Remote working remains popular but tax and legal aspects should be understood

As most parts of the world begin to emerge from pandemic restrictions, it is clear that the many companies are planning for a future in which their employees will be able to continue to be able to work remotely for at least some of the time, a KPMG survey of over 530 companies in 46 jurisdictions reveals.

The survey took place in the context of a global webcast: “Work from Anywhere: Insights from the research and government perspective”. Participants included board members, managers and experts from the fields of global mobility, human resources (HR), tax and labour law from a cross-section of industries.

During the pandemic, many employees became used to working remotely, and often found that it brings advantages which they want to be able to continue to benefit from in the post pandemic environment. So a large majority of the companies surveyed are building remote working into their long term planning, because they understand that this is critical to the employee experience and also gives numerous benefits to the business in terms of flexibility. For example, remote working can open new opportunities to hire staff from a wider range of locations. The survey showed that 89% of companies had either implemented a remote working strategy or were considering one. Even companies in sectors which might not be considered suitable for remote working, such as manufacturing, are still developing remote working policies at least for some of their employees and also considering new technological innovations such as the performance of machine maintenance remotely with virtual reality headsets.

While the majority of remote working is within the same country, the concept has also developed of “work from anywhere” which includes the idea of cross border remote working. During the pandemic, short visits to other countries became unfeasible in many cases due to quarantine regulations, so many employees spent longer periods working remotely outside their country of employment, for example to visit family members. Post-pandemic, this is likely to continue to be an attractive possibility for many employees, who might, for example, want to combine vacation time with remote working in another country. Furthermore, employers are looking at numerous ways in which cross border remote working can make their business more efficient. For example virtual assignments of an employee to work on projects taking place in another country can reduce costs and may be more attractive to an employee who has family commitments than a physical posting. Moreover, cross border hiring can widen the potential talent pool from which an employer can draw.

So the “work from anywhere” concept presents numerous advantages for both employees and employers. Nevertheless, there are some challenges, mainly related to tax and legal issues. As Madalina Racovitan, Tax Partner and Head of People Services at KPMG in Romania comments:

“I’m sure that employees will increasingly expect to be able to work from anywhere and employers too will want to gain the benefits of the concept. However, for the policy to be successful, it is important to pay attention to certain issues. Most obviously, employers will need to take care over the tax residency status of an employee who spends large amounts of time outside their country of employment. The rules are quite complex and depend on a number of factors. There could also be social security implications. Immigration rules might need to be considered too as well as legal issues related to employment law and work contracts. In some cases, a formal secondment might be necessary, especially for a longer period spent outside the country of origin. “

“However, it is not only personal tax and social security which should be considered. In some situations, an employee who spends time working in another country may create a Permanent Establishment, potentially generating profit tax liabilities and compliance requirements for the company in that country. The global trends with respect to remote working are extremely relevant for Romania too. We see more and more local Romanian companies who are looking into the possibility to offer their employees work from anywhere benefits. Remote working within the country has become more the norm rather than the exception during the pandemics, and we do not see this trend changing significantly in short and medium term. Although some companies are making efforts to bring the employees to the office, such return needs to be carefully planned and thought through in order to get the best from the flexibility it may offer but also drive the engagement levels and the organization needs.” 

About KPMG

KPMG is a global organization of independent professional services firms providing Audit, Tax and Advisory services. We operate in 145 countries and territories and in FY21 had close to 236,000 people working in member firms around the world. Each KPMG firm is a legally distinct and separate entity and describes itself as such. KPMG International Limited is a private English company limited by guarantee. KPMG International Limited and its related entities do not provide services to clients.

KPMG in Romania operates from six offices located in Bucharest, Cluj-Napoca, Constanta, Iasi, Timisoara and Chişinău (Republic of Moldova). We currently employ more than 1000 professionals, both Romanians and expatriates.