Why Won't Your Employer Let You Work Remote Abroad?
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- เผยแพร่เมื่อ 24 ก.ค. 2024
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International Tax - Fundamentals for Beginners: www.udemy.com/course/internat...
The subject of remote work has been a hot topic for the past few years and many remote workers feel restricted by employer policies that don't allow them to work outside their home country. One of the key reasons for this is due to Corporate Tax. A remote worker can potentially create a 'Permanent Establishment' in the country they are living in, causing the company they work for to have a Corporate Tax liability in that country. In this video I provide an introduction into some of the key concepts to understand.
0:00 Introduction
0:18 Background
2:34 Main issue - Corporate Tax
4:22 How Remote Workers Create Corporate Tax Issues
5:00 Permanent Establishment
7:01 Example - UK remote worker in Greece
10:00 Summary of how a Permanent Establishment can be created
12:36 Conclusion
A BIT ABOUT ME
I've been advising on international tax since 2014, and qualified as a Chartered Accountant in 2018. I worked for consulting firms PricewaterhouseCoopers and BDO, before I started a remote international tax consultancy firm, Degen Tax Advisers, in 2020.
I work with online entrepreneurs to help them navigate the complex world of international tax. I work with e-commerce businesses, digital nomads, content creators, tech startups, crypto investors and many more in the digital space. Like my clients I'm pretty nomadic. I've lived in the UK, US, Japan, China, Malaysia, Thailand, Vietnam and Singapore. Currently I'm spending most of my time around Southeast Asia.
DISCLAIMER
My videos are for general guidance, education and providing you an introduction to the concepts of international tax. They in no way constitute specific advice to your specific circumstances. I accept no liability for any reliance placed upon the content of these videos or references, therein.
hey andy, great content. one can find the basic international tax questions answered anywhere but this advanced stuff is very rare and a great resource. hope you keep going!
Thanks for your kind words! Yes I intend to make a lot of content in this area. In my experience local tax authorities (whether its HMRC in the UK, IRS in US, CRA in Canada, ATO in Australia, any EU tax offices etc) provide no help at all when it comes to international issues. But with the online business world and remote work thriving, many freelancers and small businesses are facing international issues more than ever and need guidance. So I'm just hoping to bring some much needed clarity to the space
@WorldTaxAndy two things i would recommend, if i may, are to invest a little bit into production quality (though your audio is already much better than for most people starting out); and to give the videos a more perceptible structure (think presenting slides but without the slides) - just to increase the viewing pleasure and mental engagement. i can imagine them getting quite popular as a result.
ultimately communicating information on youtube is a lot more like public speaking than having a conversation.
lastly, i hear thumbnails are important. you might want to put fewer words on them and use a larger picture of yourself so the eye doesn't skip over it as easily.
@@liv-oi6vg Thanks a lot for that feedback, really appreciate it! My first time making any sort of video content so all feedback is gladly received. I have a very basic lavaliar mic at the moment so an upgrade on that will probably be my next purchase!
@@WorldTaxAndyyou might also want to look into video recording and lighting options, there's quite a bit that can be done on that front i reckon.
most of the rest of the improvement is going to come with time as your skills in public speaking and video editing develop, in my estimation.
i suppose it would be time-efficient to hire someone for the latter and focus on the former, but i have heard a lot of youtubers say that doing the editing themselves gives them a better ability to review and improve their presenting abilities as well as the content of the video.
@@liv-oi6vg Yeah I move around a lot and have been in a new environment for nearly every video so haven't put much thought into optimal lighting yet but I'm looking into equipment options, ideally lightweight and easy to travel with! And yes I've found the editing process quite fun & cathartic - helps you put the ego aside and objectively critique yourself, the good and bad
I've been wondering that for long time
Another great video! I am intending to be a remote worker for a UK company in Malaysia under the De Rentau Digital Nomad program.
I intend to work there for a year (will be Malaysian Tax Resident) does that make me a dependent agent and therefore make my UK company liable for tax in Malaysia?
My work is IT/Software engineer related.
Thanks for the insightful video. I will soon be a remote worker for a small UK-based company only 1 day a week. This has reassured me I am not a dependent agent. Does this by default mean I will not be required to complete an Egyptian tax return? Of course, my employer will pay my tax in the UK, and there is a double tax agreement between UK and Egypt.
Hi, thanks for the kind words. In that scenario your company has no tax concerns itself so it won't need to consider Egyptian taxes. On your personal level, you'd still have to consider whether you're an individual Egyptian tax resident (which you would be if you spent > 6 months in Egypt over a calendar year), however, as you say there's a double tax treaty which credits any tax paid in the UK against any potential Egyptian tax liability. The Egypt income tax rates are generally much lower than the UK income tax rates, meaning the credit you get for UK taxes paid should always cover the potential Egyptian tax liability , meaning no taxes would be due in Egypt. However it would be worth checking with an Egyptian advisor on whether this means you can skip filing a return - in many countries, you're free to avoid submitting a tax return if you have no net tax to pay, however this isn't the case everywhere so worth confirming what their latest status on this is.
Great video Andy! We are a small uk startup so not much fear of corporation tax there yet 😅. We do have a coder and an operations manager living abroad in EU a few months of the year, which is not a problem at all. But we do wonder about payroll implications, specially if they chose to become tax residents in the EU country. Our accountant is not versed on international matters, so not too sure where to find general information about this.
Hi Alice, thanks for the kind words. So generally the only change would be as you say if they become a tax resident in the other country, typically meaning they're living there for > 6 months of the year. In which case, technically the employee has an income tax responsibility in the EU country rather than the UK, meaning you'd no longer pay them their net salary after UK tax. There are two main options: (1) pay their gross salary and then its their responsibility to submit a tax return in the EU country, or (2) register with a payroll provider in that country, or use an international provider like Deel.com. They would then help you manage the appropriate tax/national insurance equivalents to pay them their gross salary.
