With remote working the only option for many employees since the onset of COVID-19, the question of where that remote location is and the number of employees it involves can create tax implications at both corporate and personal levels. This is all linked to the longevity and type of activity being undertaken, most particularly by companies with a high number of employees from diverse jurisdictions.
This tax and employment law issues in all of these instances was explained very comprehensively by a team of tax and human resources’ experts from Mazars when addressing a Shannon Chamber webinar on the topic.
Cormac Kelleher, International Tax Partner with Mazars in Ireland commented: “The onset of COVID-19 has led to an unprecedented movement of employees either to or from Ireland, relocating in line with work and their home lives, which is reflective of the international nature of Irish business and Ireland as a location. While this movement was initially for a short period, that time-period is dragging and raises the question for employers and indeed tax authorities about ‘permanent establishment’.
“OECD guidance in April stated that temporary relocation would not lead to tax liabilities for employers; however, this guidance does not define what ‘temporary’ is. As reported, some well-known corporates have stated that they will not return to the office until mid-2021 in some cases and some are introducing hybrid working arrangements, further raising questions in this regard. We are seeing tax authorities across Europe now issuing guidance and essentially placing responsibility on employers and employees to return to their original country for tax purposes.
“The overall issue of location and movement has further implications with regard to transfer pricing and value creation from a corporate tax perspective. It is therefore imperative that business know where their employees are located, understand their role in terms of value creation, and does their location constitute a permanent establishment.”
Ken Killoran, Partner – Employment Tax & Global Mobility Tax Services with Mazars in Ireland, added: “We are seeing international employers focusing more on the payroll tax risks associated with having employees working remotely from another country as a result of the pandemic. The remote working may trigger a payroll tax withholding obligation in that country. The tax risk can apply to employees working remotely from Ireland for a foreign employer or indeed an employee working remotely abroad for an Irish employer.
“It is more important than ever for international employers to track and monitor the whereabouts of their employees who are working remotely from other countries in order to mitigate the corporate and employment tax risks. Employers should have a clear policy in place covering remote working in order to help keep the company compliant for tax purposes.
“Also, employers need to think about the potential immigration requirements that may be triggered as a result of an employee working remotely in another country. Employers need to consider whether the employee requires permission to either work remotely in Ireland or the overseas location, which may not have been an issue before.
“Employers should also consider the employment law rights which the employee may now be entitled to in the other country.
“It has been noted that some international companies are now asking employees to return to their country of employment, including Ireland, for tax and administrative purposes. While this is a prudent step, some employees may not want to return to Ireland for their own personal health or other reasons, therefore, this matter is not without complication for employers.”
Describing 2020 as the most challenging year for human resources’ managers and practitioners, Mazars HR Consulting Director Sonya Boyce said that despite all the uncertainty, they are guided by employment law in managing and organising their employees.
“HR managers are dealing with a new set of considerations since the onset of the pandemic: managing the effectiveness of remote working while preventing burnout, data protection, remote disciplinary issues and of course, the issue of when and how to bring employees back on site. Given that the contractual place of work is the ‘office’, it is not unreasonable to assume that employees will have to return on-site at some future stage. Managers may need to be flexible in how this is attained in the ever changing circumstances they find themselves in,” explained Ms Boyce.
“The key to effective employer employee engagement is communication and that’s why it is essential that companies make their expectations clear and ensure that their communications efforts are doubled, particularly when linking remotely,” she added.
As a former HR manager with a multinational company, Shannon Chamber CEO Helen Downes stated: “Managing the HR function within a company can be complex as it involves managing two sets of expectations, the employer’s and the employee’s. The pandemic has added further to that challenge.
“Shannon Chamber was delighted to bring in a team of experts from Mazars to go through the many complex issues that the HR function is currently facing particularly if a cohort of their employees are working remotely in anther jurisdiction or multiple jurisdictions, a growing occurrence in many multinational companies in the Mid-West. It was a topic of great interest to our member companies.”