Tax issue with working remotely from another country

TP_CM

Does anyone know the taxation rule which prevents people from being able to login from abroad for longer than 2 weeks? I'm fully able to work remotely, but they are now saying that due to tax reasons, I can only work 2 weeks from another jurisdiction. I heard Amazon have told their employees the same.

Not sure if this is better in work/jobs or if the Taxation forum is more apt

3DataModem

Two potential problems:
1. They may be required to register for you for income tax in the other country
2. They may incur a corporation tax liability if work is being done in a country where they don't currently pay corporation tax

2 is usually why these rules exist. Each country has its own rules and double-taxation agreements so easier for them to avoid complexity and stop employees working outside their jurisdiction.

Bob24

TP_CM wrote: »

Does anyone know the taxation rule which prevents people from being able to login from abroad for longer than 2 weeks? I'm fully able to work remotely, but they are now saying that due to tax reasons, I can only work 2 weeks from another jurisdiction. I heard Amazon have told their employees the same.

Not sure if this is better in work/jobs or if the Taxation forum is more apt

There might be a clear reason, but at first glance the two weeks limit seems like an arbitrary threshold to me.

However the obvious rationale for your employer restricting how much you can work from abroad is that if you are working too much from another country, that country would (rightly) expect you and your employer to pay taxes there related to your employment. I.e. you and your employer would be at risk of legal proceedings in that country for infringing its tax laws (while not intentionally, you would clearly become a tax evader if you are working in a country long term while paying taxes related to that job in a different country).

They might just have picked two weeks as it is short enough to safely assume it can be considered a business trip in any country (as opposed to employment in that country which requires taxation).

krissovo

Tax residency rules are based on a 183 days or more in country so I suspect its the company being overly cautious.

strandroad

Your personal obligation is to reside in Ireland for 183 days of a year to meet tax residency requirements.
But for your employer to have staff working out of other regimens might mean that staff become subject to them and the employer must comply with foreign employment and labour laws or taxaton rules, as if they had a branch office there. They are probably trying to blanket protect against such situations arising.

smellyoldboot

Suspect their might be other issues at play here too sometimes. Many times IDA grants and various types of funding received can be linked to maintaining a certain level of employment in Ireland. The work being done outside the state would certainly raise eyebrows with the IDA in particular and is not something we should really be encouraging. Not really in our interests to do in fairness.

MisterSpaccato

Apart from the tax discussions already covered above, i think there is also the problem of health insurance while on the job. What if you get injured while performing your work abroad? Would you be covered by the usual health insurance? If not, would the employer be liable for any damage not covered by the insurance?

As it stands currently, having the majority of employees working remotely is something new, and law and regulations are a little bit lacking in this regard. The situation might improve in the future.

Bob24

krissovo wrote: »

Tax residency rules are based on a 183 days or more in country so I suspect its the company being overly cautious.

Being tax resident in a country doesn’t remove liability for taxes on employment in another country.

An Irish resident going to France for a summer job is liable for income tax and social contributions in France related to that job, even if they are only staying there for 2 months. And a French resident coming to Ireland for a a summer job is liable for Irish income tax and PRSI on that Irish income even though they are only in Ireland for 2 months.

TP_CM

The thing is I'm an independent contractor working in IT. So in the same way as I have no right to company pension, perks, bonus, or job security/redundancy pay, technically my employer is my own Ltd company I have set up to invoice what's basically my client. I'm day rate independent contractor. So really, if I work with my own accountant to ensure I'm tax compliant based on my days spent wherever, and I would be very by-the-book that way, my 'client' for want of a better word shouldn't really care, right?

strandroad

TP_CM wrote: »

The thing is I'm an independent contractor working in IT. So in the same way as I have no right to company pension, perks, bonus, or job security/redundancy pay, technically my employer is my own Ltd company I have set up to invoice what's basically my client. I'm day rate independent contractor. So really, if I work with my own accountant to ensure I'm tax compliant based on my days spent wherever, and I would be very by-the-book that way, my 'client' for want of a better word shouldn't really care, right?

Well no, your contract is still subject to employment law in Ireland I suppose. If you actually work out of let's say France and there is a dispute with the employer in which you invoke the French law or work standards as you are entitled to do since this is where you actually perform the work, how do you think they would like that? That's what they want to avoid also, different legal frameworks and their impact.

