In an ever-growing global economy, international mobility of employees had become a routine and everyday occurrence. This has resulted in many challenges around tracking internationally mobile employees, meeting compliance obligations in each country and understanding the impact of international mobility on the business.

With the outbreak of the COVID-19 virus and a global pandemic, the business impact entered a whole new dimension. New considerations sprang forth from the emergence of new legislation and regulations which impacted data protection and tax avoidance. Needless to say, the physical and virtual cross-border movement of employees affects international mobility and should continue to be taken into account. 

Countries have taken extensive measures to fight this virus which entailed and still entail countries closing their borders. International and business travel has become very challenging for those who manage global mobility.

In an international context, the travel restrictions and changes in working patterns impacted several aspects of international employment. The recording on this page will cover some aspects to take into consideration within the context of international employment to ensure you meet the demands of the post-COVID-19 environment.

When setting up such an employment structure, the international taxation and social security should always be investigated in order to determine the impact for the individual and the company. Additionally, the applicable labour law is also a relevant factor. For employers, attention should be given to the potential risk of a permanent establishment status in the working state. Moreover, the employer may be obliged to set up a payroll and pay withholding taxes as per local legislation.

The COVID-19 pandemic may have also had an impact on international taxation. As per the applicable rules, stipulated in the double tax treaties, individual income tax is generally due in the worker’s country of residence. However, employees who work in cross-border situations may be taxable in countries other than their country of residence. These rules are generally based on the physical presence of an individual in a certain country.

Following the Coronavirus measures taken by countries, employees who usually work abroad or in a cross-border situation, may have been carrying out more telework from a remote location or office space - while others may have been working from home in their residence state very frequently.

From an international taxation perspective, the common rules to establish is which country has taxing rights as stated in double tax treaties which remain applicable, during this period of crisis and beyond. This may mean that the taxing rights might shift to the other country following the changes in working pattern. Some countries, however, have taken measures to avoid certain unwanted consequences of the pandemic. Belgium for example has secured agreements with its neighbouring countries to avoid that the taxing rights of one country, which would shift to the other country, as a result of home or remote working due to COVID. 

It is important to know the applicable social security scheme in the physical presence of one country or the other. Within the European Economic Area, the European Regulation on the coordination of social security systems is applicable in case of a cross-border working pattern. In relation to non-EEA countries, the European regulation does not apply. In this case, bilateral social security treaties contain the relevant provisions.

It would not be desirable for changes in working patterns, which are directly and exclusively linked to the Coronavirus measures, to lead to a change in the applicable social security system.

Please note that the measures taken in light of the pandemic are exceptional and that in principle, the general rules to determine which social security scheme is applicable in a certain situation remain applicable, even during these uncertain times.

If you have any questions related to this topic, please contact: Kenny Ransquin