After relocation, some employees may wonder: “How should I report the days spent in my former country of residence?”, “Would visiting that country again involve high-risk assessments?”, and “What are the implications from a compliance perspective?”. This article aims to address these concerns, guiding employees to provide accurate responses and ensuring a smooth transition with a focus on compliance.
Compliance Perspective: Wage Tax and Permanent Establishment (PE)
When an employee relocates to a new country for employment, their center of vital interest generally shifts to the new location. This change typically reflects where their primary economic and personal ties are now located, which is why visits to the former country of residence after a relocation are not usually seen as having a big tax impact on the compliance implications tied to the relocation.
This means that, from a wage tax and permanent establishment perspective, days spent in the previous country prior to the relocation are often considered unrelated to the new employment framework. The focus typically lies on the time spent in the former country after the relocation. As such, the days accumulated before the move might not need to be included in compliance assessments.
In cases where employees revisit their former country for a workation, the associated risks may be limited. This is particularly the case if their new country has clearly become their primary residence and these visits remain temporary, without significant economic activity being established in the former country.
How Employees Should Respond on the Platform
During the workation submission, employees are required to answer a key compliance question:
"How many days have you spent in your former country of residence?"
If the days spent in the former country occurred prior to the relocation, employees should report "0" days for compliance purposes.
This approach is aligned with the principle that days accumulated before the move are irrelevant to wage tax or PE considerations in the new jurisdiction.
It is crucial to focus responses on the period after relocation, as compliance frameworks assess risk based on current residency and employment location.
Key takeaways for employees
Days before relocation: These are irrelevant for compliance assessments and should not be included in reporting.
Formal residency status: Ensuring residency status is relinquished in the former country simplifies compliance obligations, the question can be answered as "0" provided the employee has formally given up their residency in the former country.
Conclusion:
This approach simplifies risk assessments and ensures compliance by focusing on the legal and economic realities post-relocation. Accumulated presence before the employment in the new country is not relevant for taxation or PE purposes so the EE should always disregard the presence in the former state before moving to the employment one.In case of further queries WorkFlex is always available to support.