Bob24

TP_CM wrote: »

The thing is I'm an independent contractor working in IT. So in the same way as I have no right to company pension, perks, bonus, or job security/redundancy pay, technically my employer is my own Ltd company I have set up to invoice what's basically my client. I'm day rate independent contractor. So really, if I work with my own accountant to ensure I'm tax compliant based on my days spent wherever, and I would be very by-the-book that way, my 'client' for want of a better word shouldn't really care, right?

Given the details you provided I’d add 2 more things which are unrelated to the legal implications:
1) They are the customer, so if they are adamant they want you in Ireland and are paying for it, I don’t think there is any discussion to be had? (regardless of legal options)
2) I assume you are charging them the going rate in Ireland. If they were to let you work in the likes of Greece or Portugal on a longer term basis, be careful what you wish for. After they let you go there they could come to you to renegotiate the contract based on the going rates in the country where you are actually located (from their perspective, why would they pay Irish rates to someone who is located in a lower cost location).

On the legal side, assuming you contract with them is an Irish one, I still think they might want to cover themselves in case there are legal issues (agree that potential legal issues would mostly be on your end, but why would they take the chance of being impacted especially since they are not trying to game the system on their end and have nothing to gain).

irishguy

I work for a large us MNC in IT and all of our staff pre covid were told they are no longer allowed to working remotely outside the country due to the local tax authority being able to claim this location is a branch location and demanding corporate tax for anything you work on from there. This was advice provided from a large tax advisory and totally put a stop to this practice.

It only applied to associates, contractors could still do it as they were all going via another ltd, I believe there rates were reduced if they did it on a permanent basis.

TP_CM

strandroad wrote: »

Well no, your contract is still subject to employment law in Ireland I suppose. If you actually work out of let's say France and there is a dispute with the employer in which you invoke the French law or work standards as you are entitled to do since this is where you actually perform the work, how do you think they would like that? That's what they want to avoid also, different legal frameworks and their impact.

But that's the thing, they would argue they aren't my employer. Can a KPMG employee take issue with their clients? That's essentially my company. One tiny single employee KPMG company. A KPMG employee would take issue with KPMG, not whichever client they're contracted into for a given period.

strandroad

TP_CM wrote: »

But that's the thing, they would argue they aren't my employer. Can a KPMG employee take issue with their clients? That's essentially my company. One tiny single employee KPMG company. A KPMG employee would take issue with KPMG, not whichever client they're contracted into for a given period.

You do have a contract with an entity who hired you, and it's under the Irish law for labour and tax. That's what they don't want messed with.

TP_CM

Bob24 wrote: »

Given the details you provided I’d add 2 more things which are unrelated to the legal implications:
1) They are the customer, so if they are adamant they want you in Ireland and are paying for it, I don’t think there is any discussion to be had? (regardless of legal options)
2) I assume you are charging them the going rate in Ireland. If they were to let you work in the likes of Greece or Portugal on a longer term basis, be careful what you wish for. After they let you go there they could come to you to renegotiate the contract based on the going rates in the country where you are actually located (from their perspective, why would they pay Irish rates to someone who is located in a lower cost location).

On the legal side, assuming you contract with them is an Irish one, I still think they might want to cover themselves in case there are legal issues (agree that potential legal issues would mostly be on your end, but why would they take the chance of being impacted especially since they are not trying to game the system on their end and have nothing to gain).

Yes on 1) that's a separate issue. They are a client so I will have to see what they're looking for and why. But my suspicion is that my manager, who is full time employed has been told that employees have to work in Ireland for tax reasons. He doesn't understand the law and is just passing on the rule without actually thinking about it. Some people are working from the North of Ireland for example, which is another tax jurisdiction. So I don't know what they would do. Or maybe this tax rule is only cared about if the jurisdiction in question have nice sandy beaches and a better lifestyle for the worker.

2) Yes that's always the risk but contractors can't live like their current position is the only option. If a client doesn't like what I have to offer, they're free to take in someone else and train them up. I'll pack up my IT skills and go somewhere else.

I think your main point surrounds what they want or think as opposed to an actual law or regulation which would impact them and I do take that point and agree with it. I'm just wondering if I'm missing out on anything more than that.

conor_mc

I think there’s also a question of precedent. Many employers are concerned that employees might be aggrieved if they feel contractors have a better deal than them, and so it’s fairer/less grief to apply the same standard to all. If they set the precedent with just one contractor, then they’re setting themselves up for a fall. You have to bear in mind also that wholesale work-from-home might be new to them and they need to adjust slowly lest some employees/contractors take the mick.

