Working from home in another country
This article explores the various factors employees and employers must take into account when looking to work from home abroad. The assumption is the reader is a UK national and their place of work is in the UK.
The COVID-19 pandemic has seen many companies and employers move the majority of their work online which has allowed their employees to work remotely, be it full time or part time without requiring attendance at their workplace. Some employees may wish to work abroad rather than in the country their work is based. There are many reasons they may wish to do this, such as being with family if they do not reside in the country of work, particularly as there are current travel restrictions in place due to COVID-19.
Working remotely in a country that differs from the country where you work is no simple matter and can trigger a lot of implications, such as tax, legal and immigration.
Generally, employees should notify the employer of any intentions to work remotely abroad. Provided the employer is agreeable and the nature of the employee’s work permits it, there are many factors that need to be considered.
The employee must hold the necessary immigration documentation to stay in the desired country for a prolonged period of time. Depending on the employee’s chosen host country and their intended duration of stay, the requirements may differ. If an employee is only intending to stay in the host country for a short period of time and only carry out permitted activities, it is likely they will be able to categorise the stay as a business trip.
Ultimately, the employee must ensure they have the right to reside and work in the host country. It may be that a visa is required for the duration of the stay.
Depending on where the employee wishes to work, there may be tax implications. Different host countries will have their own rules and regulations in this regard. A possible risk to the employee in addition to paying UK tax, they may be required to pay further tax in their host country. Many countries have tax agreement in place to avoid the duplication of tax payments, so please seek specific tax advice to assess an individual’s position.
For example, if the employee resides in the host country on a short-term basis of under 6 months, they will usually be expected to pay UK tax and not pay any tax in the host country (depending on residence rules in the host country). They may have an obligation to declare earnings in the host country. If the employee intends to reside in the host country for a medium-term basis, they may be subject to both UK tax and the tax of their host country. If the employee resides in the host country for a long-term basis of over a year, they may be exempt from UK tax but be subject to the tax rules of their host country.
The above is only a simplified break-down of the possible tax scenarios.
The employee will need to ascertain whether they will acquire tax residence in their host country and whether they will end their tax residence in the UK. Where the employee acquires tax residency in the host country, they are more likely to have to pay tax in both countries. The risk of acquiring tax residency is usually greater where the employee spends over 6 months in that country. On the other hand, ending your tax residency in the UK usually requires the employee to remain away from the UK for a year. It takes less time to acquire tax residency status than it does to end tax residency status, it is that brief ‘transition’ period where an employee is likely to have tax residency in 2 countries.
Once the tax residence status has been determined, the next step is to look into whether the UK and the host country have a tax treaty/agreement which dictates whether the employee will be taxed twice or only that of one country.
There may also be social security liabilities that the employer will need to deduct from the employee’s wages and provide to the host country. Similarly, to the tax agreement mentioned above, the UK and the host country may also have a social security agreement. See more details on social agreements for UK workers.
When living and working abroad, employees will be subject to the law and regulations of the host country. This will include the protections offered under the host country’s employment law. This means that the employee will benefit from the host country’s annual leave allocation, minimum wage and similarly the termination rights for ending an employment contract. It is therefore important the employer is aware of the legislation differences between the host country and the UK to ensure they are not unknowingly breaching the employee’s employment rights.
Within the UK, employers have an obligation to ensure that they protect the health and safety of their employees. This obligation extends to scenarios even where the employee is working abroad, the employer must be aware of the host country’s health and safety regulations and ensure that they are compliant.
Where an employee works abroad and the employer’s operations are based in the UK, there should considerations towards data protection. If data will be transferred internationally and depending on where the host country is, the employee and the employer could be in breach of data protection laws.
Our Business Services Team are able to able to advise on all of the issues raised above should you have any enquiries or need any advice so please do get in touch should you require any assistance.