What is Shadow Payroll?
Today’s workforce is mobile, and COVID-19 pandemic has accelerated this trend. France, Italy, Germany and even Belgium, Netherlands and UK… It is not unusual to hear that people returned to their home country and are working remotely. Can this practice have an impact on companies and the way payroll is handled? Yes, it does. As the current situation may last longer than expected, if a company has employees working from a different country they have to be considered as “expats”. Nations are more demanding and local tax jurisdictions are increasing pressure on people’s income tax and shifting the burden of taxation to employers, many things can go wrong for companies which will be required to pay heavy fines. Let’s use the following example: “Max is British. He lives in Basel and works for a Swiss based pharma company (home country). In March 2020, because of the COVID-19 pandemic, Max decides to work from his home in the UK (host country), and travel to Switzerland when required , usually one day per month for on-site meetings. Max’s plans are to return to Switzerland when his company’s office opens again, which is planned in March 2021.” How shall this case be treated? Generally, double taxation treaties apply for assignments that are less than 6 months. As the stay is longer than 183 days, it is considered a long-term assignment and Max’s income may be subject to tax in the host country (UK). In this case Max’s company is required to implement a shadow payroll and pay for the social security in the host country. What is Shadow Payroll? Shadow payroll is a method to assist and comply with international payroll and tax regulations while an employee has a different host country. As the payroll is shadowed in the host country, it generally requires the home country company to register as taxpayer in the host country or to have a local subsidiary or branch to be registered. It is a complex process, which requires detailed knowledge and expertise! For further information, please:
Work from home, employers obligations in the EU big 6 and Switzerland
Continuing with our “work from home” series, we would like to share with you in the table below and the file attached our findings about the discrepancies of the work from home laws in the 6 biggest European countries and Switzerland. Do not hesitate to download the table and the references by clicking the file below.
Tips for efficient remote office work
The transition to the world post COVID-19 is more delicate than expected. Before the summer and after several months fighting the disease, many countries flatten the curve of new cases. However, for now a few weeks the curve of infections is on the high again and what companies anticipated to be extraordinary and temporary measures could stay on the long run. Companies need to adapt to the “new normality” and implement new “Remote work” processes which are made for the long term. Becase some of the behaviours below tend to create suspicion or frustration amongst teams and the people you work with: I have been working remotely or doing “home office” for more than 20 years and I am happy to share hereafter my personal procedure and tips. Preparation, be “Remote” ready Preparation to on-line meetings E-mails Phone communication Team work Last but not least, working remotely could make you feel like traveling to Mars and you may lose motivation and purpose. It is important that you connect with your colleagues on a lighter mode and provide encouragements. I hope the above tips will inspire you when drafting your new procedures and do not hesitate to contact us for more information.
How COVID-19 is changing the approach to data driven insights
It’s here and it’s inevitable. It’s powered by technology and harnessed by people: Digital Transformation! The pandemic has wrought disruption on how companies work and has accelerated the need to transition to a more digital economy. “Focus on outcomes that make the difference and you will thrive!” Easier said than done! In practice, over 50% of decision makers have little knowledge or interest in analytics. An equal percentage of key stakeholders also have different opinions on the direction of the analytics and the implementation of priorities and plans. Why the use of data seems to create more controversy than contribution to success? The response is because of the ownership of the analytics. In most companies the primary responsibility for data and analytics is not centralised and relies on the business unit heads. It leads to challenges on what processes will likely profit from analytics and creates confusion in key processes of the company such as in communication, improved intelligence, data management and many more. In order to transition smoothly to the digital age, it is key to: The market is full of emerging solutions and it’s probably a good strategy to keep monitoring what is happening in this sector. The success of Digital Transformation relies on the Key Stakeholders to align to define a more systematic and organized approach to analytics and insight driven decisions across the entire organization. For more information on how to successfully transition to digital, do not doubt in contacting us. RELATED ARTICLE: Tips for efficient remote office work
Tax opportunities post COVID-19
