What is the legal & tax position of a UK person working remotely for UK firm, in non-UK locations, in Europe and globally?

Question

This question is inspired by this question on travel.stackexchange.com.

I am mainly asking about a UK viewpoint, but am interested others (Europe, USA, commonwealth, etc), because at its root, this is a cross-jurisdiction question.

Person X has a UK limited company Y, and his/her work on consultancy based, often remote, sometimes visiting clients in person. The consultancy reports and software are all delivered via internet. Invoicing and payments and all financial affairs are done in GBP via UK banks, and all tax affairs are in order with the UK HMRC.

The clients are based in various countries, UK, Europe and globally.

What is the legal & tax position of conducting this work various remote non-UK locations in Europe and globally?

And from a legal-philosophy viewpoint, is it any different from a UK author going travelling, taking lots and lots of notes, or even writing his/her next novel whilst in various locations, and publishing once returned to the UK?

Finally, in practical terms, if a government does get snotty about it, what basis does a government have for deciding "where" work was done? How would that apply if a team of software developers had a virtual "pair programming" session, with one in USA, one in UK, and one in the Far East ? "Where" has that software been written?

Answer 1

This is a tricky question on the intersection of visa and tax laws. It is tricky because every country can make its own rules that apply when you are in that country or do business in that country. Even within the EU, there is no uniform approach because freedom of movement merely covers the right to work in a country, but not the rules which have to be followed when doing so. Thus, you have to fall back to reading each individual country's rules and legislation.

In general:

• Whether you are even allowed to work or which work activities are permitted depends on your visa or visa-free status. If you are a permanent resident or citizen of the UK, you can come to and work in every EEA country, until the end of the Brexit transition period, subject to the same rules as residents in that country.

  Often, visa-free visits or business visa allow some business activities such as attending meetings with clients or collecting information, but not performing actual work. If you're interested in what business activities the UK allows visitors from other countries to do, take a look at the visitor rules.

• Income tax may be due at the place of tax residency or where the income is generated/earned, in particular where you actually perform the work. There is a widespread belief that you only gain tax residency after staying in one country for 6 months, but this is misleading in the general case: every country makes its own rules, and income tax may be due even without (permanent) tax residency.

  The relevant countries (the country where you work and the country where you normally reside) might have a tax agreement that specifies where tax is due. Within the EU, it is fairly common that a person works in a different country than the one they reside in, so there is a well-developed network of tax treaties. Often, certain activities are exempt from local taxes, such as compensation for visiting researchers or regular employment.

  There's also a good chance that profit from independent work / business profits are only taxable at the place(s) where that enterprise has a permanent establishment – but it depends on the details.

  This section is based on the OECD model tax treaty (https://doi.org/10.1787/mtc_cond-2017-en) which most treaties follow closely. If no tax treaty exists that exempts your income from local taxation, you must consult the local tax laws.

• VAT rules are entirely different, and for B2B services are generally taxed at the location of the client (place of supply rules). But every country makes its own rules. Exception: within the EEA, cross-border B2B supply is always taxed at and by the client via the reverse-charge mechanism.

So things can get quite tricky, and a business visitor should inform themselves beforehand what activities they are allowed to perform abroad and whether there are tax implications.

is it any different from a UK author going travelling, taking lots and lots of notes, or even writing his/her next novel whilst in various locations, and publishing once returned to the UK?

Here no tax implications arise because the travelling author is not paid during their travels, but they have to consider visa rules when performing their work. Such rules often have exemptions for artists. However, it depends on the rules of the travelled country.

what basis does a government have for deciding "where" work was done?

Each country is sovereign and can make its own rules.

How would that apply if a team of software developers had a virtual "pair programming" session, with one in USA, one in UK, and one in the Far East ? "Where" has that software been written?

It is not generally relevant where software was written, aside from copyright or export regulation issues which might have their own rules. Since each of the three programmers is working in their own country, no particular visa or income tax issues arise. However, if they have a common employer, the employer does have to consider the local employment laws regardless of where the employer is established, which may include paying some taxes in every country.