What is remote work? 

Remote work is the realization of the employment relationship usually by means of technological resources with a high-level of flexibility regarding the place and/or time of the work performance, and focusing mainly on the quality of the work produced. The typical example is an employee working on a laptop from home. 

What does it imply regarding administrative and legal obligations? 

In an employment relationship, both the employer and the employee must follow tax, social security, and employment laws. Those obligations are easier to follow when the employment relationship takes place in only one country: the employer and the employee live in the same country, and the employee performs their work in that country Then, only one legal jurisdiction applies. 

When multiple countries ie different legal jurisdictions are involved, it becomes more complicated to understand which laws to follow: Which country’s taxes must the employer and the employee pay? To which country’s social security must they contribute? Which national employment law applies? Do they need to follow certain work abroad obligations, such as posting or immigration requirements? 

This infosheet gives indications towards those answers by studying a practical case. 

Practical Case of remote working abroad

Marco Rossi, an EU citizen, is a Senior Project Manager employed by a German tech company. He decides to work from Italy in smart working for several months, coordinating teams in Germany and Brazil and using company tools provided by the employer. 

The parties have not yet defined clear arrangements regarding tax residence, social security treatment, applicable employment law, posting obligations, or immigration requirements.

There are no formal internal policies on cross-border smart working, nor any procedures for monitoring working days or data security. 

Which laws are relevant to this case? 

In the case of Marco Rossi, thus remote-working, multiple jurisdictions come into play: International Law (Treaties), EU Law and National Law. 

This Infosheet explores the various applicable laws to remote work, catered to Marco Rossi’s situation. 

Which employment law applies to my situation? 

Which employment law must the employer and the employee respect? For example, countries in the European Union have different rules regarding parental leave. Therefore, which country’s rule should the employer/company respect in this regard? 

The European Union sets some minimum rules (for example, the Working Time Directive), Nonetheless, the general rule under Regulation 593/2008 remains that parties to a contract may choose the applicable law, with some limits. Indeed, the contract cannot breach what a State considers an overriding mandatory law.  

For example, a contract governed by Dutch Law between an employer in the Netherlands and an employee living in France may not breach the French maximum working hours. 

In the case where a contract does not specify which law/jurisdiction governs it, the Regulation 593/2008 also governs which law thus applies automatically. This is the case of Marco Rossi’s contract, which does not specify an applicable law. 

Recommendations

It is extremely beneficial to receive support from professionals when drafting or adapting an agreement for remote work abroad. The assistance of a professional will help identify the correct applicable laws for each aspect of the remote work agreement. This ensures that the various practical aspects of the contract (such as place of work, working hours, health and safety, etc.) align with the laws of the countries concerned.  

If you find yourself in a situation like this, A&P Law Firm can support you in reviewing your employment contract or in drafting an employment contract fully compliant with the Rome I Regulation. For this reason, please refer to our dedicated Global Mobility service page. 

In which country am I a tax resident, and do I constitute a permanent establishment of my company? 

In order to avoid confusion as to which taxes to pay when the employer/company and the employee are in different countries, States often sign treaties clarifying which tax obligations the employer/company and the employee need to pay in order to avoid double taxation situation.  

Those treaties are especially relevant in situations where an employee working abroad could constitute a new ‘permanent establishment’ abroad for the employer/company. 

In the case of Marco Rossi, Germany and Italy signed a treaty which clarifies which taxes he must pay in his specific case, and whether his managing powers constitute a permanent establishment of the company abroad. 

Where do I contribute to social security? 

The issue of where the employer/company and the employee need to contribute to social security is similar.  

Thankfully, in the European Union, this issue is governed by the EU Regulation 883/2004 which applies to all States. This Regulation governs to which social security the employee must contribute to in the case where they work in two different countries. The European Union also provides the standard forms required by Member States to access their social security. 

Thus, in the case of Mario Rossi, Germany and Italy are both in the European Union and therefore, this EU Law applies.  

Do I have to comply to posting obligations? 

In the EU, when the employer posts an employee to perform their work in another EU State than the one where the work is habitually carried out, the Posting Workers Directive regulates the obligations of the employer and the rights of the employee. 

Because Marco Rossi’s work performance stays in the same location (online, and the result is felt in Germany) regardless of his location, he does not fit the definition of posted worker. The employer thus does not need to follow obligations, and the employee does not enjoy the rights set out in the Posting Workers Directive. 

What kind of immigration requirements do I need to comply with? 

In the European Union, workers have freedom of movement, meaning that Marco Rossi, as a European Union citizen living in Italy and working in Germany, does not need a visa for working remote in Italy. 

If Marco Rossi was a non-EU citizen, then he would need to comply to immigration requirements under Italian Law. 

Conclusion 

When Marco Rossi moved to Italy from Germany and worked remote abroad for a few months, he needed to consider multiple issues: tax law, social security, applicable employment law, posting obligations, and immigration requirements. Those issues require the knowledge and understanding of various laws.  

Therefore, professional expertise is required for a clear overview of the laws and regulations involved in Marco Rossi’s situation. Relying on a firm specialized in Global Mobility allows you to: 
– correctly identify the law applicable to the employment relationship; 
– coherently coordinate national and supranational regulations; 
– prevent risks of tax and social security non-compliance; 
– structure company policies suitable for managing international mobility. 
 
In an increasingly integrated European labour market, conscious and proactive management of remote work represents a strategic factor for protection and competitiveness for companies operating beyond national borders. 

As experts in Italian and European Labour Law, Arletti&Partners can support you through a whole process such as covered in this Infosheet. Please visit our service page ‘Remote work abroad’ for more information and to contact us.