Where Do You Work
Simple Question ... Right?
Is the recent Italian fine of Netflix a stalking horse for countries to charge businesses for remote workers operating in their country?Businesses pay people based on where they live, not where they work. For most of us - what’s the difference? It is starting to turn out … a lot! I wrote about this a few weeks ago, but there’s more - and a lot of it is to do with tax.
It’s getting ‘interesting’ as remote and nomadic work takes hold, because it will also start to affect visas, which as people move around the U.S.A. we don’t think about. But what happens if your remote/nomadic work has you living in a foreign country?
Does a nomadic worker in Kenya need a visa to work for a German company?
The answer of course is yes (ish). This is where the whole concept of expats1. status started, but that is for companies with a ‘presence’2 in that other country. What if there is no presence and you just happen to have chosen to live in (say) Kenya as part of your ‘nomadic work experience’?
When companies first started getting people ‘off their books’ through the process of outsourcing and offshoring the whole principle of being paid based on where you live wasn’t questioned. In California there is a minimum wage of $15 per hour. If I move a factory to the Philippines, the minimum wage I pay is reduced to (give or take) $10 per day. That right there starts to explain why offshoring caught on.
Today it’s a different yet connected story.
I just published a scenario on the blog for your delectation, as the 70s sitcom Soap had it;
Confused? You Will Be!
Traditional thinking suggests that in order to do work in a country, you either need to be a citizen of that country where you are working or have a work visa that allows you to do so. BUT;
the local government doesn’t know you are working there (no work visa application).
you are not ‘taking the job of a local worker’.
you are not being paid locally for what you do.
So on what grounds would they tax you?
Of course, America is one of two countries in the world (the other is Eritrea 3) that gets around this by insisting that all citizens and permanent residents are taxed on their global income.
For every other country in the world, it gets complicated. Very quickly.
But first, why does it matter?
It’s a real question - and relevant in this modern world of ‘remote work’ - the very term suggests that ‘work’ is done ‘somewhere central’ … and ‘remote work’ is done somewhere that is ‘remote to that place’.
Back in July, ‘The Atlantic’ had this to say.
When you hire someone, you’re (supposedly) hiring them to do a job in exchange for money. But the anti-remote crowd seems to believe that the responsibility of a 9-to-5 employee isn’t simply the work but the appearance, optics, and ceremony of the work.
I wrote this a few months ago over on the blog. On the face it of - nothing to do with work, but I think is everything to do with where we might be headed.
TL;DR, Netflix paid a fine to Italy because Italy argued that the cables and servers used by Netflix to deliver their service to people in Italy amounted to Netflix having a physical presence in that country.Extending the thinking, if someone is physically in Italy working for <Random Company> in some capacity as a freelancer, isn’t it a logical corollary that Italy could argue that <Random Company> has a tax obligation?
Again. Edge case, so question ...
What percentage of a country’s workforce needs to be living there but working remotely before the country realizes that it needs to change its policies?
Resources
Stowe Boyd and George Barnett recommend people read People First.
Some of the Substacks I get my head around on a regular basis.
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An ‘ex-pat’ lives and works in a different country to the organization that pays them, but has not made a ‘permanent move’ (setting aside that I know people that have been an ex-pat all their life!).
Presence being ‘Office’, ‘Factory’, ‘Legal Entity’ even a local person ‘on the books’ collecting their salary from the company.
I know - right!