Working from home abroad - tips from a tax consultant and employment lawyer

• The question of which social security and tax law applies to work from abroad is of essential importance. As is so often the case, it depends on the individual case. Is the employee only staying abroad temporarily for a few weeks or months or does he want to establish a permanent residence there?
• Should the activity take place only in the country of residence or both in Germany and at the place of residence, and to what extent should this take place in each case?
• Was the employee already employed in Germany before being hired, or is he taking up employment directly from abroad, for example because he is currently unable to enter Germany?

Existence of a secondment

If the employee is only going abroad temporarily, a posting may be considered. However, the following criteria must be met in order to be classified as a posting:

• the employee must have been subject to social security contributions in Germany for at least one month before taking up employment abroad;
• the activity abroad must be taken up on the instructions of the employer;
• the employee must remain integrated into the German company:
• he may not replace an employee at the destination and
• the posting must be for a limited period of time (within the EU a maximum of 24 months)

Employees who are stranded abroad due to the coronavirus crisis and are now working from home are also likely to be considered to be posted. Employers should take prompt action in these cases and check the facts. Posting agreements also exist with numerous other third countries. A specific examination is required in each case, which we will be happy to help you with:

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06173 - 318 170

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Permanent relocation of residence

If, on the other hand, the employee moves the center of his or her life abroad permanently or takes up employment directly abroad without having previously worked for the employer in Germany, this does not constitute a posting.

Under tax law, existing double taxation agreements (DTAs) must be observed in particular.

If an employee's center of life is outside Germany and he performs his work in his country of residence, the right of taxation generally lies with the country of employment. This may be different if the work is carried out both in Germany and in the employee's country of residence or if an existing double taxation agreement (DTA) contains different regulations

• Under the DTAs, Germany generally retains the right of taxation if
• the employee does not spend more than 183 days in the tax or calendar year or within 12 months in the other country,
• the wages are not paid by or on behalf of an employer who is resident in the country of employment and
• the salary is not paid by a permanent establishment maintained by the employer in the country of employment.

If a fixed and not insignificant part of the work (at least 25%) is performed in Germany - for example, 2 days a week in Germany, 3 days in the home office abroad - taxation may be split.

If the activity is only carried out occasionally in Germany, it is to be classified as a business trip. In this case, there would be no tax liability in Germany.

In each case, the applicable DTA must be examined carefully. There may be an obligation for the employer to report or register in the country of residence, apply for permits and also pay income tax there. . Violations may result in severe fines.

We will be happy to help you with this:

Contact our tax and law firm now:

06173 - 318 170

info@haas-eschborn.de

Rudolf-Diesel-Str. 5, 65760 Eschborn near Frankfurt

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This is different in social security law. There is no splitting of social security contributions within the EU/EEA or Switzerland. The applicable regulations must be observed and the necessary applications should be submitted in good time. Otherwise there is a risk of multiple contribution obligations or gaps in insurance cover.

The provisions of SGB IV must be observed in the area of social insurance. In principle, German law applies when working abroad. Regulation (EC) No. 883/2004 on social security and the Implementing Regulation (EC) No. 987/2009 must be observed when working abroad in EU and EEA states and in Switzerland. Furthermore, the regulations in the social security agreements must be observed. Third-country social security agreements exist, for example, with Brazil, Canada, the Philippines and the USA. A list of countries and the respective agreements can be found on the website of the German Pension Insurance Association -> To the website of the German Pension Insurance Association.

Within the EU, the applicable law is primarily based on the employee's country of residence. The territorial principle applies if the employee performs a significant part of the work (at least 25%) in the country of residence.

In the case of a temporary posting, however, German social security law remains applicable.

Close attention should be paid to the regulations in the respective target country regarding the establishment of a permanent establishment. In some countries, the deployment of a single employee working from a home office is already sufficient to establish a permanent establishment. This is certainly the case if it can be assumed that the business establishment has been established. This can occur after just six months.

This can trigger a variety of registration, approval and tax obligations. It is important to take a close look at the regulations of the respective country. Anyone who acts carelessly here and therefore does not adequately comply with existing obligations will quickly incur severe fines. In addition, you may even be banned from doing business.

Contact our tax and law firm now:

06173 - 318 170

info@haas-eschborn.de

Rudolf-Diesel-Str. 5, 65760 Eschborn near Frankfurt

To the contact form

The question also arises as to which labor law regulations apply, for example with regard to vacation, break times, maternity protection, etc.. These can vary considerably from country to country.

In principle, the following applies: the employment law provisions of the country in which the work is usually carried out must be observed. If the employee moves their place of work permanently to a home office abroad, agreements on the applicability of German law and corresponding supplementary agreements may no longer be sufficient in many cases.

For posted employees, German employment law generally applies up to a period of 12 or 18 months, provided that this does not conflict with any mandatory law in the destination country.

The new place of work abroad should be explicitly regulated in the employment contract. If the work is to be carried out both in the home office and at the permanent establishment in Germany in the future, this must be explicitly regulated in the employment contract by naming both countries. It should also be documented that the home office activity in the target country is not a place of business. Furthermore, a clear regulation of the respective working periods is recommended. A corresponding supplementary agreement should be concluded for this purpose. The employee should also be obliged to document their working days transparently.

As part of the duty of care, the employer should also ensure that the employee is informed about all essential matters such as the circumstances of payroll accounting, the applicable labor law provisions and social security and tax obligations

In addition, working from home abroad does not exempt the employer from carrying out a risk assessment as well as protective measures, safety instructions and compliance with documentation obligations.