When you are asked to help move an employee from one country to another, you have some options in terms of how you might structure that move. Broadly speaking, there are three distinct move types to consider (with numerous sub-categories):
While it might be tempting to be ad hoc on how you approach each move, there are some important things to think about as the length of time someone is in a country and who employs them will have an impact – potentially on both the mover and the company. So, what do you need to be aware of to avoid surprises?
Visas and work permits are different – and there will be specific requirements based on the business activities that the mover is undertaking. The process and time needed to get the right documents will be very different depending on the country!
Business visitor visas usually allow “permitted activities” like attending conferences and meetings. They do not permit “work”. These might be suitable for commuters for example.
Work permits are normally lengthier and more administratively complicated to apply for and may require sponsorship – but will be needed on temporary moves where work is being done for the host employer. The employee might need to meet certain criteria, such as requiring a medical, language skills or a minimum salary and there may be advertising requirements for the job.
Usually, if the employee is a short term or commuter move, they are not allowed to extend or remain on the same terms permanently.
You might need to know whether the mover’s family can move with them. Some countries don’t allow the family to accompany the employee where the move is for a short period and some countries have requirements for the family to meet language standards to qualify for a dependant visa where the move is permanent or long term.
The longer the time an individual spends overseas, the more likely they are to become resident in a country – and liable to tax, although even if they do not become resident, they could still trigger a tax liability in the host country. If this is the case, you will need to think about what that means. For example: Who is responsible for the tax on their remuneration – the employee or the company? If the company is paying, have you talked upfront with the employee about making a contribution towards these costs? If you are paying allowances, like housing or schooling, there will probably be tax due on those – either for the employee, or the employer on a grossed-up basis.
If tax is due, there may be a local tax withholding obligation for the employer. Where someone remains employed in the home country, they might remain on the home country payroll (eg for maintaining their pension) and in this case a “shadow” payroll might be needed in the host location. These payrolls do not physically pay the employee but allow the company to pay over any taxes due. Even a short term visitor, including a commuter, can create a tax liability.
Fortunately, there are a series of tax treaties that can provide an exemption for tax in the host country – but one of the conditions of treaties is that the employee doesn’t become employed in the country they are visiting. Some countries will consider that someone is “economically” employed in their country if they are working for the benefit of the local business. If a trip (or a series of trips) is longer than 6 months, then it will be difficult, and in some instances not possible, to use a treaty.
If you are permitting a move to a country where there is no local entity, then you will need to think about whether that individual creates a permanent establishment of the home country employer in the destination country. Even if a permanent establishment is avoided, the presence of the employee could create a local withholding and reporting obligation for the employer.
There are a number of social security agreements between countries that determine where social security should be paid when someone moves to work in a new country – but not all countries have them, and you might find that social security is due in both countries – so check before you agree to a move!
As with tax, if an individual is kept on a home country employment contract, it may be possible to keep them in the home country social security scheme under one of these agreements. Often a certificate must be applied for in advance to confirm that social security is only due in the home country. A permanent transfer will mean that social security is due in the country that the person is employed in, assuming that the mover also works in that country. Be aware that social security costs vary considerably between countries for both the employer and employee.
Usually, if your mover stays on their home country contract, they (and the employer) will be subject to the law in that country. However, if they are placed on a host country contract, local rules will apply. In addition, for long term moves, employees may acquire local employment rights (for example in connection with termination of employment) even if they are on a home country employment contract. This is something to watch out for and explore for longer-term temporary moves.
For moves within the EU, the posted worker directive may also require that changes are made to employment conditions to meet the minimum local requirements.