The OECD Secretariat’s recent announcement and initial analyses provide guidance on interpreting the tax implications of the COVID-19 crisis relating to dislocated cross-border workers. Many businesses have been watching for signs of global cooperation and the OECD has made a significant step towards this goal, calling on countries to “mitigate the potentially significant compliance and administrative costs for employees and employers” as well as “alleviate the unplanned tax implications.”
The OECD references certain countries that have provided relief so far under domestic law – the UK, Australia, and Ireland. In the absence of country-specific guidance, the OECD suggests how an individual’s tax residency should be evaluated and which country should have the primary right to tax government subsidy payments. The OECD generally appears to favor the avoidance of tax complications triggered by a worker’s unplanned physical presence, but only for specific scenarios and within existing international principles under double tax treaties. As a result, mobility professionals should continue to analyse the circumstances to fully ascertain employee/employer tax obligations under existing laws and regulations.
This Insight provides a very high-level overview of these recommendations.