Working with staff abroad: tax and social security ... · Working with staff abroad: tax and social...
Transcript of Working with staff abroad: tax and social security ... · Working with staff abroad: tax and social...
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Working with staff abroad: tax and
social security opportunities and pitfallsTax and social law aspects of cross border employment
Peter Wuyts
Ria Matthijssens
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• Tax implications of working with staff abroad
- General principles: Double Taxation Treaties
- The myths and pitfalls
- Obligation to withhold Belgian withholding tax
• Types of international employment
- Business Trip, Secondment, Transfer
- Simultaneous employment
• Labour law and social security aspects
• Questions
Contents
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Tax implications of working with
staff abroad
Peter Wuyts
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Distinction in function of the qualification of the individual
concerned:
- Employees (Article 15)
- Directors (Article 16)
- Self-employment (Article 14)
Tax implications of working with staff abroad
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Employees (not self-employed):
• Principle: taxable in the residence state
• Exception: in case of employment outside the residence state,
taxable in the work state unless:
- The employee is present in the state where he works during a period
or periods, which do not exceed 183 days in a period of twelve
months beginning or ending in the same relevant tax year;
- The remuneration is paid by or on behalf of an employer that is no
resident of the work state;
- The remuneration is not borne by a permanent establishment or a
fixed base that the employer has in the work state.
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Employees: Analysis of the conditions
• Cumulative conditions, i.e. taxation in residence state in case
the three (negative) conditions are met. Taxation in work state
in case at least 1 condition is not satisfied.
• 183 days rule: physical presence - !! Period !!
• By or on behalf of an employer in the work state:
- Basic principle for structures of split payroll opportunity
- Concept of the economic, material employer
- Service agreement
• Permanent establishment: material and personal permanent
establishment
Tax implications of working with staff abroad
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Exemption of double taxation treaties:
• Credit method
• Exemption method:
- “Taxable” in the source state
- “Taxed” in the source state
- “Actually” taxed in the source state
Tax implications of working with staff abroad
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A few myths unveiled…
• “When my employee stays less than 183 days, there is no
problem”
• “As long as I don’t charge any salary costs abroad, there is no
problem”
• “As long as I haven’t registered a branch office abroad, there is
no problem”
• “I have a foreign employer, therefore I am taxable abroad”
Tax implications of working with staff abroad
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Withholding tax
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Barring an exemption foreseen by law or by international
agreements, the withholding tax is owed by:
1. The debtor of remunerations, pensions, income and allowances
2. Who pays or attributes these in Belgium or abroad; and
3. Who has the quality of:
• Belgian resident (natural person)
• Domestic company
• Belgian legal persons
• Foreign companies ‘for which the remunerations paid (…), which
they pay or attribute in Belgium or abroad, represent business
expenses within the meaning of article 237 ITC92.
Withholding tax: basic principle
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How to deal with differences in
taxation
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• Split payroll structures often are implemented to benefit from
lower foreign taxes
• And why worry? It’s the employee’s problem !
• But is it?
• Sales Manager Benelux with split payroll is promoted to a function as
Sales Director in Belgium…
• A Belgian manager sends one of his team members to the subsidiary
in the Czech Republic and starts comparing net income levels
• A company has many engineers volunteering for a project in France,
while the manager responsible for the project in Germany is
understaffed…
Dealing with differences in international tax levels
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• “Laissez-faire”: the employee bears the tax impact of the
foreign employment
• Tax equalisation: employer bears the positive or negative tax
impact of the foreign employment
• Tax protection: employer compensates negative impact of
employment abroad
Dealing with differences in international tax levels
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Cross-border Employment
Labour and Social Security Law
Ria Matthijssens
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Belgium Abroad
- EU or non-EU
- Business trip
- Transfer
- Secondment
- Simultaneous employment
- Social Security
- Labour Law
- Formalities
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Social Security
Secondment
Principle
Conditions
- max. 24 months
- Economic activities in seconding country
- Relationship of subordination
- Before secondment: social security in seconding country
- No replacement of another employee
Formalities
Exceptions
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Social Security – European Union
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Example 1 – home base
Captain residing in Sweden (working there for less than 25%)
Working for a Finnish company
Flying from Stockholm to various European locations – Home base = Sweden
Regulation 1408/71: Finnish social security legislation (= registered office
employer)
Regulation 883/2004 - existing employment situations (transitional
provisions):
Finnish social security legislation (= <25% in home country → registered
office employer)
Regulation 883/2004 - new employment situations starting 28/6/2012:
Swedish social security legislation (= home base)
Europe’s impact on labour law & social security
Amendments to the EU Regulation 883/2004
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Example 2 – home base
Captain residing in Germany (working there for more than 25% but less than
50%)
Working for a Finnish company
Flying from Frankfurt to various European locations – Home base = Germany
Regulation 1408/71: Finnish social security legislation (≠ mainly employed
in home country → registered office employer)
Regulation 883/2004 - existing employment situations (transitional
provisions):
German social security legislation (> 25% employment in home country)
