Multi-state workers

Typically, multi-state workers are “commuters” who undertake a portion of their work activities in their country of habitual residence, and commute to work in other countries.

In these cases, the employer may have payroll obligations in both the home country and some of the other (host) countries where their employees work.

Determining whether a payroll is necessary in a host country depends on several factors. Where it does arise there are often mechanisms available to minimise or eliminate the impact of double tax withholdings. However, applying these correctly can be challenging and employers often require support to agree upon and implement the right solution. 

Multi-state workers will typically pay social security contributions in their home country if they undertake a substantial portion of their employment duties in that country (25% in the EU agreement).

If their home country happens to differ from the location where their employer is based, the employer may have to register and operate a second payroll to ensure the correct payments are made. 

It is also recommended that, for regular travellers, a “certificate of coverage” is obtained from the relevant tax authority to prove that contributions are being made in one location and are not required in the other.

Multi-state workers are typically reimbursed for their travel, accommodation, and subsistence expenses. Often these expenses qualify for tax relief, however, this is not always the case. It is recommended that employers seek advice on this, and the costs associated with paying taxes on the employee’s behalf where relief is not available.

Whether the employee can work in countries outside their country of residence depends on their nationality and their employment duties.

Visa free work and travel may be available to some e.g. intra EU travel for EU citizens, but others may need to limit their activities to, for example, business meetings, training, or conferences.

Where this is not possible, the employee may require a formal visa to work in other countries.

Depending on the nature of the employee's work and various other factors, there is a risk that the employee may create a corporate presence (“permanent establishment” or PE) in the host country.

The consequences for the employer can be wide ranging and if there is any doubt, advice should be sought.