BEERG Newsletter - Future of Work: Roaming nomads may be a tax no-go

The Wall Street Journal ($) estimates that there are 16m “digital nomads” in the US, wandering around working from everywhere and nowhere. Now, I suspect that the figure may be a little on the high side and probably includes people who take the car to the beach from time to time and work from a seaside bistro for a few hours. 

But, no doubt, there are a great many people who are digital nomads, forever on the move from place to place. There are obviously none now working at Twitter after Elon Musk ordered what remains of the workforce back into the office for a minimum 40 hours a week. What the WSJ article is about are the legal complications involved in digital wandering. Wanderers can be divided into two groups. Those who are employees of a company, and those who are independent contractors. 

For companies, whose employees “wander,” the complications can be myriad. Are they entitled to work legally from where they have landed? Are visas and work permits required? What are the tax and social security obligations? What about health and safety regulation governing the workplace in the country concerned? If there is an accident whose rules apply, those of the country in which the accident took place or those of the country in which the employee is based? If an employee bases him/herself in a country for any length of time, the authorities could conclude that the company now has an “establishment” there leaving itself open corporate tax complications.

One of the biggest risks is data management, especially where countries of the European Union are concerned. Cross-border data transfers are a sensitive matter and European fines for break data laws can be eyewatering. During the Covid years, most of these rules were ignored as both companies and employees did what was necessary to keep operation running in the face of lockdowns. But now that Covid is receding, though it will never be gone, regulatory agencies are catching up with the work-from-home/anywhere revolution. They are looking at how laws can be enforced in the new circumstances. Tax and social security agencies are concerned about revenue leakage and will be vigilant that taxpayers do not disappear off the radar. 

Genuine self-employed contractors will be responsible for their own business affairs which is why it may be tempting to think that some or all of these issues can be avoided by turning employees into independent contractors. That may well be doable in the US. But many European countries could see such a move as “bogus,” simply an attempt to evade the law. European courts will be quick to strike down what they see as bogus self-employment/contractor status.,

The “wild west” lawless days of working-from-home/anywhere are over. The sheriff is back in town. 

• This new paper from King’s College London says that young people are the most likely to see real career benefits from remote working.
• Check out this article from our colleagues in HR Policy Global on the same issue.