Remote work under control – how does it work?

The global workplace has been undergoing changes for many years. With the advance of technology, the traditional model of employees working together in one location has begun shifting to a model of remote work from locations away from the physical workplace.

Not only did the pandemic accelerate this area of transformation but it acted as a catalyst and there has been a seismic shift from working in offices to working from anywhere.

While for many this change is largely positive and revolutionize entrenched working practices, still there are likely to be a whole set of implications for businesses around this decentralized “new normal” of employees who can work anywhere, anytime.

As such, businesses need to be aware of the potential implications when employing a dispersed and agile workforce. EY can help you managing this process and ensure compliance with local tax, social security, labor and immigration law when it comes to remote work of individuals:

•  Either working under local employment contract and work outside of Bulgaria 
•  Or working in Bulgaria under a foreign employment contract

Our People Advisory Services team has extensive knowledge and experience. The close cooperation between our specialists ensures the best solutions for protection of your talent and limits potential financial risks.

Our team covers all aspect of Global Mobility and provides integrated services in the area of:

- International tax 
- Social Security 
- Business immigration 
- Monthly and annual compliance 
- Employment law

Tax residence assessment

The correct tax treatment of income largely depends on the individual’s tax residence position. Thus, the need for proper assessment in accordance with not only local legislation but also with the applicable Double Tax Treaty (DTT) in force between Bulgaria and the respective country. In most cases decisive will be the center of vital interests but the duration of the remote work should also be carefully monitored.

Personal income tax obligations

When it comes to taxation of employment income the general rule is that the income is subject to tax in the county where the work is performed. Depending on the specifics of each case and whether a DTT is in place, the income may be non-taxable in the country of remote work up to certain time frame.

Still, employers should carefully evaluate if tax obligation arises and if so who is the responsible party – the employer or the employee.

 

Social Security

The social security obligations depend on the presence of bilateral social security agreement (for countries outside the EU / EEA and Switzerland) or the application of the EU Social Security Regulation. The remote work would most likely derive social security obligations in Bulgaria including payment of monthly contributions and reporting for a foreign employer, except instances where no agreement between the countries in this area is concluded.

Bulgarian employers whose employee is working remotely outside Bulgaria should also review in detail the obligations arising for them in the country of remote work.

 

Labor law

Remote work should address and comply with the mandatory legal provisions of the respective country’s labor legislation. Depending on the applicable legislation, the employer may have certain obligations such as compliance with health and safety rules, provision of adequate work equipment and etc.

 

Immigration

While EU citizens are allowed to work and reside freely in Bulgaria, non-EU nationals have to complete specific procedures so that they can perform work activities in Bulgaria. Remote work for short-term periods should take into consideration these requirements as penalties can have a great impact on the business and operations.

 

Permanent Establishment

Last but not least, employers should evaluate the risk of creating permanent establishment (PE) in the country of remote work. Creation of PE attracts corporate and personal income tax obligations and often leads to additional administration and cost.

EY role and added value

EY can help with the tax and social security compliance (including monthly social security calculations and reporting obligations, as well as annual personal income tax returns), the necessary immigration procedures, fulfillment of the requirements of the labor law and the assessment of the PE risk.

EY can support you with detailed analysis of the respective remote work case as to determine important aspects which could impact the local legislation.

EY can perform a health check of the planned remote work for an employee from your company as to identify risk and exposure areas.