of opportunities, for both the employee and the employer.
With telecommuting opportunities on the rise, it can be tempting to establish your home abroad while continuing to operate in Canada. What are the tax impacts?
Overnight, millions of workers all over the world have had to convert their dining table into a new workspace and it can already be predicted that this new way of working will continue after the pandemic.
Because of the flexibility that working from home brings, some see this new reality as an opportunity to “follow the sun” by putting their computer and phone in a foreign country when possible. However, do you know the tax impacts associated with such a change?
Beware of tax impacts
When considering the option of telecommuting in another country, whether permanently or temporarily, it is essential to understand the tax implications of telecommuting abroad. Will I have to pay taxes in my host country? Will my employer be affected by my decision to work from abroad?
There can be several impacts to teleworking abroad with regard to personal taxation and the resulting compliance obligations, both in the country of residence and in the host country. Several questions must be raised before making the decision to work abroad.
In addition, it is also important that your employer knows that you plan to work from another country, because he, too, will have tax obligations to consider and legal impacts could ensue.
What should be considered before working from abroad?
Before working in another country, various tax elements must be considered. The application of the immigration and labor laws of the host country will also have to be taken into account.
What about my tax residency?
- Do I keep my tax residency in Canada?
- Is it possible that, under the tax laws of the new country, I will become a tax resident of that country?
- Is there a tax treaty between Canada and the country where I want to settle (even if only for a few months)?
- What should I do for my employer?
Does my employer have any objection to me working from abroad?
- How will my employer decide to manage these risks?
- Will the tax obligations for my employer be different?
- Will my employer have to seek an exemption from the host country in order to avoid tax consequences?
- What are my tax obligations?