With the sudden appearance of COVID-19, many businesses encounter tough and violent challenges as shut down with a loss of revenue and removal of production capacity. The preservation of the EBIT and especially the cash is critical. Therefore companies should focus on completing their 2019 tax credits on R&D might help to obtain cash refunds from the governments. As part of the various public states measures, urgent tax incentives have been introduced such as: Such measures may lead several countries to raise their tax rates and tax conditions in the coming years. The world post COVID-19 remains uncertain and companies may rethink their value chain process by using tax design to improve their bottom line results. Opportunities 1. Transfer pricing activity reorganization In context of an economic downturn, tax-group reorganization is more favourable as it triggers lower valuation in respect of transfer of business activities, goodwill, Intellectual Property (IP). Restructuring allows to benefit from the negative context to redesign the transfer pricing group policy by calibrating the benchmarks and efficiently re-streamline the generation of the value added creation in more tax efficient locations. In addition, tax losses generated during 2020 might be optimally utilized to reduce the exit tax impact. 2. Revisit of existing transfer pricing flows The negative economic context offers possibilities to recalibrate the transfer pricing remuneration by streamlining the benchmarks. This may decrease the net income of the group subject to corporate tax in the various jurisdictions. 3. CFC – Controlled Foreign Company rules. Group subject to CFC rules may also benefit from a favourable re-design in term of shareholding. Reorganizing the shareholding flows as well as the adequate level of substance might allow to minimize and optimize the negative impact of these rules. As a conclusion, the world post COVID-19, remains uncertain and companies may take this opportunity to rethink their value chain process by using tax design to improve their bottom line results. It is the right to elaborate a tax risk-benefit assessment. Please feel free to contact us for more information. Simon Massel
COVID-19 Employer Q&A Switzerland
Situation at April 1, 2020 The following lines is an intent to help you navigate to your rights when facing the most commun issues that employers and employees are facing amid the current COVID-19 pandemic. Are my employees obliged to disclose themselves as a risk-factor? Only if they have a confirmed infection. Otherwise no. As an employer can I demand my employees to disclose themselves as risk-factor? Yes, only if you are implementing sanitary measures to protect employees. Questions need to be proportionate in light of the information that the employees need to disclose. Then employees who are at risk can be asked to disclose it to the employer. It can be done by written statement from the employee or the employer may as for a medical certificate. As an employer/manager can I request employees to report co-workers with symptoms of COVID-19? Yes, but this measure can be seen as an obligation to report other employees and the data obtained in the case of a risk-factor person cannot be kept on the personal record of the employee and deleted within 5 weeks. Furthermore, the type of information provided is very important: as an employee I can report that a colleague seems to suffer from a fever, tiredness, etc. But I cannot report that an employee suffers from asthma or any other disease. It would be a violation of privacy and is very sensitive. In addition, a person which was reported has the right to know who the reporter is. It is very important to think how to address this situation. Finally, you may inform other employees in a timely and transparent matter, with the appropriate level of information as explained here; only relevant information can be disclosed. As an employer can I require that my employees see a doctor? Yes, but at the employer expense. Furthermore, the doctor is not allowed to provide details to the employer. The only information the doctor can provide is if the employee is able to work or not. One of my employees is refusing to come to work. Can he do that? At-risk employees can ask to work from home provided that it is possible from a technical and operational point of view. If work activities can only be carried from the usual place of work, employers must be fully compliant with the federal recommendations on hygiene and social distancing for all employees. The same applies if an important meeting is taking place and for business trips. My company is not on the list of companies that must shut down operations, but I want to shut it down anyway. Can I do it? In the case of a voluntary shut down, the employer must pay the full salary to its employees. Do I have to pay an employee who can’t work because kindergartens and schools are closed, and the employee must stay at home to look after his/her child(ren)? Employees will receive their full salary for the first three days of absence. As of the fourth day the employer does not have to pay any salary. Employees might qualify for a daily allowance equal to 80% of their salary, with a cap of maximum 196.00 CHF per day. The employee is responsible for the application with the social security fund of the company. Generally, if an employee is prevented from working because of an act of negligence from his part (travel to prohibited areas, breach of confinement, etc.) he/she is not entitled to receive any salary pay. The chart below summarizes your rights and obligations. We hope this article is helpful. Rui M. Teixeira
