This Wisdom of the Crowd, compiled from questions and responses posted on the Employment & Labor Forum,* addresses the implications of allowing an employee from a U.S. company to telecommute from Spain.
*(Permission was received from the ACC members quoted below prior to publishing their Forum Comments in this Wisdom of the Crowd resource.)
Question:
One of our employees is requesting to work remotely (telecommute) from Spain, for a 6-month period, beginning in December 2016. The employee's spouse is on a sabbatical. The employee is currently employed in Colorado, and wants to continue working remotely during this 6-month period. It will involve conducting scientific research and engineering on line and via telephone with colleagues back in the United States. We will continue to pay this employee's regular salary and benefits during the 6-month period. The employee's medical insurance will continue and provide coverage in Spain. The employee's paychecks would be direct deposited into a United States bank account and applicable Federal and State taxes will be deducted. This employee would not require any type of support from the Spanish economy/government, and will not be working or interfacing with any Spanish company. Given the 6-month time-frame the employee wants to apply for a Non-Lucrative Visa.
The question we have is: under a Non-Lucrative Visa, if this employee works remotely/telecommutes from Spain, are we as the United States employer required to be registered to do business in Spain, for the purposes of tax, workers compensation laws or any other financial obligation?
We are aware of international Professional Employer Organization companies Like Global Velocity, however, we rarely have the budget flexibility to use that type of resource.
Has anyone had experience with this type of situation? Alternatively, we have other employees who want to use this type of arrangement in other countries as well.
Wisdom of the Crowd
Response # 1: You should be concerned that the arrangement may trigger a permanent establishment in Spain for your United States entity, not to mention other possible immigration and criminal issues. Best to check with your tax consultants as these situations are complicated.1
Response # 2: You need to be aware that having this employee work overseas in another country could subject you to tax in that country. It is also possible that you need to register to do business in that country which can have a morass of regulations and requirements. We have run into these issues before and it can create a host of legal and tax issues.2
Response # 3: You also need to consider possible export control issues. My radar went off when you stated that the employee would be "conducting scientific research and engineering on line and via telephone with colleagues back in the United States." While the employee is a United States person, data may be exported to a foreign destination either on the employee's laptop or via collaboration online. Exemptions should provide some help depending on the nature of the data, but you need someone in your export group to weigh in and provide guidance.3
Response # 4: I would be extremely careful and make sure that the presence of this one employee does not open up a can of worms with respect to European Union Data Privacy Shield compliance for your entire company, depending on what type of data the employee has available or will access/store locally.4
Response # 5: We have been advised previously that these type of situations could potentially subject you a host of European Union laws, including local employment laws (which are SO much more employee-favorable) and potentially registration of your business (which is a headache too). Additionally, your company would be deemed to have a permanent establishment for your United States entity. Definitely consult with outside counsel before you consider this, as it could get complicated very quickly.5
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1John Hamlin, Chief Counsel, Employment, Benefits and Governance, Marsh & McLennan Companies Inc., New York (Employment & Labor, September 25, 2016).
2Marjory Robertson, AVP & Senior Counsel, Sun Life Financial, Massachusetts (Employment & Labor, September 25, 2016).
3Renee Skonier, General Counsel/Chief Compliance Officer, LMI Aerospace, Inc., Missouri (Employment & Labor, September 26, 2016).
4Anonymous Poster (September, 2016)
5Anonymous Poster (September, 2016)
Region:
United States, Europe
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