Taxation of cross-border teleworkers and their employers

Key points

The EESC:

• recognises the particular challenges that the rise of cross-border teleworking pose to the international taxation systems of today. This concerns in particular the taxation of wages and the taxation of company profits;

• agrees with the European Commission (EC) that a cross-border teleworking employee could be faced with double taxation on their income, resulting in lengthy and costly disputes between an employee and Member States' tax authorities;
• reminds that in terms of the taxation of company profits, international teleworkers may run the risk of inadvertently creating 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;
• underlines how important it is that the taxation systems are updated further to answer 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;
• stresses that the rules 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 Multi Lateral Instrument (MLI) has been used as a tool to facilitate a timely implementation of new tax rules;
• encourages the EC to consider whether a one-stop shop, like we have in the VAT area, could be a possibility. It would require the employer to report for cross-border teleworkers the number of days teleworkers worked in their country of residence and in the country where the employer is located.