Cross-Border Employment: Frequently Asked Questions
Context and Challenge
Answers to the most common questions employers, executives, directors and advisers ask about international assignments, remote working, international business trips and commuting on tax, payroll, social security, immigration and cross-border compliance.
Common symptoms include: penalties, non compliance, interest, double tax, hidden tax risks and costs, reliance on too many advisers with a single overview and reputational risks.
Topics include:
Payroll and Employer Structure
Tax Residence, Treaties and Double Taxation
Social Security and Pensions
Immigration and Right to Work
Employment Law and Contracts
Permanent Establishment (PE) and Corporate Tax
Costs, Benefits and Allowances
Policy and Governance
Directors and Non-Executive Directors
Compliance Operations
Payroll and Employer Structure
Can an employee work remotely from another country?
An employee can only safely work remotely from another country if the arrangement is reviewed for tax, payroll, immigration, social security, pension, employment law and corporate tax risk. The main issue is not whether the work is physically possible. The main issue is whether the employee's presence creates obligations for the employee or the employer in the country where the work is performed.
How many days can someone work abroad before tax applies?
There is no universal safe number of days. The answer depends on domestic tax and residence rules, treaty residence, workday sourcing, the 183-day rule, employer structure, all cost recharges, payroll rules and whether the employee is paid by or for the benefit of a host employer. Short stays can still create reporting, payroll, immigration or social security obligations.
Who should run payroll during an international assignment?
Payroll may need to be run in the home country, the host country, or both. A shadow payroll may be required where the employee remains paid from home payroll but host-country tax withholding or reporting is needed. The payroll answer normally follows the tax analysis, the treaty analysis, the employer structure and the local withholding rules. Applications can be made to reduce dual withholding in some circumstances.
What is shadow payroll?
Shadow payroll is a payroll reporting mechanism used where an employee is paid in one country but tax withholding or reporting is required in another country. It is common in international assignments, cross-border employment, short-term business traveller programmes and situations where the employment contract and work location do not align. It can be to account for tax only, social security tax only or both.
Can an employee stay on home-country payroll while working overseas?
An employee may remain on home-country payroll, but the employer may still need to register for payroll, withhold tax or report employment income in the country or withhold social security taxes in the location where the work is performed. Continuing home-country payroll does not remove host-country obligations. The answer depends on the treaty position, local rules, the length and nature of the work, and the employer structure.
Can an employer use an employer of record (EoR) instead of setting up a local entity?
An employer of record (EoR) may help with some employment administration and payroll in a country where the employer has no entity, but it does not automatically solve all corporate tax, immigration, social security, pension, equity, employee shares or governance risks. Check the scope of the EoR services provided. The employer remains responsible for understanding whether the arrangement creates permanent establishment, employment law or regulatory exposure in the relevant jurisdiction.
Tax Residence, Treaties and Double Taxation
What is the 183-day rule?
The 183-day rule is a treaty condition that may restrict host-country taxation of employment income in some circumstances. It is not a general permission to work abroad tax-free for 183 days. The rule normally needs to be considered together with who the employer is, where the cost is borne, whether there is a permanent establishment, and how days are counted under the relevant treaty. Payroll, social security, director fees and pension rules are usually subject to different tax treatment.
Does a double tax treaty prevent tax in the host country?
A double tax treaty may reduce or allocate taxing rights, but it does not automatically remove host-country tax, payroll reporting or filing obligations. The treaty analysis usually depends on residence, workdays, employment income, where costs are borne and recharged, economic employer issues, permanent establishment issues and the precise wording of the treaty. Payroll, social security, director fees and pension rules are usually subject to different tax treatment.
What is tax residence and why does it matter?
Tax residence determines which country has the primary right to tax an individual's worldwide income. Each country has its own rules for determining tax residence, and an individual can be tax resident in more than one country at the same time. Treaty residence rules, including the tie-breaker provisions, determine which country has priority where dual residence arises. This matters how foreign tax credits are allocated and calculated for example.
What is split-year treatment?
Split-year treatment allows an individual who arrives in or leaves a country part way through a tax year to be treated as resident for only part of the year. The rules vary by country and depend on the specific circumstances of the move, including the date of arrival or departure, the reason for the move and whether the individual retains ties to the original country.
What is the difference between tax equalisation and tax protection?
