The possibility of employees of working outside of company premises – so-called smart working – was governed in 2017, with the labour law reform known as the “Labour Law”.
The governance of the smart-working mode requires that the employer and the employee enter into a specific agreement. The possibility of a different governance with the involvement of the trade unions is currently subject to major debate.
Currently, the individual agreement should include the following aspects: the work premises address, other than the usual address, duration and the work execution mode (for normal work coordination). The foregoing assumes that the Company has adopted a specific work mode, considering also the following key aspects: the right to disconnect in order to favour the work/life balance, work time, daily and weekly breaks and the limits to the remote control of the work activity.
The COVID-19 health crisis has led to an exponential spread of the recourse to the remote-working mode, given that the health and safety policies adopted by employers define remote work as a key prevention measure.
The Italian legislator has introduced a temporary simplified regime (to date effective until 31 December 2020) to enable private employers to resort to remote work without the prior consent of the employee, provided that the list of the employees involved is duly submitted to the Ministry of Labour.
On the other hand, no governance has been enacted to deal with the possibility that the work activity is executed remotely from abroad. Given that the main principle to identify the applicable law – for both labour and social security – is the place of execution of the work activity, its remote execution from abroad is becoming a crucial point that shall be considered in a necessary update of the local and European legislation. On the other hand, from a tax standpoint, the main consequences that may arise may be summarised as follows:
→ the risk of rise of an agency PE of the foreign company in the other State: the OECD has clarified that the agent’s activity in a different state should not be deemed as “habitual” as long as restrictive measures are in force; to date, Italy has declared the state of emergency until 31 January 2021;
→ an individual may become resident in both countries under domestic law. If the employee is also an executive director of the company, his inability to travel may cause a potential change in the “place of effective management” of the company and, therefore, a change of its residence for tax purposes. In both cases, if the two countries signed a Double Tax Convention (“DTC”), the double residency question should be addressed with the application of tie-breaker rules;
→ the Italian Tax Code provides for a special regime (taxation on conventional values) for employees working abroad for more than 183 days a year. The fact that the activity is carried out in Italy, if interpreted rigidly, would exclude the possibility to apply the special regime;
→ DTCs between Italy and France, Switzerland and Austria contain a specific provision for cross-border workers. In the summer of 2020, it was agreed in three special agreements with the aforementioned states that said DTC provisions shall not be affected by the fact that workers are unable to commute (or are advised not to do so) to the other country. These mutual agreements will apply until the end of 2020 (France) or until the parties agree to end it (Switzerland and Austria).
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