Is remote work the answer to higher productivity and well-being? And what tax topics does this actually raise?
One thing is certain: working from home (home office) or any other location is becoming increasingly important, a trend reinforced by the pandemic.
From an HR perspective
Meanwhile, remote work is not only a prerequisite for being attractive on the candidate market, but it also enables companies to fish in a larger pond. The location-independent search makes it easier to find the "perfect fit" instead of the best possible candidates. Accordingly, remote work fosters the diversity of teams and enables higher performance as well as mutual inspiration because ofdiverse strengths and mindsets. On an individual level, it supports greater flexibility and the ability to work according to one's own biorhythms. In addition to that, itoffers the possibility to work more focused (provided there are no children or other dependents to care for).
Nevertheless, remote work also poses challenges for teams and leaders. The common WHY and collective goals are becoming increasingly important, so that teams can grow together and even develop into high-performing teams. Shared rituals, clear communication rules and a common meeting structure support (virtual) team development. Leaders are primarily caught between the conflicting priorities of individualization and team orientation. Daily team stand-ups and regular check-ins with individual employees can support this. At the same time, regular exchange fosters a sense of belonging, which is essential for achieving the desired effects such as increased productivity and well-being.
The corporate culture must also be considered as a framework for the successful use of remote work. In particular, the leadership culture, the importance of leadership and team development, and the promotion of diversity and collaboration within the company play an important role. In addition, remote work requires a virtual environment in which all employees feel connected to each other and can work together using various collaboration tools.
From a tax perspective
If employees work from their home office and the home office is not located in the country in which the employer's registered office is located, this may have tax and social security consequences both for the company and for employees in Austria and abroad.
From a tax perspective, the provisions of the applicable double taxation agreement have to be considered. The Double Tax Treaty (OECD Model Convention) provides the following allocation rules for the right to tax income from employment activities:
- Income attributable to days worked in the employer's country of residence is subject to taxation in that country.
- Income attributable to days worked in the home office is subject to taxation in the employee's state of residence (home office state).
As a result, the right to tax income from employment has to be divided between the two countries. Whether the tax is collected in the employee's country of residence by submitting a tax return or whether the employer is obliged to withhold wage tax in the employee's country of residence is to be assessed according to the respective national law.
In the area of social security within the EU/EEA and Switzerland z the regulations of the Regulation (EC) 883/2004 have to be observed. If a substantial part of the activity (at least 25%) is carried out in the country of residence (home office country), the social security regulations of the country of residence apply. Only if employees perform less than 25% of their work in the country of residence, the social security regulations of the employer's country apply.
In addition to the tax consequences for employees, there may also be income tax consequences for the employer in the employee's country of residence. The activity in the home office can lead to the constitution of a permanent establishment for income tax purposes and thus trigger a tax liability for the employer in the respective home office country.
Remote work offers a wide range of opportunities that can have a positive impact on collaboration. However, the benefits can only take effect if the necessary framework conditions are provided or promoted. In the case of cross-border remote work, tax and social security consequences may arise, which must be assessed in each individual case.
Authors:
Sandra Donhauser
Learning & Development - People & Organisation
Sandra.Donhauser@bdo.at
+43 5 70 375 - 1293
Katja Reichl
Global Mobility – People & Organisation
katja.reichl@bdo.at
+43 5 70 375 - 1463
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