Global Mobility During a Pandemic
Workforce issues take center stage

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The COVID-19 pandemic has disrupted how US businesses operate, causing significant challenges as many seek to adapt to a harsh economic reality that has continued into 2021. As businesses navigate the crisis, they have managed a seismic shift in how American and global workforces operate that has disrupted and redefined how and where employees work.

This shift created a new range of tax complexities that businesses now face, from corporate tax to employment taxes and payroll obligations to employee tax exposure. This complexity is manifest in the need to comply with new tax laws responding to these changes in every state and is multiplied globally for multinational companies and domestic US employers with an international workforce.

For employers, the pandemic has been characterized by fluidity in how it has impacted businesses and their employees both within the United States and globally. In March and April 2020, as COVID-19 spread across Europe and the United States, many employers took steps to mitigate health risks and exposure to their employees by temporarily restricting access to or closing physical workspaces. As lockdowns cascaded from city to region to country, these restrictions increasingly became a new standard with the anticipation of a return to “normal” later in the year. Many businesses found themselves operating on a nearly full or fully remote basis for the first time, with employees tackling what has been called a new normal.

As local and then national lockdowns became increasingly commonplace to mitigate against the spread and impact of the virus, so too did the closure of national borders to noncitizens and permanent residents. Countries like Chile introduced border shutdowns overnight while options for international flights decreased significantly as travel declined. This sudden change created the first new population of globally mobile employees during the COVID-19 pandemic—those stuck on the wrong side of an international border and thus forced to remain outside their home country locations for long periods.

As lockdowns in the United States and globally have been introduced and extended in response to new and subsequent waves of the COVID-19 pandemic, a second new population of international mobile employees has emerged—those who have chosen to work outside their home countries for extended periods. For some employees, this meant returning to a foreign country to stay with family and friends, whereas for others this entailed using the opportunity to work from an international destination while offices remain closed. Many employees have notified their employers of their international move, though, as employers across the United States are experiencing, some have not.

A year into the pandemic, the latest “new normal” is emerging where remote working has transitioned from being an arrangement primarily agreed upon as an exception to normal arrangements, as was often the case pre-pandemic, to a long-term, common way of operating integrated thoroughly into working arrangements. With a fulltime return to office work seemingly unlikely for many businesses, employers are developing and transforming policies that allow employees to work outside their home states or countries.

The advent of “work anywhere” policies has a twofold impact on companies. As Grant Thornton LLP’s research has shown, these policies incentivize and support talent retention while ensuring that employers remain competitive with peers.1 Additionally, “work anywhere” and remote working arrangements attract talent where jobs are no longer geographically tied to a physical office and therefore no longer require costly and sometimes disruptive relocation of new employees.

The globalization of the war for talent creates a third new population of internationally mobile employees, those already based outside the country of employment who will primarily work remotely from a foreign country while occasionally traveling to their employing office. They may be working in a country where the employer currently does not have a legal entity in place. Similarly, companies may be exploring whether an employment or independent contractor relationship best fits the arrangement.

Global employee mobility has historically addressed formal programs for the relocation or assignment of employees to another country, either at the direction of the company or based on accommodating an individual’s request. International business travel has become an increasingly common focus in recent years. Characteristically, management of tax risk within these programs is managed and monitored. However, these three new populations of mobile employees, stuck employees, and remote workers and remote hires present employers with a new frontier of global mobility and tax risk management: a distributed workforce.

Distributed Workforce—Tax Framework

When addressing the potential tax consequences of employees working outside their home countries, employers should consider both the corporate tax implications and the impact of individual taxation outside the country of employment. While an employer, understandably, may not be primarily concerned with an employee’s personal tax affairs, taxability in a foreign country may give rise to a range of company obligations, from registrations with the tax authorities to company filings to employer taxes to the operation of payroll. With sourcing of employment income for taxation purposes often based on where the employee’s duties are physically performed, including under bilateral double-tax agreements (DTAs), employees working outside the home country have the potential to trigger company tax exposure.

