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ISSUE 1
Whilst the employee’s home country payroll may remain the same, care is also needed to ensure that any overseas payroll obligations are satisfied. For example, Canada requires the employer of any remote worker in Canada to register with the authorities as a foreign employer. Even where no tax or social security is due in Canada, a waiver is normally required from the Canadian authorities in order to relax an obligation under the Canadian rules to set up and operate a payroll in Canada. Permanent globally remote working Where an employee is working from home overseas permanently and their employer is based in another country, payroll and employer compliance obligations generally can be more difficult. The potential considerations include: Triggering an overseas corporate presence : Employers are often surprised to learn that the activities of an employee in another country may unintentionally trigger a corporate presence in that country. That is, even where an employer is not registered overseas, an overseas tax authority may deem the employee to have created a corporate presence (or “permanent establishment”). The creation of a permanent establishment can lead to the requirement for corporate tax returns, the payment of corporate tax on profits allocable to the permanent establishment, the filing of accounts, the operation of a payroll and a host of other overseas corporate obligations. The rules
on permanent establishment are complex and often subjective and will require careful review. EU social security obligations : Even where no corporate presence is created overseas, an overseas payroll may still be required, together with other employer obligations. For example, if the employer is based in one EU or EEA country and an employee is living and working indefinitely in another EU or EEA country, the employer will normally be required to register with the overseas tax authorities to operate employer and employee social security. There have been numerous examples of employers falling foul of this obligation and receiving unexpected demands from tax authorities across the EU. Home country payroll considerations : From a home country payroll perspective, it is equally important to note that an employer cannot normally simply cease payroll withholding when an employee leaves to work indefinitely in another country since, depending on the tax and social security position, there may be ongoing home country payroll obligations. Other implications : Outside of payroll, employers will also need to ensure that their employees have the legal right to work in the country overseas. It will also be important to have the employee’s employment contract reviewed in the overseas territory to make sure that it meets
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