The legal implications of remote working cross-border
jessicamayzwaan.medium.com
jessicamayzwaan.medium.com
I live in Canada, but got a position with Amazon where I'd fly around the US (and occasionally other countries) to do upgrades and launches of Amazon warehouses. Paid in US dollars because I was working in the US. A lot of fun, working with some of the best co-workers I've ever had. Most Monday mornings, I'd get an Uber to YYZ Toronto and fly to some new city and be back by Friday night.
Where I got burned was the weeks I did not fly anywhere and worked from home doing prep work. I didn't sync correctly with payroll and HR that I was doing this work in Canada, which implies that the Canada Revenue agency was owed my taxes for those days, not the IRS. But the company paid my taxes to the IRS since I was a US worker. (To be clear, they had a system to avoid this problem but I didn't understand and didn't set it up right).
Come tax time, I owed the CRA $15,000, and the IRS owed me $15,000. But there was 3-month long gap between the date to pay and the date I'd get my refund. We managed, but yeah that wasn't fun at all.
The worst part is the horrible tax advice I’d get.
Their Handbook talks a lot about what legal entities (first-party, third-party, etc.) are in place in different countries, for employees in those countries.
Everyone says this insane amount of legal red tape and gatekeeping is the government's way to prevent remote talent brain drain to places like the US and prevent local remote work turning to outsourcing which, if true, is complete BS reasoning as every company who wanted to outsource did that already, before remote work became popular.
I feels it's just German and Austria having a cultural and national obsession with red tape and regulations for the sake of preserving the status quo, and not for improving things for the ambitious workers who wish for better opportunities than the local market can provide.
ATM, the only way to legally work remotely is either as a freelancer or opening your own company and contracting which come with their own set of pros and cons.
Because in those two countries, freelancing is the only way to skirt around the fact that no company will set up shop locally just for you, and if you freelance, you pay higher taxes than being a FTE, while also loosing almost all benefits that come with being a FTE like sick leave, paid vacation, and pension contributions VS for example in Denmark, if you're a freelancer, you also get pension.
Yes, in most other countries you have to freelance for remote work, but at least in other countries (Portugal, Romani, Bulgaria, Spain, etc.) , if you freelance and say goodbye to social and workers' benefits, you at least pay less taxes since you get no safety net from the government, not pay more taxes like in Austria and Germany while getting no safety net and no benefits.
(Source: I am for social security and tax purposes a freelancer)
(1) https://www.fuer-gruender.de/wissen/existenzgruendung-planen...
(Disclaimer: This is not legal advice, I’m not a tax accountant/lawyer.)
For immigrants from most countries, this only works if they are really wealthy or very lucky. We basically just let people buy themselves into immigration via Cyprus nationality, but hard work or education are minor points in a kafkaesque process to get in.
Actually it's more exciting because not only can you get in trouble for violating the Utah labor laws, as a California company the employee can complain if they are not treated in accordance with certain California rules (that bind to the company rather than the employee) -- and win.
In practice though this is all pretty easy to mange; all the rules above devolve down to simply: 1 - file a couple of forms and 2 - tell your payroll company. Health insurance isn't uniform across the country so in practice it's the most complicated part to deal with.
In a lot of cases the taxes are mostly the same just paid to the employees country instead of the companies one.
It’s mostly knowns in administration what companies seems scared of
The vast majority of tourist visas don’t allow you to work at all, so it’s not only "stay too long"
Some (many?) states have mutual arrangements where you can take a tax deduction for income taxes paid to another state, but I don't think they all do. You might end up paying double taxes! And even if the two states do have an arrangement, your employer might not set up tax withholding correctly between the two states, so you have to carefully check your W-2s to make sure you didn't overpay (or underpay, leaving you with a big bill in tax season) throughout the year.
Also, health coverage tends to be very state-specific, so you might get stuck with less-than-ideal coverage for your local health providers if you're on a health plan intended for another state.
State B has a law that says if you spend more than 180 days a year in State B, then you owe State B income tax for the full year.
Now you owe tax for that 1 day to both states.
The Supreme Court has ruled on this as well - https://www.cpajournal.com/2017/10/26/icymi-supreme-court-ru...
edit: I should have stated, assuming you are not physically working in that state.
> But a handful of states take a different, more aggressive approach. They use special rules to tax remote workers based on the location of their employer’s office — even if the employee doesn’t physically work at that location, according to the Tax Foundation.
> Six states took this approach before Covid-19 upended office work: Arkansas, Connecticut, Delaware, Nebraska, New York and Pennsylvania. But now, that policy is facing fresh scrutiny since many people weren’t telecommuting by choice during the pandemic but were forced to work from home because their offices had closed.
