A fex weeks ago, I sat down with our Nordic team for our annual meeting and as always there was laughter in the air, beautiful views of the Swedish archipelago, a lot of good ideas on further collaboration – but also headaches on how to make life easier for our clients. It was an intensive two days, and for me a conclusion is that at people level there are no borders whatsoever on what we can achieve together. But I knew this.
So then what stops, or slows down some of the ideas and projects? I would argue that to some extent rules and regulations, some that we have created ourselves but many that are created by governments on a national level and on the other hand on a Nordic or even EU level.
I think we have all seen that sometimes the talent you need sits on the other side of a border and sometimes you may need to move people just ever so briefly across a border to solve a resourcing situation. Naturally in a post-Covid world we have learnt that remote work is here to stay and that too sometimes happens across borders. With the risk of being repetitive or stating the obvious – these types of situations require more than just getting a plane ticket both for the employer and the employee.
A big part of what we do is helping employers navigate this jungle and a constant topic at our Nordic Global Mobility meeting is cross-border work in the Nordics. This year we also had the pleasure of having a full day collaboration session with universities from different Nordic countries and yes, they also have challenges in navigating rules and regulations. For them a key issue is ensuring research, that benefit us all, goes further and on the other hand ensure we have future talent in the workforce. So, what to do when the talent you need has to cross borders and you get tangled up in different rules and regulations?
The opportunity of a lifetime – to be part of making life easier
Any company or organization dealing with employees that need to move cross-borders has likely bumped into issues. These include remote workers triggering employer obligations in another country, employees having to deal with taxes being withheld in two countries, and last but not least, lengthy registration and reporting obligations for short-term business travel. This is something that has been noted not only by the KPMG global mobility teams, international organizations and universities but is something that is also popping up on the agenda of various international organizations and cross-border collaboration forums. Within the EU some revisions to the social security rules have been made to make cross-border remote work easier.
What is interesting and extremely important on a Nordic level is that some years back the Nordic Council of ministers set a goal to make the Nordic region the most integrated and sustainable region by 2030. A key issue here is having an integrated and functioning labor market. What warms my heart and makes both me and many of my Nordic global mobility colleagues smile is that we together with Resonans Nordic were asked to prepare a study and give our recommendations on what could be done to simplify the tax rules.
How could cross-border work be made simpler from a tax point of view?
During the past year, I had together with a group of my Nordic colleagues at KPMG the pleasure of giving suggestions on how the tax rules within the Nordics could potentially be changed to simplify and make mobility smoother.
The key challenges that we identified when it comes to mobility of the workforce were creation of permanent establishments due to remote work from another country, the requirement for employers to register in multiple countries in relation to one single employee, how salary is taxed when working in another Nordic country and the taxation of pensions in cross-border Nordic situations.
Primarily, and unsurprisingly, our recommendation was to simplify the rules. A brave and big suggestion is to change the rules so that tax withholdings are only required for an employer in its own home country, irrespective of where the employees work or how they potentially travel. May sound like a surreal suggestion when looking at how the rules are today, nevertheless, to make mobility easier it would make sense.
Our suggestions around remote work includes clarifying and aligning the rules in all Nordic countries on when remote work can lead to a permanent establishment and through that to corporate tax obligations. Furthermore, for remote work, a suggestion would be to tax the salary only in the country where the employer is resident.
This is only a sneak peek on the conclusions and the suggestions of the report. The full report and summaries of the findings in all Nordic languages can be found here.
I warmly recommend this reading and I do hope you enjoy it as much as we enjoyed brainstorming to find solutions that would create better mobility.
I do recognize that change takes time, and I may already be a mobile pensioner by the time these changes may have happened. Nevertheless, as an optimist I still believe these changes should be totally doable and they would solve some common obstacles within the Nordics. Then of course the rest of the world would need to follow…
