Is it Legal to Work Remotely from Another Country? | IAS (2024)

Overview

As a manager or human resource personnel, managing remote workers in your own country is already hard enough; managing employees in other countries adds a different level of difficulty to the task. While a manager who is aware of the benefits of remote work may not want to deprive their employees of the chance to travel the world while giving in their best work, they are also careful not to attract legal consequences to the company. Some of the most important aspects where the employer needs extra care include:

Communication

When an employee travels abroad and decides to work from another country, communication may become an issue, especially when there is a difference in time zones. The parties involved would have to practice asynchronous communication to get work done. Asynchronous communication means communication that is not done in real-time. It usually involves sending messages to other team members and expecting a reply during their convenient time. If done correctly, it can ensure that there is a seamless flow of information between you and the employees that work abroad.

Employee classification

One of the most concerning factors of having an employee overseas or abroad is paying taxes. A simple way many organizations solve this is by employee classification. Companies can decide to classify an employee as an independent contractor just before they embark on their digital nomad journey; however, there are peculiarities to it. It will take away tax obligations from them to the employee turned contractor, but the employee may not want to work under those conditions, as it takes away benefits like health insurance from them. While on the journey, if your employee turned contractor still has someone who manages their daily work from your company, receives compensation per time rather than per project, or thrives on using company resources to complete the job, they may be in violation of the local employment laws in the country where they are. They may still be seen as an employee rather than an independent contractor.

Data protection

The individual circ*mstances surrounding data protection in one country may not apply in another country. Many employees are also not very skilled in the subject of protecting data. Remote employees are at a higher risk of cyber attacks than those who work locally. In addition to education and being more security conscious, having a multi factor authentication system can protect company data from getting into the wrong hands.

Taxes

Tax issues and tax laws are the main barrier or limitations to having employees travel abroad. As an employer with a foreign employee or an employee working abroad, the question becomes who to pay taxes to. Everywhere around the world, provided you are employed and get paid for the work you do, you are required to pay tax in one form or another. The laws surrounding tax payment vary by country. However, most employees are required to pay taxes to their resident country, regardless of where they work from, especially on short visits.

If a person works in the UK, travels to South Africa on a tourist visa, and works from there during their stay, their UK employer must withhold taxes for them in the UK. When an employee stays in a foreign country for an extended period, their employer may be at the risk of permanent establishment. It is a situation where an employer is required to pay corporation tax to the host country where their employee is working from. Apart from an extended stay in the country, other scenarios that put the company at risk of permanent establishment include offering services at the local market and working with local employers.

Another tax situation an employer has to take note of is double taxation. Double taxation is a situation where a person is required to pay tax in the two countries where they are residents. If a person is a resident of the UK and Nigeria, for example, they may have to pay income taxes to both the UK and Nigeria. Some countries charge this tax on worldwide income. Before allowing your employees to travel to work abroad, ensure their intended country has regulations against double taxation.

Bringing it all together, it is mostly legal to work remotely from a different country from where your company is based. However, there is no one-size-fit-all approach, and it depends on the countries in question, the duration of stay in the country, and the person’s conduct. Before travelling to another country to work abroad, check out the rules and regulations surrounding it in your intended country.

Companies are becoming more flexible with their remote rules and regulations, and so are the countries. Many countries are beginning to make provisions for digital nomads to work freely from their land while enjoying the country’s scenery and experience. Some other countries have also established structures to ensure travelling workers are not taxed twice with these and many more, the incidence of working abroad from other countries increases and further plunges the world into a global village.