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Covid-19: Tax Trap for International Remote Working?

Covid-19: Tax Trap for International Remote Working?

Hungary
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At the time of the COVID-19 pandemic, remote working became the “new normal” in many industries: large numbers of people who had previously worked and commuted across the border within the EU or Switzerland, had been forced to work from home. Telecommuting, however, worked out so well that most people would want to continue in this way. However, in terms of taxation, this can put them on thin ice, and not just them, but the companies employing these workers.

Many people who opted to work remotely permanently might risk thousands of euros a year with their home office, Bloomberg points out in its recent article. The portal immediately provides an obvious example: a French IT scientist works in Geneva and is taxed where he earns his income under the prevailing tax rules. Previously, this has clearly been in Switzerland. But now, permanently working remotely from his home in France, the French tax authority might also present a tax claim and not only against the employee but also against the employer. According to Eurostat this is not a rare phenomenon: there are 173,000 French citizens working in Switzerland. Moreover, if the employee has or enters into a management contract, working from a different country may result in tax residency and thus corporate tax implications in that country as well.

Since COVID-19 is expected to stay around for a while and as estimated, more than a million EU citizens are affected, a comprehensive solution would be needed. The Member States and countries, however, seem to be addressing the issue differently: in London, the tax office has already discreetly warned bank employees working from another country to return home as soon as possible if they do not wish to be subject to a comprehensive tax audit. Italy, Germany and France on the other hand agreed with Switzerland to nullify the tax implications of working abroad, but only for the duration of the pandemic.

By Balint Zsoldos, Head of Tax, KCG Partners Law Firm

Hungary Knowledge Partner

Nagy és Trócsányi was founded in 1991, turned into limited professional partnership (in Hungarian: ügyvédi iroda) in 1992, with the aim of offering sophisticated legal services. The firm continues to seek excellence in a comprehensive and modern practice, which spans international commercial and business law. 

The firm’s lawyers provide clients with advice and representation in an active, thoughtful and ethical manner, with a real understanding of clients‘ business needs and the markets in which they operate.

The firm is one of the largest home-grown independent law firms in Hungary. Currently Nagy és Trócsányi has 26 lawyers out of which there are 8 active partners. All partners are equity partners.

Nagy és Trócsányi is a legal entity and registered with the Budapest Bar Association. All lawyers of the Budapest office are either members of, or registered as clerks with, the Budapest Bar Association. Several of the firm’s lawyers are admitted attorneys or registered as legal consultants in New York.

The firm advises a broad range of clients, including numerous multinational corporations. 

Our activity focuses on the following practice areas: M&A, company law, litigation and dispute resolution, real estate law, banking and finance, project financing, insolvency and restructuring, venture capital investment, taxation, competition, utilities, energy, media and telecommunication.

Nagy és Trócsányi is the exclusive member firm in Hungary for Lex Mundi – the world’s leading network of independent law firms with in-depth experience in 100+countries worldwide.

The firm advises a broad range of clients, including numerous multinational corporations. Among our key clients are: OTP Bank, Sberbank, Erste Bank, Scania, KS ORKA, Mannvit, DAF Trucks, Booking.com, Museum of Fine Arts of Budapest, Hungarian Post Pte Ltd, Hiventures, Strabag, CPI Hungary, Givaudan, Marks & Spencer, CBA.

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