European Economic and Social Committee response to cross-border teleworkers and their employers
The European Economic and Social Committee (EESC), a consultative body of the European Union, recently released a statement on the taxation of cross-border teleworkers and their employers.
Some of the key points raised in the document include the following:
- Cross-border teleworking poses particular challenges to the current international taxation systems, particularly in relation to the taxation of wages and the taxation of company profits;
- A cross-border teleworking employee could face double taxation on his or her income, resulting in lengthy and costly disputes between the employee and member states' tax authorities;
- In terms of the taxation of company profits, international teleworkers may inadvertently create a permanent establishment (PE) for the company in a country other than its own. If a PE were established in another country, the company would be forced to accurately divide its corporate income between the two locations, and thus be subject to different filing obligations and tax liabilities;
- It is important that taxation systems be updated further to address the needs of today's work environment. The international corporate tax framework has recently been overhauled through an agreement on an OECD/G20 Inclusive Framework tax package consisting of two pillars;
- Any new rules addressing the taxation of cross-border teleworkers should be easy for both employees and employers. One possibility would be for member states to agree to only tax the employee if the number of working days in the country exceeds 96 days per calendar year. The EESC notes that in the OECD/IF tax work, a multilateral instrument (MLI) has been used as a tool to facilitate a timely implementation of new tax rules;
- The EESC encourages the EC to consider whether a one-stop shop, like the one in the VAT area, could be a possibility. It would require the employer to report the number of days cross-border teleworkers worked in their country of residence and in the country where the employer is located.
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