Regulation 883/2004 - new employment situations starting 28/6/2012:
German social security legislation (= home base)
Europe’s impact on labour law & social security
Amendments to the EU Regulation 883/2004
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Example 3 – home base
Captain residing in Germany (working there less than 25%)
Working for a Belgian company with a permanent representation in
Luxemburg
Flying from Luxembourg to various European locations – Home base =
Luxembourg
Regulation 1408/71: Luxemburg social security legislation (=
representation office)
Regulation 883/2004 - existing employment situations (transitional
provisions):
• Belgian social security legislation (< 25% in home country →
registered office employer)
Regulation 883/2004 - new employment situations starting 28/6/2012:
• Luxemburg social security legislation (= home base)
Europe’s impact on labour law & social security
Amendments to the EU Regulation 883/2004
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Example 1 – 25%-rule
Residing in the Netherlands
Working in Belgium 4 days/week Belgian employer A
Working in the Netherlands 1 day/week Belgian employer B
2 employers in the same country
< 25% in the Netherlands
legislation country registered officeemployer(s)
Belgian social security
amended regulation : no changes
Europe’s impact on labour law & social security
Amendments to the EU Regulation 883/2004
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Example 2 – 25%-rule
Residing in the Netherlands
Working in Belgium 4 days/week Belgian employer A
Working in the Netherlands 1 day/week Dutch employer B
1 employer in country residence
no 25% rule
legislation country of residence
Dutch social security
Amended regulation :
• Belgian social security = employer outside MS residence
Europe’s impact on labour law & social security
Amendments to the EU Regulation 883/2004
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Example 3 – 25%-rule
Residing in the Netherlands
Working in Belgium 3 days/week Belgian employer A
Working in Germany 1 day/week German employer B
Working in the Netherlands 1 day/week Dutch employer C
2 employers outside country residence
no 25% rule
legislation country of residence
Dutch social security
Amended regulation : no changes
• = at least 2 employers outside MS residence
Europe’s impact on labour law & social security
Amendments to the EU Regulation 883/2004
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Social Security – Non EU
Bilateral agreements
- The United States of America, Canada and Quebec, San Marino,
Serbia, Bosnia-Herzegovina, Montenegro, Kosovo, Turkey,
Algeria, Morocco, Tunisia, Israel, Chili, Australia, Croatia,
Philippines, Japan, Macedonia, South Korea, Uruguay, India and
Switzerland (for nationals from outside the EEU).
- Nationals of the contracting countries, but exceptions are
possible.
No agreements
- Short period: 6 m. + 6 m.
- Local legislation
Service Overseas Social Security
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• Basic principle : freedom of choice
Not limited to law of EU Member States
May be implicit, but must be clear
Can be changed during the lifetime of the contract
Different parts of the contract can be subject to different national legislation
• Restrictions:
If all elements of the employment situation refer to 1 country: choice for
legislation of another country may not result in loss of protection provided by the
legislation of the first country
Choice for non-EU law may not result in deviation from mandatory EU rules
Choice for non-EU law may not be the only link to that country (substance)
Choice may not result in loss of protection provided by the mandatory legislation
that would be applicable if no choice had been made by both parties.
“Public order” rules in the country where the case is brought to court
Labour law & social security
Rome I regulation: principles
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• If no choice has been made: tie-breaker rules included in the
Regulation determine applicable legislation;
• This legislation also provides the minimal coverage;
• Criteria used in ECJ jurisdiction:
Quantitative criterion: where does the employee perform most of his
duties
Qualitative criterion: where is the real centre of activities located,
where does the employee perform his most important duties
Europe’s impact on labour law & social security
Rome I regulation: determination applicable law
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• Subsequent criteria:
Law of the country in which the employee habitually carries out his
work in performance of the contract;
Law of the country from which the employee habitually carries out his
work in performance of the contract;
Law of the country the place of business through which the employee
was engaged is situated;
Where it appears from the circumstances as a whole that the contract
appears to be more closely connected with a country than with the
countries designated under the rules above, the laws of that country.
Europe’s impact on labour law & social security
Rome I regulation: tie-breaker rules
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• Assignment (cf. EU Regulation 883/2004)
Temporary assignment does not change the place where work is
‘habitually’ carried out
No definition of notion ‘temporary’ intention to return
• Transfer: usually law of the receiving country
• Simultaneous employment
1 employer: qualitative and quantitative criteria to apply
More than 1 employer:
Several part time employment contract: different legislation
applies to separate contracts (but exception)
Framework agreement: qualitative and quantitative criteria to
apply
Europe’s impact on labour law & social security
Rome I regulation: tie-breaker rules
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EU Social
Security
Labour Law Formalities
Business trip
Transfer
Assignment
≥2 employers
Summary
EU Social
Security
Labour Law Formalities
Business trip
Transfer
Assignment
≥2 employers
EU Social
Security
Labour Law Formalities
Business trip Home Home/hostEHICEuropean Health
Insurance Card
Transfer Host Host Host
Assignment Home Home/host A1/S1 Labour agreement
≥2 employers EU Rome IA1/
Labour agreement
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Non EU Social Security Labour Law Formalities
Business trip Home Home/host Host
Transfer Host Host Host
Assignment
Home - agr.:
- no agreement:
6 m. + 6 m.
Home/host
Agreement:Certificate of coverage
- 6 m.: no form?
+ 6 m.: approval Belg.
Social Security
≥2 employersBilateral agr.
No agreementHome/host
Agreem.: Certificate of coverage
No agreem.: local/host
Summary
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Thank you for your attention
Peter Wuyts Ria Matthijssens
[email protected] [email protected]
+32 (0)496 57 48 61 +32 (0)475 71 93 11