Employer requirements for employees working from another EU country

D

David1234

Registered User
Messages
264
Hi,

A friend who runs a small professional services firm had 2 employees move to their home countries, Spain & Italy, at the start of lock down March 2020. They have not returned since and have continued to work for the company with no changes being made to the way their salaries were paid and taxed while in Ireland. The Spanish employee has been contacted by the revenue equivalent in Spain saying that the employee owes money for the wages earned since they returned.

My friend is happy with the current set up and is happy to have the employees work from wherever they choose provided it doesn't cause too many issues or give rise to significant tax bills for them or employee. Does any one have any idea of the employer commitments in terms of reporting to all of the relevant authorities?

Many Thanks
 
Generally, income tax is due in the country where you reside.

So the employees would be liable for Spanish & Italian tax once the moved to Spain & Italy and the employer could be liable for witholding the amounts from their pay and paying it to the proprer authorities.

I suggest that they get proper advice from an expert in this are rather than looking for advice here
 
Thanks @jpd .Ye, from reading up online it seems like it could be quite complicated for both employer's & employees. I see that there were also some agreements in place between some countries to cover scenarios like this during Covid.

I will recommend for them to get professional advice. If anyone else had any experience with dealing with it it would be great to hear any further feedback.
 
The simple thinking is to use an umbrella company in the employee's country of residence. The umbrella company is the nominal employer and handles all local tax and social welfare issue. It sends a monthly invoice to your friend for services rendered, including the costs of the salary etc for the employee. IT contract do it all the time.
 
We looked into this in great detail years ago, but for specific countries (ie not Spain and Italy). My memory is: Your friends company (Company A) is now an employer in Spain and Italy. They have employees, not contractors, so very different obligations. They have requirements as an employer in both places that depend on the country's own regulations. They are eligible for playing employer PRSI (equivalent) and ensuring employee payroll taxes are deducted and paid to local authorities (probably). There may also be wider problems about the fact that their company can be viewed as having a subsidiary in those countries, because work is being done there on a permanent basis. This could - potentially - be an issue in terms of corporation tax.

Its very complicated, where the other country is is an issue, and there are companies that help you out with this. A friend of mine set up a permanent overseas working arrangement here in Ireland before COVID, her firm uses a company that basically takes her salary from her employers (plus whatever fee they charge) ensures her taxes are paid to revenue and she gets a payslip as she should etc etc and neither the company nor her has to worry about it any more. But its really not straightforward, and I think a lot of people may end up being stung by this in the future. Your friend needs to get proper advise ASAP.
 
You must log in or register to reply here.
Back
Top