Expats whose work pattern may change due to coronavirus; three situations explained
The country in which employment activities are exercised determines where the employment income is taxable. Due to the coronavirus, many employees are now working from home. For many expats, this means that they are currently working from a different State than the State where their employer is located and where they normally exercise (the majority of) their employment activities. In this update, we will briefly address the potential changes in the tax and social security position of expats in three specific situations.
1. I am working in a different country than where my employer is located
Generally speaking, if you have an employer in another country than the country where you live, the right to levy tax on your employment income is allocated between those two countries. The part of your employment income that relates to days of workexercised in the country where your employer is located istaxable in that country. The employment exercised outside of that country (in third countries or the country where you live) is taxable in the country where you live. In the current situation, you are probably working more from home, in the country where you live. As a result, a larger part of your income will also be taxable in that country instead of in the country where your employer is situated.
2. I will exceed 183 days of presence in a third country
The situation may arise that, due to a changed working pattern, you will be present in a third country (not being the country where your employer is located or in which you are living) for more than 183 days in a year or a 12-month period. This may result in your employment income that relates to days of work exercised in the third country being taxable in that country.
3. What if my relocation is delayed?
If you were about to relocate to the Netherlands, the delay of your relocation may also affect your tax position. For instance, your intention was to relocate to the Netherlands to start working for a Dutch employer as of 15 March 2020. Due to the coronavirus, your relocation to the Netherlands has been delayed. Nevertheless, your employment contract commences as of 15 March 2020. For the present, you will exercise your employment activities remotely from your home country. In this situation, this would mean that the employment income from your Dutch employer until the moment you actually relocate to the Netherlands will likely be taxable in your home country.
What about my social security position?
An adjusted work pattern may affect not only your tax position but also your social security position. If you are now working in a State where you usually do not work (as much), then this could affect your social security position.
The Dutch social security authorities (SVB) did announce that the social security position for residents that are now working abroad (in the EU, EER or Switzerland) will for now not change due to the current situation. If you are in the possession of an A1 statement, which states which social security system applies, then you can assume that it will continue to be valid for now. The Dutch social security authorities also mention that if the corona related measurements are extended, this may affect the social security position of individuals in the future.
If your work pattern (partially) lies outside of the EU, EER or Switzerland, then you should seek advice on whether your social security position will be affected.
In this update, we have attempted to demonstrate the potential consequences of a changed work pattern in specific situations. This update cannot be considered as binding advice, since for each individual the actual consequences can only be determined once all the details of the specific situation have been discussed and the applicable regulations analyzed.