Got a serious case of wanderlust? You’re in luck.
There’s finally an alternative to being tied to one office location. Thanks to technology and the availability of broadband access, executives to administrative staff (and many people in between) can work remotely from another country without giving up their nine to five.
Remote workers report being 32% more satisfied with their careers than their office-dwelling counterparts.
But if you’re employing digital nomads, it’s not all sunshine and frequent flyer miles. If you have employees working remotely from another country, there are important considerations around paying taxes and immigration.
Employers in the United States operate within predefined jurisdictions at the state and federal levels. This makes it simple to determine where your company does business and what entities you are obligated to pay taxes to. Similar structures are used in other countries, too, but the rise of remote working is challenging these boundaries—and raising plenty of questions.
Let’s chat about some common sticking points.
Is it legal to work for a U.S. company remotely from another country?
Mostly yes, but it’s not a straightforward answer.
There are many countries—like Spain, Portugal and South Africa—that allow U.S. employees to remain in their countries on tourist visas while simultaneously performing job duties for a state-side employer. But this isn’t common law across all borders, so employees looking to jet-set around the world should check restrictions in each locale.
The definitions of work can also become problematic. In most cases, U.S. employees need to keep their business activities aligned with the needs of their U.S. employer in their U.S. market. That means that remote workers cannot interact with the domestic workforce, including:
- Performing work for domestic subsidiaries or local employers
- Employing, soliciting or contracting workers from the local labor force
- Providing services or selling goods to the local market
Will I need a work visa to work remotely from abroad?
Visas are official endorsements that allow an individual to enter, leave or stay in a specific country. For example, if a U.S. citizen wants to travel to London, they will need a visa that identifies their purpose in the U.K. Different types of visas are issued for different reasons—like tourism, education or employment abroad. The duration of each visa depends on its purpose.
If you’re a U.S. worker traveling abroad and working remotely from another country, what type of visa do you need? Again, the answer depends on where you are traveling, the scope of your work in that country, and where the company you work for operates.
If your employer is strictly a U.S.-based company with zero global subsidiaries, getting a visa is little easier. If the scope of your work is limited to your company’s U.S. operations, things are even more straightforward (you won’t be interacting with the local workforce). And, if the country you are traveling to has a tourism treaty with the U.S.—even better.
When things work out well, U.S. employees can work remotely from abroad on a simple tourism visa. Some countries like Antigua and Barbuda in the Caribbean have even created a special Nomad Digital Residence Program that caters to these types of employees with a special visa designation.
What are the tax implications of working remotely from another country?
Everyone wants their piece of the tax revenue pie—and remote workers have created a lot of confusion as to who gets to eat it. Technology allows the workforce to bend and adapt in ways that have never before been possible, but tax structure hasn’t quite kept up. That leaves a lot of questions for remote workers and their employers.
Will I have to pay U.S. taxes?
Yessiree—getting out of taxes isn’t that easy. U.S. employees working remotely abroad for a U.S. company are still liable for paying U.S. taxes.
If the arrangement changes and the employee begins working for a foreign subsidiary, tax obligations will change accordingly. But of course, those arrangements will come with an equal number of complications like changing visas.
What concerns will my U.S. employer have if I ask to work from another country?
Many employers start biting their nails when remote employees talk about traveling abroad. Corporations have some big-time liabilities when it comes to immigration, taxes and permanent establishment risk.
But while the challenges of remote work compliance are real, a lot of companies recognize that their remote employees are up to 85% more productive—making it well worth the effort for companies to learn how to manage outsourced employees so that they can work any way they choose.
Typically, when workers enter another country, they are required to obtain work visas sponsored by their employer. But this system was designed for employees immigrating to a country for the purpose of obtaining work.
The age of the digital nomad is a different story.
In most cases, these employees are working for their U.S.-based company while enjoying the freedom to travel. While work is an activity they will perform, their purpose in the country is recreational—and therefore commonly tied to a tourist visa. This means they do not require sponsorship from an employer to stay in the country. Easy peasy.
But immigration isn’t the only concern.
Many employers also need reassurance when it comes to their own tax liabilities in foreign countries.
When a global company begins conducting business in another country, they become subject to permanent establishment laws. This means they are liable to pay corporate taxes in that country. But many HR departments are unclear on what, exactly, constitutes permanent establishment.
Whether working remotely or at the office, if the activities of an employee remain strictly within the scope of conducting business in the U.S. market, there is virtually no risk that a single employee's travel itinerary will force a company to have a corporate tax liability in another country.
However, lines can be crossed easily if the employee works in sales and is encouraged to network with the locals. Or if a creative director who is accustomed to working with freelancers solicits help from local talent. One solution is to get ahead of this trend and develop a Digital Nomad Policy for your business.
And what about payroll for remote workers? Workers who travel abroad are still U.S. employees and subject to U.S. taxes. Unless a global company already has a presence in the intended country of travel and can offer a local contract and work visa, the 2,600 pages of US tax law still apply. And it’s the burden of the employer to withhold these taxes through payroll deductions.
Considering the complexity of the tax situation, employers and remote employees alike might be tempted to convert the traveler to an independent contractor status. But that’s not always a great option.
Employees might want or need to keep their benefits (to cover the next root canal or, you know, save for retirement). Employers may be concerned about retaining full-time employees to uphold their culture and maintain stability. Plus, at the end of the day, there can be big compliance penalties for misclassifying an employee.
The bottom line on working from another country
When it comes to working remotely from another country, the ins and outs are still a bit ambiguous.
There are many situations where employees can travel freely using tourist visas while performing remote work for a U.S.-based employer. These countries have treaties in place with the United States that facilitate these arrangements—so long as the employee does not interact with the local workforce (let’s just hammer that one home once more).
But global companies who have a presence in the country of travel should consult local laws based on individual circumstances. The same goes for employees who intend to stay in-country beyond a traditional 90-day tourist visa.
Looking to support digital nomads on your team? Learn how Global Employment Outsourcing helps you employ and pay your best talent (liability-free), even where you don’t have an entity.
Suffering from wanderlust yourself? Point your employer in this direction.