Episode 47: Is your business ready for the summer remote working rush?

Is your business ready for the summer remote working rush?

International remote working is on the rise — and so are the risks. Here is what finance and HR professionals need to know before they approve the next cross-border request.

Every summer, the same requests land on desks across the globe. An employee wants to work remotely from another country for a few weeks. It feels low-risk. The contract stays the same, the salary does not change, and in the UAE, there is no personal income tax to worry about anyway. So organisations say yes — often without asking the questions that matter most.

That instinct to be flexible is understandable. But the compliance picture is significantly more complex than most employers realise, and the consequences of getting it wrong can be costly and difficult to unwind.

Episode 47 of the Chartered Accountants Global Update explores this in depth. Here are the key points.

The UAE tax-free assumption does not travel

One of the most persistent misconceptions in international remote working is that an employee's UAE tax-free status protects them wherever they choose to work. It does not. The moment an employee begins exercising their employment in another jurisdiction, that country's rules begin to apply.

Most countries will not tax a short-term visitor. But once an employee crosses the threshold set out in the relevant double tax treaty — typically 183 days within a rolling 12-month period — the host country acquires the right to tax their income. The calculation is not always straightforward: some treaties count from the date of arrival, others from the date of departure, and some are tied to a specific national tax year. An employee who has worked across borders over several consecutive summers may already be closer to the threshold than anyone realises.

There is also the recoups rule: if the employee works from a related entity of the business in the host country, and that entity picks up any portion of the salary cost, the 183-day protection falls away entirely. Tax liability can begin from day one.

Permanent establishment: the business-level risk

Beyond the individual's tax position, there is a significant risk at the organisational level: permanent establishment (PE). This is the point at which a business is deemed to have a taxable presence in another country — and it can be triggered without anyone intending it.

The fixed-premises test is rarely the issue for remote workers. The more common trigger is the dependent agent test: if an employee habitually enters into, or negotiates the terms of, contracts on behalf of their employer while located in another jurisdiction, that is enough to constitute a PE.

The employees most likely to be doing this are senior ones — the very people organisations are keenest to accommodate. Once a PE is triggered, the business must register in that jurisdiction, file for income tax, account for payroll obligations including social security, and potentially register for VAT. In markets with strict exchange control regimes, such as South Africa and India, there are further regulatory layers on top.

Tax specialists working in this area are clear: this is a board-level decision, not an HR process. The risks accumulate over time, and by the time they surface they are considerably harder to resolve.

What good governance looks like

Organisations that want to manage this risk properly should start with three things.

First, know where your people are. Finance, HR, and payroll teams need a clear, current picture of who is working outside their home jurisdiction, in which country, and for how long. Visa records help, but they are not the complete picture.

Second, take professional advice before approving arrangements. The applicable tax treaty, the PE risk, and the individual's residency position all need to be assessed at a senior level — not retrospectively, once the employee is already mid-stay.

Third, review your broader risk management. Professional indemnity cover, medical aid obligations, and insurance policies may all have territorial exclusions. Some jurisdictions are excluded entirely from standard professional cover. It is worth verifying before the employee boards the plane.

If your organisation already has people working abroad without a proper framework, the priority is to understand the current exposure and take advice on how to address it. In some cases, that may mean restructuring arrangements or temporarily recalling employees. It is manageable — but it requires action.