TP_CM

strandroad wrote: »

You do have a contract with an entity who hired you, and it's under the Irish law for labour and tax. That's what they don't want messed with.

Do you think the contractors who are working remotely from the North of Ireland will be impacted then? I mean after covid and regardless of Brexit. We've been told we're working remotely for the foreseeable. Some have bought houses back 'home home' north of the border.

Bubbaclaus

GarIT wrote: »

In some countries. In Austria for example its 1 day.

Exactly. People saying that there's an 183 day rule as if there's some global uniformity in tax law is really unhelpful in these threads.

Even for employees coming into Ireland, it's as little as 30 days here that causes potential issues for a company, depending on where the employee is coming from.

GarIT

TP_CM wrote: »

Do you think the contractors who are working remotely from the North of Ireland will be impacted then? I mean after covid and regardless of Brexit. We've been told we're working remotely for the foreseeable. Some have bought houses back 'home home' north of the border.

If they're caught yes they are avaiding tax. Could face fines or prison. Unless they have declared their income to HMRC and are paying tax on it.

TP_CM

conor_mc wrote: »

I think there’s also a question of precedent. Many employers are concerned that employees might be aggrieved if they feel contractors have a better deal than them, and so it’s fairer/less grief to apply the same standard to all. If they set the precedent with just one contractor, then they’re setting themselves up for a fall. You have to bear in mind also that wholesale work-from-home might be new to them and they need to adjust slowly lest some employees/contractors take the mick.

I think it's more this yes. I think a lot of the permanent senior 'decision makers' are stuck in Ireland with their families watching younger people on a higher wage travel the world's nicest beaches. And that's fine, human nature. But it's not 'tax' reasons which they're mentioning. I'm still waiting on my accountant to confirm if there is any tax reason on my side which I'm missing. For example, I'm an irish registered company - is there a requirement for it to operate mainly on Irish soil.. I'm just shooting the breeze now by the way.

strandroad

TP_CM wrote: »

Do you think the contractors who are working remotely from the North of Ireland will be impacted then? I mean after covid and regardless of Brexit. We've been told we're working remotely for the foreseeable. Some have bought houses back 'home home' north of the border.

If your company only has Irish operations yes they are at risk of being in breach.

I used to work for a company where employees would do that but the company itself was cross border so it was legalised in some way.

Johnny Jukebox

strandroad wrote: »

Well no, your contract is still subject to employment law in Ireland I suppose. If you actually work out of let's say France and there is a dispute with the employer in which you invoke the French law or work standards as you are entitled to do since this is where you actually perform the work, how do you think they would like that? That's what they want to avoid also, different legal frameworks and their impact.

I don't think so. If he is a genuinely independent contractor then he has a contract of service and not one of employment.

TP_CM

Johnny Jukebox wrote: »

I don't think so. If he is a genuinely independent contractor then he has a contract of service and not one of employment.

Correct, if I had a contract of employment I would be able to avail of things like redundancy which I definitely don't have. The whole idea of contracting is more money in exchange for less security with the company. I have been with them for years and years and they are under no obligation to renew my contract.

strandroad

Johnny Jukebox wrote: »

I don't think so. If he is a genuinely independent contractor then he has a contract of service and not one of employment.

But under which legal framework? Where do you go if service is disputed?

TP_CM

strandroad wrote: »

But under which legal framework? Where do you go if service is disputed?

If they don't like the service, they terminate my contract. If damage has been done, they sue my company which has professional indemnity insurance (that's a requirement for us).

GarIT

Isn't there a law that after 2 years you automatically become an employee and can no longer be a contractor?

ByTheSea2019

Could the position not be even worse for an independent contractor? The limited company would be responsible for paying the employees tax in the correct jursidiction and if it did not the director would be responsible for that.

TP_CM

GarIT wrote: »

Isn't there a law that after 2 years you automatically become an employee and can no longer be a contractor?

That's not independent contractors. I think that's fixed term contracts which do have an employment contract between the company and the person. Independent contractors are basically mini KPMG/PWC companies who take on companies as clients, not employers.

