Remote working has become part of everyday business for many employers. Whether you employ staff through a Dutch entity, have employees working remotely from the Netherlands, or receive requests from Dutch employees who wish to work abroad, flexible working arrangements have become the new reality.
We believe remote working offers significant benefits. It enables employers to attract talent regardless of location, while employees often enjoy greater flexibility and a better work-life balance.
However, what often starts as a practical HR decision can quickly have tax, payroll and legal consequences. In our experience, employers are frequently surprised by the number of obligations that arise once an employee starts working remotely from another country.
Supporting employers with international employment structures is part of our daily practice. Below, we highlight the key considerations that deserve attention before approving cross-border remote working arrangements.
Remote working may create unexpected tax risks
One of the first questions employers should ask is whether remote working could create a taxable presence abroad.
When your employees work from abroad, there is a risk that a “permanent establishment” (PE) is unintentionally created in that country. This can arise from the home office itself, but also from the nature of the work performed.
This risk increases in particular if an employee has a commercial role within your organization, for example, by negotiating and/or concluding contracts. It is important to understand that using an Employer of Record (EOR) does not automatically eliminate this risk. Ultimately, tax authorities assess the factual situation: what is your employee actually doing in that country on behalf of your organization?
Because permanent establishment is a complex topic in itself, we explain this in more detail in our dedicated blog on Permanent Establishment risks for remote workers.
Cross-border payroll obligations often arise sooner than expected
Remote working also raises an important payroll question: where should payroll taxes actually be paid? Assessing the payroll implications before approving remote working helps avoid unexpected administrative obligations and potential tax exposure.
With structural remote working, the key question arises: where should payroll taxes be paid? In many cases, the employee’s country of residence is decisive for taxation on worldwide income. If your employee works on a sustained basis from their home country, this may mean that you, as the employer, must register there and withhold and remit local payroll taxes.
In practice, the well-known 183-day rule often does not provide a solution. In fact, it may result in taxing rights being fully allocated to the country of residence.
In addition, the country where the work is physically performed may have the right to tax that portion of the salary. The country of residence typically provides double tax relief. In practice, this often leads to a so-called salary split, where income is divided across multiple jurisdictions for tax purposes.
Social security does not follow payroll taxes
Payroll taxation and social security are often confused, but they do not follow the same rules.
Within the EU, EEA and Switzerland, employees are generally insured in only one country. If an employee performs at least 25% of their activities in their resident country, that country may become responsible for social security.
For employers, this may result in an obligation to register with foreign social security authorities and pay contributions abroad.
Outside Europe, the outcome depends largely on whether a social security treaty applies. Without one, double contributions may arise for both employer and employee.
Local employment law may apply sooner than expected
Many employers assume that their national employment law continues to apply simply because the employment contract is governed under their national law.
In practice, this is not always the case.
Employees working structurally from another country are often protected by mandatory local employment legislation, including rules on minimum wage, working hours, paid leave and dismissal protection.
The longer employees work abroad, the greater the importance of assessing these local employment law implications.
Don't overlook immigration requirements
Another topic that is often underestimated is immigration.
Employees sometimes assume they can simply work remotely from another country because they remain employed by the same company. However, this does not necessarily mean they are allowed to work there from an immigration perspective.
Depending on the country and the duration of the stay, a work permit, visa or local registration may still be required.
Assessing immigration requirements in advance helps prevent unpleasant surprises for both employer and employee.
Your duty of care extends beyond the office
Even when employees work remotely, employers remain responsible for providing a safe and healthy working environment.
This includes ensuring an ergonomic workspace, monitoring workload, preventing physical complaints and maintaining employee wellbeing.
When employees work from another country, fulfilling this duty of care can become more complex. Local health and safety legislation may apply, while employers often have less visibility of the employee's working environment.
Remote working requires more than an HR policy
Remote working creates opportunities for organisations to attract talent and offer greater flexibility. At the same time, every cross-border remote working arrangement should be assessed from multiple perspectives.
In our experience, successful remote working policies are not driven by flexibility alone. They are built on a clear understanding of the tax, payroll, employment law, immigration and social security implications.
Every organisation is different. The right approach depends on where employees work, how your business is structured and your international ambitions.
At Bol International, we help employers assess remote working requests from every relevant angle. By combining expertise in global mobility, payroll, tax and employment law, and working closely with our international network of partner firms, we help organisations offer flexibility while remaining compliant.
Thinking about introducing or expanding remote working within your international organisation? We'd be happy to discuss what this means for your specific situation.