Transcript

SPEAKER_00 0:00

Welcome to the Chartered Accountants Global Update, the audio newsletter from Chartered Accountants Worldwide, keeping you informed on the issues, ideas, and developments that matter most to our profession. This episode we are focusing on a single subject, but it is one that is directly relevant to a great many organizations and professionals right now as we head into the summer months. The subject is international remote working. Specifically, the tax, payroll, and compliance risks that arise when an employee works from another country. Risks that many businesses are still not fully accounting for, even as they routinely approve these arrangements. This episode is also a preview of a special edition of our Difference Makers Discuss Live webinar series, coming to you on the 2nd of July. So if what you hear today resonates, and I suspect it will, there is a link in the show notes to register. Let's start with the most common mistake. A UAE-based employee asks to spend six weeks working remotely from the UK or India or South Africa. They are on a UAE employment contract, they receive their salary in a UAE bank account, and crucially, the UAE has no personal income tax. So from the employee's perspective, and often the employer's too, it feels like a straightforward yes. It is not. And that assumption that UAE tax-free status travels with the employee wherever they go, is, as one international tax specialist put it, a dangerous one. Here is the reality, the moment an employee crosses a border and begins exercising their employment in another jurisdiction, that country's tax rules begin to apply. Most countries will not tax a short visit. But once you cross a threshold, typically one hundred eighty three days or one hundred eighty in some treaties, within a rolling twelve month period, the host country acquires the right to tax that individual's income. And the calculation is not as simple as it sounds. It is not just the current calendar year that matters. Depending on the treaty, the clock may start from the day of arrival and count 365 days forward. Or it may run backwards from the day of departure. Some treaties refer to a specific national tax year. An employee who has been working across borders for several summers may already be closer to the threshold than anyone realizes. There is also a further complication known as the Recoupes rule. If the employee works from a branch or related entity of the business in the host country, and that entity picks up any part of the salary cost, even informally, the 183-day protection no longer applies. Tax liability can be triggered from day one. Beyond the individual's tax position, there is a business level risk that deserves equal attention. Permanent establishment. A permanent establishment, or PE, is the point at which a business is deemed under international tax law to have a taxable presence in another country. And the consequences of inadvertently creating one are significant. For most remote workers, the fixed premises test is not the issue. They are not setting up an office. But there is a second trigger that is far more common and far less well understood, the dependent agent test. If an employee habitually enters into contracts or negotiates the terms of contracts on behalf of their employer while sitting in another jurisdiction, that can be enough to constitute a permanent establishment. And here is the problem. The employees most likely to be doing that are the most senior ones, the ones whose employers are most keen to keep happy. The ones most likely to be granted the flexibility to work from wherever they choose. Once a PE is triggered, the business does not simply owe a tax bill. It is required to register in that jurisdiction, file for income tax, account for payroll obligations, which may include social security contributions and local employment levies, and, depending on the level of turnover attributed to that presence, potentially register for VAT as well. In markets like South Africa or India with strict exchange control regimes, there are additional layers of regulatory obligation on top of that. The message from tax specialists working in this area is consistent. This is a board-level decision, not an HR process. Not something to be managed informally by line managers approving requests on a case-by-case basis. The risks are real, they compound over time, and by the time they surface, they are significantly harder to address. So what should organizations be doing? Let's make this practical. First, know where your people are. That sounds obvious, but it is not always the case. Finance HR and payroll teams should have a clear current picture of who is working from outside their home jurisdiction, in which country, and for how long. Visa records are a good proxy, but they are not the complete picture. A proper data audit is the starting point. Second, get the right professional advice before approving arrangements, not after. The tax treaty between the UAE and the relevant host country will determine what thresholds apply, whether a PE risk exists, and how the employee's residency position should be assessed. That analysis needs to happen at a business ownership or board level, not at the point when an employee is already halfway through their stay. Third, look at your risk management more broadly. Professional indemnity cover, medical aid obligations, insurance. All of these may have territorial exclusions that are not immediately obvious. In some countries, certain jurisdictions are excluded entirely from standard professional cover. It is worth checking before the employee boards the plane. And if you already have people working abroad without a proper framework in place, you are not alone, and it is not too late. But the first step is to understand the exposure you currently have, and to take professional advice on how to resolve it. In some cases, bringing employees back temporarily or restructuring arrangements may be necessary. The bottom line, remote working across borders is not just an HR flexibility question, it is a tax, compliance, and governance question. And it deserves the same level of care that any other business risk receives. That is all for this episode of the Chartered Accountants Global Update. If the issues we have covered today are relevant to your organization, and with summer approaching, the timing could not be more pressing. I would encourage you to register for our upcoming special edition of Difference Makers Discuss Live. The session is titled Remote Working Across Borders: The Hidden Risks Businesses Need to Understand. It takes place on Wednesday, the 2nd of July, at 6 o'clock in the evening, British Standard Time. It is free to attend, it runs for 30 minutes, and it brings together two exceptional experts. Hugo Van Zell, an international tax specialist with more than two decades of experience in cross-border taxation, and Sarah Brooks, founder of FICRA HR, and a chartered fellow of the CIPD with nearly 30 years of GCC and UKHR experience. More content from Chartered Accountants Worldwide, including insights on AI, sustainability, ethics, and the future of the profession, is available at Chartered AccountantsWorldwide.com. Thank you for listening. Until next time.