ICC proposal to reduce tax challenges of cross-border teleworking

Five years after the pandemic, many organisations have largely returned to office-centric working models. Yet, the crisis fundamentally changed how we work, establishing new expectations around flexibility and remote work that continue to persist. In many ways, we accidentally discovered a way of working that actually fits how people live – one where handling a family crisis abroad didn’t preclude delivering excellent work.

This shift in expectations has created a new reality for businesses navigating the complex tax risks of flexible work arrangements.

The gap between employee needs and tax reality

ICC’s 2023 internal global survey of its members revealed that over 80% of employers receive temporary teleworking requests prompted by family circumstances, health-related needs, caregiving responsibilities, or the use of a secondary residence. Despite these arrangements generally being temporary and arising from normal life circumstances, employers frequently find themselves caught between employee expectations and regulatory uncertainty. These seemingly straightforward requests are hampered due to concerns around permanent establishment risk – the potential for creating a taxable business presence in another country – employer tax and social security obligations, and complex compliance requirements.

The 60-day teleworking solution

To address these challenges, ICC has proposed the introduction of a 60-day teleworking ‘safe harbour’, under which an employee’s temporary physical presence in a jurisdiction for teleworking purposes would not, in itself, give rise to a permanent establishment risk, or trigger employer-related tax or social security liabilities. The proposal aligns to the broader principles of international tax law, would not affect a country’s tax rights beyond a limited scope, and can be considered and reflected in the revised Commentary to Article 5 OECD Model Tax Convention and in the Commentary to the UN Tax Convention, without the need to work on a new article.

Why this benefits everyone, from business to country

For companies, ‘safe harbour’ eliminates legal uncertainty, allows for project continuity and continued revenue generation, and transforms potential talent retention risks into a competitive advantage.

For people, it supports workforce well-being by accommodating short-term teleworking needs in times of personal, medical or geopolitical emergencies.

For tax authorities, it reduces enforcement and compliance burdens and eliminates low-risk, low-revenue case loads from already stretched resources.

For countries, it ensures that the employee’s country of employment retains its income tax revenue, while the temporary work location benefits from increased consumption and sales tax receipts.

How it would work in practice

The proposal is built around several key components:

• Short-term and on request: The presence of an employee in a country different from the country of employment should be limited in time (e.g. maximum of 60 days per year) and at the request of the employee.
• A clear definition of a day: Consistent with approaches in tax residency rules, a day should be counted if any work activity is performed from the jurisdiction in question.
• Individual treatment of multiple employees abroad: The presence of multiple employees in the same country should not be treated cumulatively for determining employer tax liabilities. Each employee’s teleworking days should be assessed independently to avoid unintentionally triggering permanent establishment risks or compliance obligations based on collective presence.
• Administrative simplification: Where possible, encourage administrative filing to be done in a single country through optional one-stop-shop mechanisms or employer-led tax remittance models..