As a result of measures taken due to the COVID-19 pandemic, numerous questions have risen regarding the social security liability and personal income tax liability of expats. In many cases they spent – or some of them were forced to spend due to borders being locked down – more time in their home country working remotely from home, while they were supposed to be working in another country.
Is there a change in the personal income taxation or the social security liability due to the involuntary home office working of these expats? Let’s see the guideline provided by the local authority (Hungarian Ministry of Finance) and compare it to the proposal of the European Committee and the OECD.
The most important question to determine which country has the right to tax the income deriving from non-independent activity is the tax residence of a person. Based on the OECD Model Tax Convention – which is the foundation for most double tax treaties – there is a certain order of aspects to consider so as to decide the tax residence of the individual:
The social security obligation is in the country of work unless the individual’s working hours exceeds the 25% limit in another country. According to the opinion of the Hungarian Ministry of Finance, the existing social security status of the individual will not be reviewed due to the pandemic even if there is a change in the proportion of the working time spent in the country of residence. This latter approach is in line with the guidance of the European Committee in cases that could lead to changes in the employee’s member state of insurance due to COVID-19.
With this newsletter we give an overview of recent or expected changes in the area of Global Mobility in different countries.
If you have any questions about WTS Global or our global services, please get in touch.
We will respond to you as soon as possible.