> The State of New York has so far said that it will continue the policy despite the pandemic. If you don’t live in New York, but your “primary office” is there, “your days telecommuting during the pandemic are considered worked in the state” unless your employer has a formal office at your remote work location, the state revenue department says on its website.
https://www.nytimes.com/2021/03/12/your-money/taxes/2020-tax...
> It means that if you usually worked in New York but are working remotely from your home in New Jersey during the pandemic, you’ll still owe New York state income taxes, said Alan Sobel, president of the New Jersey Society of Certified Public Accountants.
But, yes, in general people pay even less attention to this than they do to paying use taxes and my accountant has never asked me anything about this kind of thing in the big questionnaire he sends me every year.
https://moskowitzllp.com/what-is-california-source-income
Wages and salaries. Wages and salaries for services performed in California, regardless of the location of the employer or the employee (or where the payment was issued), are taxable to nonresidents.
Of course, people widely don't follow these rules and many states have minimum cut-offs of various sorts but a lot of states are starting to crack down.
“Wages and Salaries
Wages and salaries have a source where the services are performed. Neither the location of the employer, where the payment is issued, nor your location when you receive payment affect the source of this income. Part-year residents include on Schedule CA (540NR), column E or Short Form 540NR, line 32 all wages and salaries earned while a resident, regardless of where the services were performed. Nonresidents include the income for services performed in California.”
Without more clarification that would seem to suggest remote work would not be taxable since the services are not performed in CA.
So residence in the literal word sense is moot. If you travel there enough, regardless of where your official house is located....for tax purposes , NY bureaucrats will consider you a resident of NYS.
Historically, most people and most states didn't really pay attention to routine business travel but that's starting to change.
States generally either tax the global income of their residents (e.g. California), or they tax income earned within the state (e.g. Connecticut). If you are a resident of the former but earn your income in the latter, then you would be on the hook for double tax unless there is a specific exception.
No, it doesn't.
> so you can be a full-time resident of multiple states despite only having a single domicile and mailing address.
You cannot (well, not for California, though perhaps for some combination of other states), though you could be a tax resident of multiple states in the same tax year by having a series of domiciles during the year that each were not intended to be transitory when established.
(If you move directly from California to a foreign country, but retain citizenship and return to California for more than 45 days in a future tax year, you can also be a California tax resident with a domicile in a foreign country, but because it is keyed on being a California resident immediately before departing (and not just for any part of the tax year), that wouldn't be a backdoor way for multi-US-state tax residency unless the other state had a broader rule.
> States generally either tax the global income of their residents (e.g. California), or they tax income earned within the state (e.g. Connecticut).
California taxes global income of residents and income earned in the state by nonresidents; this is, AFAIK, the majority rule for states that have income taxes.
A few years ago I was at an all remote company and there were several all staff emails along the lines of: “you absolutely need to talk to your manager before you move to another state.”
Certain states were not allowed.
I’m not positive but I think you owe state income tax in the state that you are physically in even if it is only for a couple of weeks or a month or so. Think of all of the tax fraud that has happened in the last two years.
Just to clarify, the important "you" here is your employer. In many (if not all) states, having a full time employee work from a state establishes a tax nexus there, making the _employer_ liable for collecting sales taxes (if applicable) and requiring them to pay taxes on their business income to the state (again, if applicable).
It's the taxes on business income that can be quite painful for the employer. If the state has particularly high taxes, employing just a single person in that state may not be worth the additional cost in taxes.
This is all completely insane, of course. Doesn't the EU, made of actual separate countries, have a solution for this? So why can't the regions of _a single country_ do the same thing? Because we're a dysfunctional mess of a country, that's why!
The details vary by state. In some it's as short as one day but there may also be some minimum dollar cutoff--the laws are basically aimed at pro athletes and entertainers. I know I didn't have to file out of state taxes this year for some short business travel; all our expense reports are now audited for out of state working days.
Of course, you can usually get off with a certain amount of personal digital nomadism if you're not filing expense reports. But working for extended periods of time is getting into tax fraud territory. And you're absolutely right that a lot of people have been doing it, often without really thinking about it.
Sounds like a nice way for some accounting firms to expand their market.
--applicable tax regime<br>
--immigration<br>
--social security/pension schemes
--workmen's compensation (it's more than just ergonomic home furniture)<br>
--presence of employees means doing business?<br>
--exposure to corporate tax<br>
--commercial territory restrictions<br>
and more. A book is needed on this subject.
what is different wrt budget here ?
The hiring company cannot treat you as a regular employee though (you are essentially a contractor), so you may have less 'rights' than a regular employee - i.e. your contract can likely be terminated a lot easier than a regular employment one. You may also not be able to get some benefits that a regular employee gets - ie contributions to pension funds, etc. These are often compensated by simply increasing your daily rate. I personally prefer it that way as I often find the benefits offered by the companies unnecessary.