Tax equalisation is an arrangement where the employer ensures the employee pays no more and no less tax than the employee would have paid had the assignment not taken place - they are effectively tax neutral from a cost perspective when compared to their position had they not worked overseas. Tax protection is an arrangement where the employer reimburses the employee only if the assignment results in a higher tax liability than would have applied at home. The employee can benefit where tax is lower when working overseas under this arrangement. The two approaches create different cost, cash flow and administrative consequences for the employer, and net position for the employee.
What is an economic employer and why does it matter?
An economic employer is relevant for the application of certain double tax treaties as one of the conditions for an employee to claim exemption from tax in the host country. Under this concept, the entity that bears the cost of, or benefits from, an employee's services, regardless of which entity holds the employment contract may be regarded as the economic employer, even if the legal employer remains in the home country. Many countries and tax treaties now apply economic employer tests to determine whether host-country tax and payroll withholding is required. An employee paid by a home-country entity may still trigger host-country payroll obligations if the host entity directs, controls or benefits from the work performed. It is important to know where all costs are borne and recharged, including local accommodation and travel expenses, as well as employee share income like stock options, RSUs and LTIPs.
Social Security and Pensions
Which country's social security applies during an international assignment?
The applicable social security system depends on the countries involved, whether a bilateral or multilateral social security agreement exists, the expected length of the assignment, and the employment structure. Within the EU/EEA, an A1 certificate provides evidence for country's system applies for a specific period (These are called Certificates of Coverage in other social security agreements). There are generally fewer social security agreements than tax treaties. For example the UK and Australia have a double tax agreement, but no social security tax agreement. Outside treaty networks, dual contributions may arise where no agreement exists to allocate liability.
What is an A1 certificate or certificate of coverage?
An A1 certificate is a document issued under EU social security coordination rules that provides evidence that an employee remains subject to the social security system of one member state while working temporarily in another. Outside the EU, similar Certificates of Coverage exist under bilateral social security agreements. The certificate must normally be obtained before the overseas work begins. the certificates only evidence relief for a specific period and while conditions continue to be met.
What happens to pension contributions during an international assignment?
Pension contributions may be affected by changes in work location or tax residence. Whether contributions remain tax-relievable depends on the rules of the home and host countries and any applicable treaty or social security agreement. Host-country pension enrolment may also be mandatory. Employer pension contributions may be treated as taxable benefits and employee pension contributions may not receive tax relief so pension should be reviewed whenever working overseas including remote working, international commuting and secondments.
Immigration and Right to Work
Does working remotely abroad create immigration issues?
Working remotely from another country may require a work permit, visa or right-to-work authorisation, depending on the nature of the work, the duration, the nationality of the employee and the immigration rules of the host country. Business visitor status may apply for short, non-productive visits, but substantive work — including work performed remotely — may require a formal work authorisation.
Can a candidate start work remotely before visa approval?
A candidate should not start substantive work from another country until immigration, payroll, tax, social security and employment law issues have been reviewed. Starting work before visa approval can create right-to-work, payroll and corporate presence problems. The employment contract and offer letter should specify when work may begin and from which location.
Employment Law and Contracts
Which country's employment law applies during an international assignment or other international working arrangement?
Employment law applicable to an international working arrangement like an assignment but may include remote working and international commuting. It depends on the governing law of the contract, the location where the work is habitually performed, and any mandatory local employment rights that cannot be overridden by contract. An employee working in a host country may acquire local employment rights regardless of the contract terms, including rights on termination, notice, working time and benefits.
Permanent Establishment (PE) and Corporate Tax
When does remote work create permanent establishment risk?
Remote work may create permanent establishment risk where an employee habitually exercises authority to conclude contracts on behalf of the employer, or where the employee's fixed place of work in another country is treated as a permanent establishment of the employer under the relevant tax treaty or domestic law. Senior employees performing strategic or decision-making functions create higher risk than junior employees performing routine tasks. New OECD commentary includes specific rules for remote workers and should also be reviewed.
Does a senior executive working from a holiday home create corporate tax risk?
A senior executive who performs strategic duties, attends board meetings or exercises decision-making authority from a foreign location may create corporate tax, corporate residence or permanent establishment risk for the employer. The risk depends on the seniority of the individual, the nature of the duties, the frequency and duration of the work, and the relevant treaty and domestic law rules. New OECD commentary includes specific rules for remote workers and should also be reviewed.
Costs, Benefits and Allowances
Are relocation costs taxable?