In addition to domestic tax laws of the country where the employee is working, attention should be paid to the existence of double-tax treaties and bilateral social security “totalization” agreements. Assessing tax exposure has not changed significantly as a consequence of the pandemic (see below for further discussion of revenue authority responses); rather, the context in which the assessment may be applied has changed, particularly regarding its potential enforcement by revenue authorities internationally.

Although employees are characteristically subject to income tax in the country where they perform duties2 under a DTA, US residents covered by a DTA may not be subject to income tax in a foreign country in respect of employment income relating to duties performed there if they meet the following criteria, as outlined in Article 14(2) of the United States Model Income Tax Convention (2016):

  • they are present in the other country for a period or periods not exceeding 183 days in aggregate in any twelve-month period starting or ending in the tax year;
  • they are paid by, or on behalf of, an employer that is not a resident of the other country; and
  • their remuneration is not borne by a permanent establishment that the employer has in the other country.

Importantly, whereas an individual may prima facie be able to exclude employment income from income tax in a treaty partner country if they meet the terms above, the existence of a deemed corporate presence under domestic tax law or a permanent establishment under a DTA may result in there also being a deemed employer in the other country such that the criteria above may not be met.3

In considering whether the existence of employees working remotely may risk creating a deemed taxable corporate presence, two key issues arise:4

  • Is the employees’ work location in that country a “fixed place of business”?
  • Are their duties sufficient to regard them as creating a “dependent agent” permanent establishment?

A detailed discussion of permanent establishment under a DTA or the creation of a corporate taxable presence under domestic law is beyond the scope of this article, but employers must consider whether individuals are working from home or have established a more permanent working arrangement, such as leased workspace, in determining whether their presence may constitute a fixed place of business. Similarly, where companies have an employee who “is acting on behalf of an enterprise and has and habitually exercises in [the other country] an authority to conclude contracts that are binding on the enterprise, that enterprise shall be deemed to have a permanent establishment in that Contracting State in respect of any activities that the person undertakes for the enterprise, unless” they are of a preparatory or auxiliary nature.5

Beyond employer obligations arising from an employee’s liability to income tax, a company may be exposed to and liable for employer social security contributions. The United States has concluded numerous bilateral “totalization” agreements that address multicountry work. These agreements also require that social security be paid according to where an employee works. However, they typically allow employees to remain covered only in their home country scheme when they are sent to work by their home country employer to temporarily work in another country for up to five years.6

Where an employee does not meet the terms of a DTA or totalization agreement to be able to exclude employment income from tax in a foreign country, or where no bilateral agreement is in force between the home country and the country where an employee works, a cascading series of company obligations may follow the individual’s liability to income tax.

Changes to Context for Tax and Impact on Compliance

For employers, the challenges of managing compliance for employees working outside their home country means understanding whether their presence and activities will give rise to liabilities and obligations for withholding tax, employer taxes, and corporate taxes.

At the onset of the spread of COVID-19 outside mainland China, the Organisation for Economic Co-operation and Development (OECD) responded quickly, issuing guidance on April 3, 2020, to address the pandemic’s impact on tax treaties, considering factors such as permanent establishments, cross-border working, and individual tax residency.7 With the immediate onset of the pandemic triggering government-mandated travel restrictions and border closures, the OECD’s guidance primarily addressed scenarios where cross-border workers were unable to physically perform their duties in their country of employment as well as employees who were stranded in a country that was not their country of residence. These issues have an impact on the right to tax between countries, which is currently governed by international tax treaty rules that delineate taxing rights.

The guidance effectively called on taxing authorities to exercise discretion in applying tax law and DTAs to confer taxing rights where employees were working remotely from that country due to exceptional circumstances outside their control.

The Internal Revenue Service, for example, issued Revenue Procedure 2020-20 on April 21, 2020, that directly addressed the short-term impact of international travel restrictions on employees who were stuck in or had chosen not to travel from the United States. Eligible individuals present in the United States for an extended period due to COVID-19 could exclude up to sixty days of presence (their “COVID-19 Emergency Period” that started between February 1 and April 1, 2020) from counting toward federal tax residency under the substantial presence test,8 or the counting of days for purposes of excluding income under a DTA, as outlined above.

