Working with staff abroad: tax and social security opportunities and pitfalls

Transcription

1 Working with staff abroad: tax and social security opportunities and pitfalls Tax and social law aspects of cross border employment Peter Wuyts Ria Matthijssens 1 International Business Forum

2 Contents 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 2 International Business Forum

3 Tax implications of working with staff abroad Peter Wuyts 3 International Business Forum

4 Tax implications of working with staff abroad Distinction in function of the qualification of the individual concerned: - Employees (Article 15) - Directors (Article 16) - Self-employment (Article 14) 4 International Business Forum

5 Tax implications of working with staff abroad 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. 5 International Business Forum

6 Tax implications of working with staff abroad 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 6 International Business Forum

7 Tax implications of working with staff abroad 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 7 International Business Forum

8 Tax implications of working with staff abroad 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 8 International Business Forum

9 Withholding tax 9 International Business Forum

10 Withholding tax: basic principle 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 ITC International Business Forum

11 How to deal with differences in taxation 11 International Business Forum

12 Dealing with differences in international tax levels 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 12 International Business Forum

13 Dealing with differences in international tax levels 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 13 International Business Forum

14 Cross-border Employment Labour and Social Security Law Ria Matthijssens 14 International Business Forum

15 Belgium Abroad - EU or non-eu - Business trip - Transfer - Secondment - Simultaneous employment - Social Security - Labour Law - Formalities 15 International Business Forum

16 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 16 International Business Forum

17 Social Security European Union 17 International Business Forum

18 Europe s impact on labour law & social security Amendments to the EU Regulation 883/2004 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/ existing employment situations (transitional provisions): Finnish social security legislation (= <25% in home country registered office employer) Regulation 883/ new employment situations starting 28/6/2012: Swedish social security legislation (= home base) 18 International Business Forum

19 Europe s impact on labour law & social security Amendments to the EU Regulation 883/2004 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/ existing employment situations (transitional provisions): German social security legislation (> 25% employment in home country) Regulation 883/ new employment situations starting 28/6/2012: German social security legislation (= home base) 19 International Business Forum

20 Europe s impact on labour law & social security Amendments to the EU Regulation 883/2004 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/ existing employment situations (transitional provisions): Belgian social security legislation (< 25% in home country registered office employer) Regulation 883/ new employment situations starting 28/6/2012: Luxemburg social security legislation (= home base) 20 International Business Forum

21 Europe s impact on labour law & social security Amendments to the EU Regulation 883/2004 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 office employer(s) Belgian social security amended regulation : no changes 21 International Business Forum

22 Europe s impact on labour law & social security Amendments to the EU Regulation 883/2004 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 22 International Business Forum

23 Europe s impact on labour law & social security Amendments to the EU Regulation 883/2004 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 23 International Business Forum

24 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 24 International Business Forum

25 Labour law & social security Rome I regulation: principles 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 25 International Business Forum

26 Europe s impact on labour law & social security Rome I regulation: determination applicable law 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 26 International Business Forum

27 Europe s impact on labour law & social security Rome I regulation: tie-breaker rules 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. 27 International Business Forum

28 Europe s impact on labour law & social security Rome I regulation: tie-breaker rules 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 28 International Business Forum

29 Summary EU Social Security Labour Law Business trip Transfer Business trip Home Home/host Assignment 2 Transfer employers Host Host Host Formalities EHIC European Health Insurance Card Assignment Home Home/host 2 employers EU Rome I A1/S1 Labour agreement A1/ Labour agreement 29 International Business Forum

30 Summary 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 employers Bilateral agr. No agreement Home/host Agreem.: Certificate of coverage No agreem.: local/host 30 International Business Forum

31 Thank you for your attention Peter Wuyts Ria Matthijssens +32 (0) (0) International Business Forum