Many relocation costs paid by the employer are taxable in one or both countries, depending on local tax rules and any available exemptions. Costs that may be taxable include flights, temporary accommodation, home search, schooling, storage and household goods shipping. Some countries provide limited statutory exemptions for qualifying relocation expenses, but the scope and conditions vary by jurisdiction.
How are bonuses, equity awards and share-based compensation taxed across countries?
Bonuses, equity awards, RSUs, options and LTIPs may be taxable in more than one country where the employee has worked during the vesting or earning period. The tax treatment depends on the type of award, the allocation method used to apportion income between countries, the relevant tax treaties and each country's domestic rules on employment-related securities. The tax advantaged status, tax elections and tax valuations may not be accepted in the host country, and additional tax, payroll obligations, social security may be due so should be carefully reviewed.
What costs arise during an international assignment?
Costs beyond salary may include tax equalisation or tax protection, host-country tax return preparation, social security contributions in two countries, immigration and visa costs, relocation allowances, housing, schooling, home leave, cost-of-living adjustments, medical insurance, employer pension contributions and vendor management fees. Many of these costs are grossed up for tax, which increases the total employer cost further. Trailing income which is earned during the assignment but paid and taxed after repatriation may also increase costs further.
Policy and Governance
What should an international assignment policy cover?
An international assignment policy should cover eligibility, approval workflow, permitted countries, tax equalisation or tax protection, payroll, social security, pensions, immigration, benefits, expenses, equity, data security, duty of care, records, tax return support, repatriation and remediation of unauthorised working. The policy should be reviewed regularly and aligned with the employer's risk appetite and compliance framework.
What should a work-from-anywhere policy cover?
A work-from-anywhere policy should define who may work abroad, for how long, from which countries, doing what duties, with what approvals, and with what tax, payroll, immigration, pension, social security and employment law checks. It should also address unauthorised work abroad, record-keeping, data security and the process for withdrawing approval if circumstances change.
What records are needed to help defend a cross-border working position?
Records should include travel data, day counts, duty descriptions, contracts, assignment letters, payroll records, tax filings, treaty analysis, social security certificates, immigration approvals, expense records, policy acknowledgements and internal approval documentation. The records should be sufficient to explain the employer's position on tax, residence, treaty relief, payroll, social security, pension and reporting if challenged by a tax authority.
What should Boards ask about global mobility and international working risks?
Boards should ask whether the organisation knows where employees are working, which countries create the highest risk, whether senior executives create additional exposure, whether payroll and social security are correct, whether policies are followed, and whether records are sufficient to defend the position. Board-level oversight is particularly important where employee locations affect corporate tax, permanent establishment or regulatory compliance. International working includes business trips, commuting, working remotely, assignments, short projects and overseas statutory director roles, not just formal secondments.
What are the risks of getting an international assignment or working arrangement wrong?
The risks include double taxation, missed payroll withholding, social security liabilities, penalties, interest, immigration breaches, permanent establishment exposure, employment law claims, employee disputes, governance failures, audit issues and reputational damage. The scale of exposure depends on the seniority of the individual, the countries involved, the duration of the arrangement and whether the position was assessed before work began.
Directors and Non-Executive Directors
Are directors' fees taxed differently from employment income?
Directors' fees may be taxed under different treaty articles from employment income. A director or non-executive director may have tax, payroll or reporting obligations in the country of the company, the country of residence, or both. Travel, accommodation, equity and consulting income should be reviewed separately from directors' fees because each income type may be sourced and taxed under different rules. Social security taxes and payroll obligations may exist separately. In some countries statutory directors are treated as employees and in other countries as self employed workers which further complicates the treatment.
Is travel to board meetings taxable?
Travel and accommodation for board meetings may be taxable where the meeting location is treated as a place of work or where local rules do not treat the cost as a tax-free business expense. The tax treatment can differ between the country of the company and the director's country of residence. Whether the director is executive or non-executive may also affect the position. In some countries statutory directors are treated as employees and in other countries as self employed workers which further complicates the treatment.
Cross-Discipline Issues
Why is immigration advice not enough on its own?
Immigration advice answers whether someone may enter or work in a country. It does not usually resolve tax residence, payroll withholding, social security, permanent establishment, employment law, pension, equity or benefit reporting. These areas need to be aligned so that an immigration approval is not treated as confirmation that all other obligations have been met.
Why is employment law advice not enough on its own?