By extending the medical condition exception in Section 7701(b)-3(c) to days of US presence due to COVID-19 under a DTA, the IRS also extended relief to US employers such that affected employees would not have US-sourced employment income and therefore should not trigger federal income tax withholding obligations.

Similarly, on an international basis, many taxing authorities provided comparable guidance to prevent employees and employers from becoming unduly subject to unintended tax liabilities and obligations due to the pandemic. Accordingly, employers have had to stay current on developments and how evolving international guidance impacted employees’ changing plans due to the pandemic to determine where normal domestic and DTA rules would not be applied and how new guidance may impact employees in order to mitigate exposure to employer tax obligations. The consequence of the guidance, however, was to limit employees’ exposure to income tax due to an unexpected period of time in a foreign country, in turn limiting corporate exposure to employment taxes, payroll obligations, and potential liability for employee taxes not withheld.

A Remote Global Workforce

Much of the guidance issued by revenue authorities and the OECD in the first few months of the pandemic focused on mitigating unintended tax consequences from employees working temporarily outside their home country as a consequence of travel restrictions and other challenges in returning home.

However, as another “new normal” now takes shape where remote working is widespread globally and with many employees still unable to return to their previous place of work, employers are responding by allowing temporary or even long-term foreign remote work. Arguably the context for the application of tax legislation appears to have changed little—travel restrictions are still being implemented or remain in force9 and consequently employees are unable to work as they did pre-pandemic. As remote work policies are developed, tax considerations should be a key factor in shaping the parameters for which an employee may work internationally, reflecting the reliefs provided by DTAs and totalization agreements.

For employers, understanding the nuance and potential application of guidance issued by tax authorities will be increasingly important. While many employees found themselves impacted by travel restrictions, employees’ ability to return home also has the potential to cause employers issues if, say, employees can return home but choose to continue remote working for an extended period. Commentary from the Inland Revenue Authority of Singapore (IRAS), for example, states that income earned by nonresident non-Singaporeans who are working temporarily from the country during the crisis will not be considered earned in Singapore in cases where they are “unable to leave Singapore in 2020 due to travel restrictions.”10 This creates risk for individuals who choose to remain in Singapore that the relief does not apply and they become subject to taxation. The Australian Tax Office (ATO) has similar limitations where COVID-related relief on individual tax residency and taxation of employment income is impacted by whether employees intend to and actually do return to their home country when they are able to do so.11

The OECD further acknowledges in its updated guidance12 that the taxing right may change between countries where an employee works remotely from a foreign country. Although OECD guidance encourages tax authorities to take action to ease the compliance burden on employers and coordinate efforts between countries to mitigate complexity, the obligations, risk, and potential relief that arise from remote working are born out of the same domestic tax law, DTAs, and totalization agreements. This new population of mobile employees, therefore, may have initially been within the scope of reliefs and could effectively opt out, with the effect that these workers become liable for taxes and are conferring tax exposure and obligations on the employing company.

An opportunity for remote working is the increase in countries offering “digital nomad” visas. These allow individual employees to work remotely in a foreign country typically through simplified immigration requirements and may require the visa application to be made by the individual employee rather than by an employer. Some countries have legislation specifically tied to tax law and, like Croatia,13 offer individuals the opportunity to remain in the country for periods in excess of 183 days while explicitly mitigating the risk of creating a permanent establishment, individual income tax, and in turn employment taxes and employer obligations.

With remote work becoming codified in corporate policy as a normal way of working and employees having degrees of discretion over where they may work, employers should take care to appropriately analyze whether COVID-19-related guidance that eases the taxation exposure in a foreign country will in fact apply to elective international remote working arrangements.

