A Top Guide to Organizing Tax for Remote Employees

A Top Guide to Organizing Tax for Remote Employees

A Top Guide to Organizing Tax for Remote Employees

March 2, 2023

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Key Takeaways

  1. Remote employees must be taxed according to the tax laws of the country they’re living in
  2. You must withhold the same taxes for remote employees as you do for on-site employees
  3. Many countries have tax cuts or deductions available for remote workers
Summary

 

Hiring workers remotely is a cost-effective way to add new staff to your team and increase the diversity of talent in your workforce. It’s important to remember, however, that managing remote workers requires a different approach to on-site employees. Making mistakes with remote employee payroll and taxation can be costly in terms of fees and fines.

With the information and advice we offer in this article, you’ll be able to prevent any expensive errors. Additionally, you can ensure that you are effectively and compliantly taking care of taxes for all your remote employees.

 

What Taxes Apply to Remote Employees?

 

Around the world, the same taxes that apply to in-office employees are required for remote employees. This is despite some companies seeing remote employees as freelancers or independent contractors.

Applicable payroll deductions will look different depending on your company’s location and local taxation guidelines, but will typically include:

  1. Income tax
  2. Unemployment tax
  3. Social security deductions
  4. Pension
  5. Healthcare Tax

You will need to withhold these amounts for all your remote employees just like with on-site workers.

 

Taxes for Remote Employees: How Do They Work?

 

Generally speaking, employees must adhere to the tax laws of the location they work in. This can become complicated when remote employees work from home yet aren’t in the same state or country as the company they are working for.

To make sure that you are managing remote teams’ taxes correctly, you need to first consider the labor regulations of your principal place of business. Some countries may require companies to make employer payments in the country where the entity is based. This could be regardless of where their employees are operating.

Next, you need to research the tax rates in the location of your remote employee. Some countries like the USA have tax return laws that differ according to state or region. You may be in the same country as your remote employee but still have to use different forms when filing taxes. In the USA and similar countries, there are likely to be agreements or exceptions made between states that will prevent double taxation.

If a remote employee has recently moved to a new location within the same country, you need to ensure that they register correctly in their new place of residence. This is to avoid paying state taxes twice. Additionally, many countries have tax treaties to prevent double taxation, so it is essential to look up all relevant laws.

Any additional taxable employee benefits you may offer, such as employee stipends or employee benefits, must also be reported according to local tax requirements. At the same time, some countries may allow deductions for remote work expenses.

 

Countries with Remote Employee Tax Deductions and Benefits (2023)

 

Now, with the rise of remote working and remote employees, many countries have introduced tax deductions and digital nomad visa options for those who want to work remotely.

 

  • As of April 2022, the UK offers tax relief of 6 pounds (GBP) per workday for those whose job requires them to work from home. Other European countries like France, Germany, and the Netherlands also have legislation that requires remote employees to receive stipends. These range from 5 euros daily to 10 euros monthly (EUR).

 

  • Portugal has an NHR (Non-Habitual Resident) program that includes tax exemptions and a flat rate of income tax for remote workers that qualify for the program.

 

  • Since September 2021 Greece has had a digital nomad visa available for remote workers. This includes a tax break of 50% for up to 7 years.

 

  • Italy has a tax exemption equal to 70% for digital nomads who commit to staying in the country for a minimum of two years.

 

  • Both Australia and Canada have reimbursement schemes for remote workers. This allows them to receive compensation for home expenses like video conferencing tools.

 

  • In the US, self-employed remote workers are eligible for certain tax deductions. In recent years this has come to include write-off expenses in some US states.

 

Handle Remote Employee Taxes Easily with an International Employer of Record (EOR)

 

Fortunately, there is a simplified way to handle all the different rules and regulations around remote employee payroll. We recommend partnering with a global Employer of Record or Professional Employer Organization (PEO).

These are third-party employment and HR outsourcing providers that can manage all administrative tasks on your behalf.

Usually, without an EOR, you will be required to take care of every aspect of employee taxation laws. These range from the rules for the country your company is based in to local rules in that location.

You may have to hire legal consultants to make sure you aren’t being double-taxed or making any other incorrect calculations. Even minor mistakes here could cost your company a lot of time and money.

Instead, with an EOR expert like INS Global, all areas of payroll and taxation can be covered with speed and professionalism. An Employer of Record acts as a representative legal entity in the country you want to hire in. So, with this support, you can easily find and onboard new staff without having to set up a physical branch of the company overseas.

In the end, managing your remote employees through an EOR also guarantees that your remote workers receive their salaries on time and with full legal security.

 

guide to tax for remote employees

 

How INS Global Helps Digital Nomads and Remote Employees

 

INS Global has teams located all over the world. This coverage ensures expertise in all remote working matters. Managing a global team is difficult. From a lack of face to face interaction to integrating laws from multiple countries, it requires specialized knowledge and skills. Fortunately, our team of qualified professionals is multinational and multilingual.

Our experience and talents make us your ideal partner for both managing remote employees and finding the most talented digital nomads to work for you.

We’re familiar with the everchanging remote work policies and tax liabilities of countries worldwide. We can stay on top of any new developments while you reach for your expansion goals.

With our help, you can hire new remote workers and make sure that your current remote employees are being taken care of well.  Additionally, thanks to our experience with following changes to things like tax cuts and job requirements worldwide, you’ll never be out of legal compliance.

INS Global has nearly two decades of experience helping companies expand worldwide simply and safely. Finally, our EOR and PEO services are available globally across multiple time zones. This makes us well-equipped to handle all your expansion, recruitment, and HR needs.

So, contact us today to learn more.

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