Remote working is easily becoming a differentiator for companies looking to attract talent. Many organizations have fully embraced the idea of remote working and have begun offering work arrangements with varying degrees of flexibility, not just to keep employees safe but also to keep them happy. In the wider mobility space, there is a much greater flexibility being explored by multinational companies to achieve their global goals – working from anywhere in the world.
Digital nomads have been around for years, but interest in this lifestyle has increased as more organizations shift to remote working. Before the pandemic, the nomadic lifestyle was well-suited for freelancers or self-employed individuals. However, as organizations and employees realize that work can be done online, the opportunity of traveling while maintaining employment becomes not just a feasible option, but a desirable one. In the early days of work-from-anywhere, the crafting of policies was driven by emergency circumstances and employee requests. Nowadays, organizations are seeing the benefits of implementing work-from-anywhere policies, such as increased employee productivity, reduced organizational costs, and reduced turnover rates. This has put work-from-anywhere policymaking as a top priority.
As with any new process, there are bound to be challenges in implementing a work-from-anywhere policy. Process design and implementation, existing policies and solutions, technology, ESG commitments, employee benefits, and immigration and tax obligations are just some of the more important considerations. Will flexibility in location be domestic, regional, or worldwide? Are benefits applicable in other jurisdictions? What would be the limitations as to duration, considering the tax and immigration rules of the destination location? Policies will usually require a case-by-case determination of immigration and tax compliance requirements in the destination location and will only proceed if the requirements can be met by the employee and the company. Based on market research, work-from-anywhere policies still vary a lot from one company to another This shows how differently organizations set their compliance risk appetite and respond to needs and long-term goals.
As it stands, tax and immigration rules around the world are limiting from a work-from-anywhere standpoint. For instance, the Philippines’ current immigration rules only provide for working visas to those who can be tied to Philippine entities through secondment or employment. Digital nomads will usually enter the country on a temporary visitor’s visa and stay long-term while traveling the country and working remotely for a foreign entity. There is nothing in the immigration law that explicitly allows or prohibits such work arrangements. It could be argued that this scenario cannot be considered employment in the Philippines, thus, no working permit or working visa is required. Since the position occupied is in a foreign entity, consideration as a threat to the local labor workforce and the need for regulation are questionable.
Tax compliance can become a headache if employee movement is not properly monitored. Work-from-anywhere can accidentally create a permanent establishment for the company or cause double taxation for the individual. There were several countries that issued tax policy reforms in response to COVID-19, however, that was for a time when movement was restricted. For instance, Revenue Memorandum Circular No. 83-2020 was specifically issued by the Bureau of Internal Revenue to address situations brought about by COVID-19 and cannot be adopted for work-from-anywhere circumstances.
Most immigration laws are not set up to respond to work-from-anywhere, but that is beginning to change. Croatia and Brazil are two of the latest countries to launch their digital nomad visas, designed for remote workers who wish to live in those locations for periods longer than what tourist visas allow and which require them to declare their foreign employment or business. This kind of response from the authorities provides a sense of security for individuals, and clarity for organizations in policy design and implementation.
There is no question that work-from-anywhere is here to stay. Working in an office as the rule and working from anywhere as the exception is a thing of the past. The modernization of tax and immigration laws is an opportunity to make increased mobility benefit both people and the government and is essential for the country to remain a competitive expatriate destination.
Jozette Issel Dizon is a Director from the Tax Group of KPMG R.G. Manabat & Co. (RGM&Co.), the Philippine member firm of KPMG International. The firm has been recognized in 2021 as a Tier 1 in Transfer Pricing Practice and in General Corporate Tax Practice by the International Tax Review.
This article is for general information purposes only and should not be considered as professional advice to a specific issue or entity. The views and opinions expressed herein are those of the author and do not necessarily represent KPMG International or KPMG RGM&Co.
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