Where it may not, the question arises as to what employers should be assessing. Taking as an example nonresident alien employees choosing to work remotely from the United States from January 1, 2021, rather than in their home country,14 key federal income tax issues can be summarized as:

  • Where there is no double-tax treaty in place, is US-sourced employment income subject to federal income tax where it does not meet the criteria to be excluded in Section 864(b)(1)(B)?15
  • Has the employee spent more than 183 days in the United States in any twelve-month period starting or ending in the tax year? If the employee has, and income is subject to US withholding, is the US or foreign employer liable for withholding under Section 3402(a)?
  • Where an obligation for federal income tax withholding obligations has arisen but has not been met, what is the quantum of tax, penalties, and interest the company may be liable for if not paid directly by the employee?16
  • Does the employee have or qualify for a US Social Security number or individual taxpayer identification number for the employer to include in filings and reporting?

While on an individual basis the tax risk attached to a single employee may seem insignificant, when extrapolated across a global workforce and in the context of corporate policies enabling international remote working arrangements, the financial quantum of the tax risk may increase exponentially. Furthermore, while policies may outline the parameters under which an employee may travel internationally, tracking and monitoring of international remote working will still be critical to proactively managing compliance. For a displaced workforce, employers need to be able to identify where employees are and where they “should” be. Leveraging technology and data analytics, companies may automate tracking and tax risk assessment, with the ability to customize the criteria specific to assessing employer and corporate risk.

As observed by Nishant Mittal, senior vice president at the global talent mobility technology provider Topia, “The talent strategy seems to be a step ahead of the compliance implications for many companies. Finance and compliance teams are therefore rapidly trying to implement solutions to manage this, leveraging technology and analytics to help address the complexities that remote work creates when it comes to payroll withholding, employment taxes, and permanent establishment risk.”17

Tapping the Global Talent Pool

The transformation of a global workforce can also be seen where companies deploy alternative models of talent engagement and different staffing models. This may be in response to market pressures, for example, where projects are funded or resourced on a modular, short-term basis, or where the right talent is hard to find. With more flexibility and the ability to limit the fixed overhead cost associated with permanent employees, consideration of the use of independent contractors is increasing. Similarly, the availability of talent in a specific country or region, or on a fixed-term basis, is driving efforts to attract the best candidates outside the country of employment.

Where employees are engaged by a foreign employer, questions of circumstances, optionality, and permanence that characterize the above cases should apply less in the country in which they reside. There is likely a clearer basis that these individuals, tax residents in their home country, sit outside the reliefs and exceptions afforded by tax authorities to temporarily mobile employees during the pandemic and, rather, they are subject to relevant income and social taxes. Where this is the case, the potential exposure to employer obligations increases for the foreign company. Operation of payroll withholding and liability for taxes may occur from the first day of employment, and therefore exploring hiring strategies, such as employing through a local entity where one exists, may meet the needs of the business. The potential differentials in employer costs should be considered—local employment could represent a 7.6 percent to 13.8 percent increase in employer tax due when considering the differential between US and UK employer tax contributions,18 for example. Again, extrapolated globally, this could result in an unexpected rise in tax cost to an employer.

Developing an understanding of where talent is being sourced can enable more effective and strategic business support while potentially streamlining tax risk and compliance management. Where a local entity does not currently exist in a country, risk may be counterbalanced with opportunity. Austria, for example, has introduced the ability to voluntarily operate payroll withholding for employees working there and where a permanent establishment has not been created, whereas the burden of operating payroll in the United Kingdom may lie with an individual, if not simply settled with a personal tax return. Similarly, as mentioned earlier, the number of countries now offering digital nomad visas is rising, allowing individuals to work remotely with simplified immigration requirements.

Engaging independent contractors may also be an appropriate way for businesses to engage new talent. The risks associated with misclassification in the United States are mirrored outside the country, with factors such as control and direction of work, subordination, integration into the business, supply of tools and materials, and who bears the financial risk becoming common in determining whether the substance of an employment or contractor agreement is more substantive than the form. The misclassification risk has different dimensions, however, depending on the country. Argentina has a presumption of an employment relationship where services are provided in the ordinary course of business; in Colombia, a contractor may bring suit to be treated as an employee, which if successful may trigger retroactive taxes, interest, and penalties.