TP_CM

ByTheSea2019 wrote: »

Could the position not be even worse for an independent contractor? The limited company would be responsible for paying the employees tax in the correct jursidiction and if it did not the director would be responsible for that.

Yes I am responsible for that, as in I'm the director of the Ltd company. It's just me though, so I would just get an accountant who knows how to handle that. Probably in the foreign jurisdiction but admittedly I would need to research that and consult a tax advisor.

zephyro

TP_CM wrote: »

Yes I am responsible for that, as in I'm the director of the Ltd company. It's just me though, so I would just get an accountant who knows how to handle that. Probably in the foreign jurisdiction but admittedly I would need to research that and consult a tax advisor.

Contractor also, are you tax resident in this foreign jurisdiction now?

ByTheSea2019

TP_CM wrote: »

Yes I am responsible for that, as in I'm the director of the Ltd company. It's just me though, so I would just get an accountant who knows how to handle that. Probably in the foreign jurisdiction but admittedly I would need to research that and consult a tax advisor.

Obviously you don't have to say, but is the "foregin country" where you will be based the UK by any chance? If so find out how IR35 legislation applies to your situation from a professional. I wonder if it could leave either you or your end client with a massive tax headache post April when the new legislation comes in.

TP_CM

ByTheSea2019 wrote: »

Obviously you don't have to say, but is the "foregin country" where you will be based the UK by any chance? If so find out how IR35 legislation applies to your situation from a professional. I wonder if it could leave either you or your end client with a massive tax headache post April when the new legislation comes in.

No, not the UK but I have colleagues which have purchased houses in the north of Ireland. I'll mention that to them, thanks. The foreign jurisdiction for me would be outside Ireland but within the EU.

TP_CM

zephyro wrote: »

Contractor also, are you tax resident in this foreign jurisdiction now?

No as of right now, I'm completely tax resident in ROI and the company is Irish too.

conor_mc

TP_CM wrote: »

I think it's more this yes. I think a lot of the permanent senior 'decision makers' are stuck in Ireland with their families watching younger people on a higher wage travel the world's nicest beaches. And that's fine, human nature. But it's not 'tax' reasons which they're mentioning. I'm still waiting on my accountant to confirm if there is any tax reason on my side which I'm missing. For example, I'm an irish registered company - is there a requirement for it to operate mainly on Irish soil.. I'm just shooting the breeze now by the way.

I think you’re oversimplifying my statement to say “they’re just jealous of my freedom”. ðŸ˜

It’s more about equity within a team and esprit de corp. Even as a contractor in IT, I presume you are part of a team unless you’re there for a ~6 month project or some such. In that sense, a manager needs to keep a reasonably level playing field so as not to demotivate their permanent employees who cannot be granted the same flexibility as you. The initial jokes about sunning yourself by the pool on daily stand-ups will get pretty wearing as people grind their way through what is no doubt an awfully challenging time for all of us at the moment, albeit for some more than others.

zephyro

TP_CM wrote: »

No as of right now, I'm completely tax resident in ROI and the company is Irish too.

OK, obviously you'll need to be aware and prepare before you do become tax resident there as it will introduce issues for your ltd. Is there anything in the contract between your company and the client which states where the work will be done?

TP_CM

conor_mc wrote: »

I think you’re oversimplifying my statement to say “they’re just jealous of my freedom”. ðŸ˜

It’s more about equity within a team and esprit de corp. Even as a contractor in IT, I presume you are part of a team unless you’re there for a ~6 month project or some such. In that sense, a manager needs to keep a reasonably level playing field so as not to demotivate their permanent employees who cannot be granted the same flexibility as you. The initial jokes about sunning yourself by the pool on daily stand-ups will get pretty wearing as people grind their way through what is no doubt an awfully challenging time for all of us at the moment, albeit for some more than others.

Yes I agree with that. But what you're describing sounds more like managing jealousy which is more or less what I was saying. I'm not disputing the optics of some employees being able to travel the world while the permanent staff sit in Ireland. I definitely get that. But by the same token, permanent staff know that contractors are on 2 or 3 times the wage and they accept that because a permanent job is worth more to them than the additional money that comes from contracting. And contractors know that when the time comes for cuts, they're first out the door. There are known differences to each already. Maybe this is just one more difference.

