The remote work boom during the Covid-19 pandemic has created new situations for both employers and employees. Employees have extended their vacation trips indefinitely or moved to their holiday home to work. There are issues regarding distance work that you should be aware of. First of all, the parties need to sign a written agreement about remote work, including how the work is to be carried out and monitored. Some of the main general rules for distance work are:
- There may be a fixed office formed overseas for the company, as well as general tax liability, if an employee working remotely is in managerial position, if the company has a business location in the country or if its de facto management location is situated there. The decisive factor is where the company’s strategic management is located.
- Each country wants to hold on to its taxpayers and be aware of their total income, regardless of their country of residence. A general tax liability is generally formed after residing in a given country for six months. Taxation is based on living and working in the country, while the taxpayer’s citizenship does not play any role in the matter. The United States is an exception to this rule. It requires its citizens to report all their income regardless of how it is gained. International collaboration between officials has tightened. Their joint goal is to root out tax avoidance.
- In remote work, employers are responsible for their obligations regarding the contract relationship. Employers may be liable to report distance employees’ salaries and so forth in their working country. As a rule, employers are covered by the social security system of the country where they work.
The coronavirus situation is new for officials, too, and their information systems are being developed to meet the new challenges.
Particularly in regard to taxation, official monitoring is done retroactively. To avoid surprises, everyone should sort out their own situation and get their local registrations in order.
A distance worker’s tax status may not be registered in the overseas working country. It is difficult to monitor remote work if a Finnish employer files income tax returns in Finland. However, local registration benefits employees. If they face a serious accident or illness, correctly handled social security and insurance are essential. Unauthorized residence or breaking official regulations may lead to penalties. It is therefore important to take care of matters by the book while you enjoy remote work and the freedom it brings.
More information: Master of Laws Anne Nikula, Nikula Legal Oy, +358 50 341 6562 / anne@nikulalegal.fi
Anne Nikula is an experienced lawyer specialized in taxation and international affairs. Her services are chargeable. The Finland Society members receive a free preliminary discussion as well as a 20 percent discount. Please remember to give your membership number.
The article can be found also in the Suomen Silta 1/2021 magazine.