Employment law advice may confirm the contract structure, governing law and local rights, but tax, payroll, social security, immigration, pension and corporate tax consequences can still arise. A legally valid contract can still leave an employer with tax or payroll exposure in the country where work is performed if the other obligations are not reviewed alongside the legal position.
What should procurement ask global mobility advisers?
Procurement should ask what services are included, which countries are covered, who coordinates advice, what is excluded, whether the adviser gives a single consolidated position, how technical quality is reviewed, how data is protected, and what governance reporting is provided. Selecting advisers by hourly rate alone does not assess scope, coordination or accountability for the final position.
When should historic remote work be remediated?
Historic remote work should be reviewed when employees have worked abroad without approval, where payroll was not adjusted, where travel records are incomplete, where social security certificates were not obtained, or where senior employees worked in countries that may create corporate tax risk. The remediation should be prioritised by risk and managed with professional advice to avoid compounding the original exposure.
When should specialist advice be taken?
Specialist advice should be taken before an employee works abroad, before an assignment letter is signed, before a senior executive works overseas, before equity vests across countries, before payroll is changed, before an employee is hired where there is no entity, and before historic errors are remediated. Early advice is significantly less expensive than correcting problems after they have occurred.
Compliance Operations
Who should own compliance for international assignments and international working arrangements?
International assignment and international working arrangements usually requires HR, payroll, finance, tax, legal, reward, immigration and the business to work together. No single function can answer all questions alone because work location can affect employee tax, employer payroll, corporate tax, immigration, social security, benefits and governance. Effective compliance requires a defined owner with authority to coordinate across functions.
What is the best way to reduce cross-border work risk and costs?
The best practical control is to require approval before work abroad begins, supported by travel tracking, payroll review, immigration checks, social security analysis, clear policies, employee communications, records and periodic audit. Cross-border work should be reviewed before it becomes a tax authority, payroll or employee-relations problem rather than afterwards.
How should payroll handle a retroactive change in work location?
Where an employee's work location changes without payroll being adjusted, the employer should determine whether host-country payroll withholding or reporting was required for the period in question, whether social security was correctly applied, whether a treaty position was available, how to report and source taxable income and expenses and whether filings need to be corrected. The correction should be documented and controls applied to prevent recurrence.
What is the simplest compliant operating model for international remote work?
There is no single model that works for every employer. The simplest compliant approach usually involves a pre-approval process, a defined list of permitted countries, a risk assessment for each request, tax and payroll review before work begins, immigration checks, social security analysis, records and periodic review. The operating model should match the employer's risk appetite, headcount and geographic footprint.
Who is responsible for compliance relating to international assignments and other international working arrangements inside an organisation?
Responsibility for international assignment compliance is typically shared across HR, payroll, finance, tax, legal, immigration and reward. The most effective governance model assigns a single owner — usually within HR, tax or finance — with authority to coordinate across functions and escalate to senior management. Without a defined owner, obligations are frequently missed because each function assumes another has addressed the issue.
How Fenton Can Help
Fenton International is a London-based Private Advisory Office specialising in cross-border tax, global mobility and international people advisory for employers, executives and professional advisers.
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Author
Mark Abbs, CEO, Fenton International
Fellow of the Association of Taxation Technicians (FATT)
Enrolled Agent of the IRS (EA)
Global Mobility Specialist – Talent Management (GMS-T)
Accredited Expert Witness (MAE)
32+ years' experience in international tax, cross-border employment tax and global mobility
Advises CFOs, HRDs, and Chairs on cross-border tax governance
Head of Advisory at Global Tax Network
Former Tax Partner, Head of International and Senior Leadership Team at Blick Rothenberg and Senior Tax Adviser in the Big 4.
Key terms: international assignment, remote working, cross-border employment, payroll, shadow payroll, tax residence, 183-day rule, double tax treaty, social security, A1 certificate, permanent establishment, immigration, work permit, tax equalisation, tax protection, directors' fees, employer of record, economic employer, assignment policy, work-from-anywhere policy.
Scope note: These FAQs provide general guidance on common cross-border employment questions. They do not constitute legal or tax advice for specific circumstances. Country-specific rules vary and professional advice should be taken for individual situations.
Jurisdiction: Multi-jurisdiction (primarily UK-focused) | Last reviewed: June 2026 | Next review due: December 2026 | Insight type: Technical Guide
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This page is general information and not legal or tax advice. Professional advice should be taken for specific circumstances.