TP_CM

zephyro wrote: »

OK, obviously you'll need to be aware and prepare before you do become tax resident there as it will introduce issues for your ltd. Is there anything in the contract between your company and the client which states where the work will be done?

The thing is I would just like to work abroad for 6/8 weeks. But yes I would need to look into the tax situation carefully. To your question - At the moment, no. My contract is a quarter page long. It has their name, my company's name, the day rate and new contract expiry date. But if they feel strongly about this then I suppose it could be included in the future.

zephyro

TP_CM wrote: »

The thing is I would just like to work abroad for 6/8 weeks. But yes I would need to look into the tax situation carefully. To your question - At the moment, no. My contract is a quarter page long. It has their name, my company's name, the day rate and new contract expiry date. But if they feel strongly about this then I suppose it could be included in the future.

In that case from your perspective you're quite entitled to just tell them what you're going to do, the risk of course being that they don't like it and end the contract.

TP_CM

zephyro wrote: »

In that case from your perspective you're quite entitled to just tell them what you're going to do, the risk of course being that they don't like it and end the contract.

Yes, and the big input into that issue is how other IT companies treat this 'perk'. If my current 'client' is the only one which requests contractors to stay in Ireland, then it's easy to walk and find a company which allows me to work from abroad. But if it's going to be a general theme across my industry then there isn't much I can do about it, except get over it and move on. I just wanted to check if there was something regulatory which would stop me. I will see what my accountant thinks next week. He might think of something I'm missing.

relax carry on

I often wonder how many IT contractors would actually meet the criteria of an employee if Revenue were bothered to challenge it?

https://www.revenue.ie/en/employing-people/becoming-an-employer-and-ongoing-obligations/guide-to-pay-as-you-earn-paye/determining-the-employment-status-of-an-individual.aspx

zephyro

relax carry on wrote: »

I often wonder how many IT contractors would actually meet the criteria of an employee if Revenue were bothered to challenge it?

Yes likewise, in IT and pharma "contractors" are typically treated as if they were employees which clearly conflicts with the guidelines. They occasionally make noises about the construction sector which is much smaller, can only assume Revenue have been told to stay clear to avoid p1ssing off the MNC that employ contract so many.

Bob24

conor_mc wrote: »

I think there’s also a question of precedent. Many employers are concerned that employees might be aggrieved if they feel contractors have a better deal than them, and so it’s fairer/less grief to apply the same standard to all. If they set the precedent with just one contractor, then they’re setting themselves up for a fall. You have to bear in mind also that wholesale work-from-home might be new to them and they need to adjust slowly lest some employees/contractors take the mick.

Very good point.

Bob24

Johnny Jukebox wrote: »

I don't think so. If he is a genuinely independent contractor then he has a contract of service and not one of employment.

While technically I believe you are correct, it still is somewhat a needless risk from the client company’s perspective.

They have nothing to gain from allowing their supplier to do this cross country thing. And even though they aren’t legally liable they might end up being involved/impacted if things go wrong.

So why taking even the slightest risk? (unless maybe the contractor in question has a very hard to find skill set which would make them very hard to replace, and is threatening to end the contract if not allowed to work from abroad).

Just my guess but I think this might be a simple explanation: they’re not exactly sure how this might impact them, and since they don’t have anything to gain from it they just don’t see why they should chance it or look further into it.

strandroad

TP_CM wrote: »

I just wanted to check if there was something regulatory which would stop me.

Consider data security. If you're in the EU it helps with GDPR but there might be other regulations regarding taking the data out of jurisdiction.

3DataModem

TP_CM wrote: »

The thing is I'm an independent contractor working in IT. So in the same way as I have no right to company pension, perks, bonus, or job security/redundancy pay, technically my employer is my own Ltd company I have set up to invoice what's basically my client. I'm day rate independent contractor. So really, if I work with my own accountant to ensure I'm tax compliant based on my days spent wherever, and I would be very by-the-book that way, my 'client' for want of a better word shouldn't really care, right?

Two points:
1. Your company will have a services agreement with the client company, so it is possible there are stipulations about where the work can be done (or where systems can be accessed from).
2. Your client company may have system access rules they want to apply to contractors or employees alike (perhaps for data protection / security reasons) and if your location is at odds with this policy, one of those things will have to change and neither party is automatically 'right'. I would say your employer's services agreement with the client company covers "using IT systems in line with policy" as a requirement, so you are probably going to have to convince them otherwise.