Fundamentally, while COVID-19 continues to disrupt and businesses adapt to successive “new normals,” a path forward can be navigated to mitigate the tax risk to companies where the tax landscape may still look the same. For employers, collaboration among functions including tax, human resources, legal, and Total Reward strategies can ensure the capabilities, infrastructure, and agility needed to respond are in place, with actions including:

  1. developing defined policies that enable remote working and hiring within parameters aligned with a company’s objectives and culture;
  2. implementing robust identification and tracking processes;
  3. undertaking proactive corporate and employer tax risk assessment; and
  4. automating tax risk analysis in the United States and internationally to focus resources on addressing situations that pose more risk.

And while further “new normals” will likely emerge as businesses return to a globalized and physically interconnected world, these actions will enable employers to take the initiative rather than to simply react.

Richard Tonge is a principal at Grant Thornton LLP.



  1. Grant Thornton LLP’s By the Numbers pulse survey in February 2021 showed that seventeen percent of respondents saw remote working as having the greatest influence on employee engagement in 2021. This compares to twenty-seven percent for bonus and incentive compensation. See our analysis, “Cash, Remote Work Top Employer Rewards Concerns,” Grant Thornton, February 25, 2021,
  2. See Article 14(1) of the United States Model Income Tax Convention (2016) for sample wording: model-2016.pdf.
  3. Additional complexity may arise when an employee is deemed to have an “economic employer” in the other country. See OECD Commentary on Article 15, Income from Employment, of the Model Tax Convention on Income and on Capital (2017) for further discussion of the “economic employer” principle, in particular Section 8 in
  4. See Article 5 of the United States Model Income Tax Convention (2016) for complete definition and criteria.
  5. See Article 5(5) of the United States Model Income Tax Convention (2016).
  6. See US–UK Social Security Agreement, Part II, Article 5(1) and (2),
  7. “OECD Secretariat Analysis of Tax Treaties and the Impact of the COVID-19 Crisis,” OECD, April 3, 2020,
  8. See Internal Revenue Code Section 7701(b)(3).
  9. The Trump administration’s series of presidential proclamations on entry into the United States are still in force, limiting inbound travel for noncitizens and nonlegal permanent residents. See “Travelers Prohibited From Entry to the United States,” Centers for Disease Control and Prevention, February 19, 2021,
  10. See “Working Remotely From Singapore Due to COVID-19,” Inland Revenue Authority of Singapore, January 29, 2021,
  11. Residency and Source of Income, Australian Government: Australian Tax Office, October 29, 2020,
  12. “OECD Policy Responses to Coronavirus (COVID-19): Updated Guidance on Tax Treaties and the Impact of the COVID-19 Pandemic,” OECD, January 21, 2021,
  13. Refer to Article 59 of the Croatian “Law on Foreigners,” (2020), Further visa application information can be found at and
  14. This scenario is illustrative and does not consider the immigration limitations on entry into the United States for aliens.
  15. Income earned by a nonresident alien temporarily in the United States for a period or periods not exceeding ninety days during the tax year and the compensation for the services performed does not exceed $3,000. See 26 US Code Section 864, Definitions and Special Rules,
  16. Tax may not be collected from the employer if remitted by the employee per Internal Revenue Code Section 3402(d), but penalties and interest may still be applied.
  17. Further details can be found in Topia’s 2021 Adapt survey, “Topia Survey: 28% of Employees Worked Outside Their Home State or Country During the Pandemic, But Only 1/3 Reported It to HR,” Cision PR Newswire, February 23, 2021,
  18. Employer FICA contributions are due at 6.2 percent on taxable income capped at $142,800 and 1.45 percent for Medicare in the United States. This is compared with Class 1 National Insurance contributions due at 13.8 percent uncapped on taxable compensation.

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