There are also companies like deel.com that offer employers to hire people through their local branch office in pretty much every country in the world. FWIW I haven't used any myself but I have heard good things.
Hence I honestly consider remote working to be a solved problem already, but to each his own.
At some point us working in Mexico like this had better benefits than our peers in the US.
I work for a small company who has set up a legal entity to employ me and others in the UK while being based in the US themselves. Our US employees outnumber our UK employees 20:1 and yet our UK employees have better benefits than the US employees, _and_ we cost less for an equal salary (basically US healthcare is so expensive that it ends up being roughly equivalent to employing people in countries where you don't have to pay 10% of someone's compensation on healthcare) even when you have to put up with all the legal headaches
Hiring people as contractors rather than employees probably does simplify things. But a contractor may, for example, not be able to work for you full-time and you may not be able to offer them benefits beyond base salary. The bottom line is that, for a small company especially, hiring an individual who requires a lot of special care and feeding is probably more trouble than it's worth.
If it's easy enough for the average Uber driver, I'm sure the average HN reader can figure it out (because that's exactly how Uber works).
Hire them on a project basis. When one project ends, setup a new contract.
We had maybe 30+% of the team working that way, if we got big enough in a country outside the EU we set up a subsidiary there. Often a real pain to administer with a team of 100 people:, but sometimes the only way to make it work. Indonesia, India, Kenya, Burkina Faso, Mali.
Of course the original hiring company benefits/RSUs etc can't be passed through easily, you need to get those as cash.
Getting those benefits as cash defeats the point of them being those benefits in the first place.
Unions for tech workers are rare but if you’re working for a company with people scattered all over the planet, it’s a massive increase in complexity. I’ve never done any serious organizing, and the companies I’ve worked for have been relatively benign. But after almost ten years in satellite offices or remote work from home, it feels like I’m taking on risks here if I ever get into a dispute.
According to one organizer I talked to, you need to form unions in each country with “recognized units” of a handful of people. At my current company there are knots of employees here and there but we are starting to look like the General Assembly of the UN with one person per country. Then there’s all the varying rules on when the employer has the recognize a union.
Are there any precedents for doing this?
But my personal policy is to only take jobs that I could walk away from and quit the moment anything I'd want union support for comes up. A union for international employees seems next to impossible, especially with the employer of record thing getting in the way.
Luckily the market for my skills is such that I can afford that policy. You should probably only consider international employment relationships if you are going to be paid a butt load of money and can find a replacement job very easily.
I have lots of thoughts for this, and it’s something I think about quite a bit as a remote worker. If this is something you are serious about, or just want to chat about, look me up.
Whose laws apply when people from multiple jurisdictions interact with each other in a digital space? Which law takes precedence? I think we see this with property rights, privacy rights, workers' rights, business law, tax law, and so much more.
I think web3 may partially be driven by a desire to have a shared global system of currency, business registration, property registration, and more. For example, registering a DAO is global whereas registering a company, in the US, is at a state level.
I feel both afraid and excited at how we will start to more collectively govern global spaces.
And unless you win the lottery, USians in Canada don’t have to pay the US, really. Just file and summarize your worldwide investments.
I’ll just add that there are extensive trade treaties between the U.S. and Canada that prevent workers from being double taxed on income, which is why in this particular case it nets out. This might not have been the outcome if this was the U.S. and another country.
>In only a few months, the coronavirus (‘COVID’) pandemic had devastating economic, social, and health impacts worldwide. Today, millions of lives have been lost, and the end of the crisis seems it may finally be in sight
Here's 37 words that literally no one needed to read.
I may be an outlier, but have been working cross-border remotely for 6+ years and absolutely never needed this legal stuff.
Quite opposite, I was super thankful to have an excuse to escaping local legal insanity and also ignoring insanities abroad.
It's like being "country-less" in terms of these crap legal stuff.
It's a dream.
Again, my personal experience here. Don't know if it works the same for all...
Now that I'm hiring staff this stuff actually applies but whenever there is information presented it's "speak to a legal representative" as the bottom line. When you speak to someone pro bono it's "depends on what country you're in, been in, born in, planning to stay in", then when you finally pay it's still your responsibility if something gets messed up.
There's companies out there that claim to solve these problems for you, I fired one of them this week because they couldn't get the basics of pay the people on time right.
The very next line that will allow for that.
This info also doesn't have a long lifespan as laws are always changing and digital nomad visas are becoming more common. In 2 years time much of the information may not even apply to the country that you're living in.
I would argue it's better to optimize for today's readers. Not that difficult for 2040's readers to pick the context.