(1) is usually the easier approach and is what I see in 90% of cases, but (2) might be preferred if you're likely to have a lot of employees in this situation and want something more standardised. If you are likely to have multiple employees across multiple countries, it would be better to get an international provider who can manage it all, rather than local providers for each country which could become an admin burden.
Hi Andy, as a follow up to this conversation with Alice, are you able to explain what the situation is if our employees are moving around the world, and not staying for longer than a few months in a single country? By the sounds of things that's what you are doing, which I think is an interesting concept and one that I'm seriously thinking of adopting if possible.
@@cj1359 Hi CJ, yes this is becoming increasingly common. This can theoretically lead you to being a 'tax nomad' where you don't have a tax residency anywhere. The ability to do this depends on where you are from originally and your previous tax residency, because some countries don't allow you exit their tax system without a new adopted tax residency.
For example, for American citizens this isn't possible as they're always taxed by the US no matter where they go, and for a lot of Western European countries (Spain, Germany, Sweden to name a few) they often require you to pick up a new residency before you can surrender theirs.
However, for UK tax residents, its possible to be a tax nomad - so long as you don't meet the UK's statutory residency test, then you are not a UK tax resident. No other residency needs to be obtained.
So in effect you can end up in an interesting position where you owe no income taxes to anyone. Thus if your employees were doing this, you would withhold no taxes on their behalf, and they would not pay any income taxes or submit a tax return.
The key considerations here are usually not from a tax perspective. Clearly it's extremely beneficial from that side of things, but depending on future plans, it can be beneficial to have a tax residency. For example, if you're applying for a mortgage, opening a bank account or even trying to start a company, it can work against you if you don't have a tax residency. So the tax pros have to be weighed up against the potential other impacts it can have. But I've worked with hundreds of ex UK tax residents who have generally managed to do this fine over the past decade.
Thanks@@WorldTaxAndy for the thorough and enlightening answer. I guess it depends on a case by case basis. What's best for one person might not be best for another. And if you decided not be a tax resident anywhere then unless you have a massive stash of cash or investments somewhere you're likely to lose a lot of benefits, like mortgages, pensions and the like. Thanks again for taking the time to answer. Appreciate it.
@@cj1359 Yes indeed, and I've even seen situations where nomadic UK expats have just decided to continue their UK tax position as normal (i.e continue going through the PAYE process or filing UK self assessment tax returns) even if they qualify as a UK non tax resident. HMRC will never turn someone away for trying to pay taxes! But many find paying UK taxes to be akin to an insurance policy, particularly if they're dependent on certain arrangements like UK mortgages that they don't want to disrupt
Hey channel, not sure if you can answer this but if I transition to a contract with my current employer and move to Europe. Will they creating a PE - permanent establishment in Europe? In other words, will they be subject to European taxation and European employment regulations for having a contractor in Europe?
And I would still be paying taxes normally in the US and keeping fiscal residence in California. Thanks in advance for your response! Great video, many thanks !!
@@SINADINO Hey, thanks for the comment and kind words! In most cases - you wouldn't create a PE in Europe.
This depends on your role at the company though - if you're "habitually concluding contracts" on behalf of the company, for example you're often meeting with clients as well as negotiating and signing contracts on behalf of the company in Europe, this could indicate the company has a European PE. If this isn't the case then the company should be okay.
On payroll, as an American, typically you'd continue to pay US tax / social security as normal. In terms of contract, I believe the employment regulations of your European country would apply if it's a employee/employer relationship - but this can be a grey area if you're a genuine contractor. In which case the employment regulations tend not to apply. In most countries a contractor has to be more autonomous than an employee (for example, can work with other clients should he choose, has flexibility, can choose hours etc)
Wow thanks for thorough response, I cannot thank you enough. I anticipate getting contracts from other companies, I would not be contracting exclusively with my current one. Although, initially my current company will provide with most of it. And I don’t sign contracts with clients on behalf of my company, I simply serve as a Solution Architect on projects the company has with various clients. So I believe there is nothing preventing my company from allowing me to contract from overseas. In fact, they already do near and off shoring but those contractors usually have a middle man providing them with all the legalities. Thanks so much again and keep up the great work!
@@SINADINO No problem at all, glad to help! Yes this should be pretty clean from your side then, you can be viewed as an independent contractor and will pay your US taxes as normal. Further you may be able to qualify for Foreign Earned Income Exclusion which generally exempts you from US tax on the first $126,500 of your income (as of 2024).
@@WorldTaxAndy thanks again Andy and I am glad you brought up the foreign earned tax exemption because I was under the impression that tax benefit would only apply if I earned income from a foreign company. I did not think that it could apply for earned income from an American company simply because I live abroad.
As a remote worker living in the USA this has been very helpful. I wonder how this applies to Non-profits though, since I work for a non-profit and they also do not allow me to work (for longer than a few weeks anyway) outside of the USA.
Hi Mike, thanks for the comment and great question. Certainly the non-profit aspect of the company means Corporate Tax won't be a concern on their part.
I would imagine the most likely concern they have is payroll related tax implications - currently they will process your US payroll taxes such as social security, FICA, Medicare etc.
However they may have a concern that this could change if you're abroad - and they'd have to consider local payroll tax implications. In most cases, US employers have to take a conservative approach as they 'dont know what they don't know' about other payroll regimes.
Whilst I'm not a payroll tax specialist I have seen people get expert advice in this area - those who have confirmed that their foreign presence won't come with additional payroll concerns have been able to provide this assurance to their employer who has then allowed them to work abroad. So I think it generally can be addressed on a case by case basis, depending on your intended destination/travel plans.