Home office: new tax and social security implications in France
Employment tax
Home office: new tax and social security implications in France
Tue 19 Jan 2021
With the Covid-19 crisis, working from home is expected to become the “new normal”. 2020 marks the end of many tax holidays with respect to home working arrangements within and between certain countries. We have already featured some general comments on the implication of remote working in previous blog posts; and we will regularly feature updates by country as we learn more.
What follows outlines the tax and social security impacts on employees and directors working remotely from France for a company located in another country. These may now become significant.
Home office tax implications in France
If the employee or director works from home in France for a foreign company, even partly, this could be considered as constituting a permanent establishment of the company in France. Especially if:
- the premises can be considered as a fixed place of business, or
- the employee has the ability to sign contracts on behalf of the company (in certain circumstances, the fact that the employee has the ability to negotiate the contracts can be sufficient, even if the foreign company formally has the power to sign them)
Therefore, the business could be responsible for paying tax in France on the part of the benefits which can be related to the French permanent establishment.
Obligation for foreign employers to levy French income tax
If the employee or director is regarded as a tax resident due to their stay in France, days worked in France, which are taxable according to local tax law, will remain taxable in France, even by application of relevant tax treaty provisions.
For non-residents of France, days worked in France will be taxable in France – according to most of the treaties – if the employee is present for at least 183 days in any 12-month period.
In this case, employers will have to register and withhold French income tax in France on part of the salary corresponding to the days taxable in France. The employee will also have to file a French income tax return, which may jeopardize its initial tax planning.
Temporary agreements have been signed between France and Germany, Italy, Luxembourg, Belgium and Switzerland to mitigate the adverse effects of remote working made compulsory due to health measures, however the effect of these agreements are currently scheduled to end on March 31. 2021 (December 31. 2020 for Italy). Furthermore, they do not apply in cases where teleworking is not made compulsory or recommended as a result of health measures but is offered to employees as a longer-term company policy.
Obligation for the employer to levy French social security contributions
Teleworking from France might trigger an obligation for the employee/director to be affiliated to the French social security regime, and therefore for the employer to pay French social security contributions on the total salary. Such an obligation usually arises as soon as an employee/director works in France (no minimum threshold of days required). Within the EU, immediate affiliation to the French social security system can be temporarily avoided if the employee/director can be qualified as “seconded” to France; otherwise, French affiliation may be avoided if the person usually resides in France and spends less than 25% of their work time in France.
Note that, if the employee is affiliated in France, all their salary – and not only the portion corresponding to days worked in France – will be subject to French social security contributions.
Other impacts may include, but not be limited to:
- French labour law obligations for work time and severance payments may apply although the employment contract was originally concluded under a foreign labour law;
- Working permits;
- Special regulations deriving from the type of activity performed
Want to get notified when new blog posts are published?
Subscribe 
UK Spring Budget 2024
The UK Spring Budget on 6 March 2024 was relatively measured in its tax policy decisions, despite a background of falling inflation and rising tax receipts. Below are some areas of interest for globally mobile individuals, those with UK staff, and those with business and investment interests. Main measures affecting individuals Main measures affecting those […]
South Africa: certain foreign employers to be required to account for payroll taxes from 2024
Currently, the provisional tax system ensures that when a non-resident employer of individuals working in South Africa has no representative employer in South Africa, their employees’ tax obligation is settled in the form of a provisional tax payment by the employee, not the employer. The requirement for an employer to deduct and remit employees’ tax […]
Telework in Europe : the new official framework agreement on social security is out
Following our previous newsletter on this topic, we are now pleased to inform you that the expert working group consisting out of 20 different EU Member States has now officially published the “Framework Agreement on the application of Article 16 of Regulation (EC) No. 883/2004 in cases of habitual cross-border telework” (hereafter referred to as […]
Polish Deal’s tax complexity and worsening economic conditions force revisions
A package of significant tax legislation changes came into force in Poland with effect from 1 January 2022. Dubbed the Polish Deal, these changes were intended to ‘tighten up the tax system’ and deliver a more progressive tax framework. However, they primarily involved a greater burden on a large number of taxpayers, which has subsequently […]
Spanish Supreme Court allows tax benefit to company directors
A Spanish Supreme Court Ruling on 20 June 2022 effectively reverses the decision by the Spanish tax authorities to remove the tax exemption for company directors for works carried out abroad(1). In its ruling, the Supreme Court considers that directors and board members can apply the exemption, provided that requirements set out in Article 7.p) […]
New tax rules in Luxembourg impacting cross-border workers and PEPPs
Guidelines on the taxation of cross-border workers during the Covid-19 pandemic and an update on PEPP as defined in the latest budget laws in Luxembourg.
Recent Tribunal ruling on the taxation of ESOPs (Employee Stock Option Plans) in India
In accordance with OECD guidelines, the taxability of ESOP in India depends on where employment is exercised and the period of service for which ESOP has been granted.
Switzerland is an attractive business hub. What is their secret?
Choosing a business location involves many considerations, with tax being only one of them. Nevertheless, tax is a consideration. Below is a note commenting on the attractions of Switzerland as a business location. There may of course be other locations that should be considered. Switzerland attracts global business, research, and innovation, and maintains the high ground […]
Migrants and refugees have employment rights and obligations in Uruguay
As Covid restrictions begin to lift there will inevitably be increased movement of workers across borders. This brings back into focus a range of global mobility and tax considerations for businesses and individuals. Examples include work permits, visas, payroll and social security amongst other issues. Below is a snapshot of some pints concerning Uruguay to […]
Updated OECD guidance on the impact of Covid-19 for cross border workers
In April 2020 the OECD issued guidance on the impact of Covid-19 on double taxation agreements (DTA) and their application to cross border workers. In January 2021 they updated this guidance. This guidance is necessary as some cross-border workers have been stranded in a country that is not their normal residence, and double taxation could arise without applying a practical approach to the […]
Why Czech Republic’s tax system is attractive for expatriate employees?
Tax reform continues to come in waves across the globe. One common theme of many reforms is tax breaks for low to mid wage earners and surprising tax hikes for high wage earners. This trend seems to be consistent with the latest out of the Czech Republic. New changes to the Czech tax law effective […]
How to attract private capital to fund the new American Jobs Plan?
On March 31, 2021, the Biden administration released The American Jobs Plan, which detailed, among other critical items, the need for infrastructure improvements to enhance America’s competitiveness and to create well-paid American jobs. For this to be successful in attracting needed private capital, the existing regulations concerning Real Estate Investment Trusts (REIT) and Foreign Investment in […]
Covid-19 and the impact on taxation of individuals and permanent establishments in Nigeria
world. In addition to adversely affecting the world economy, the restrictions placed on travel could have personal income tax implications for individuals and permanent establishment risks for businesses.
Remote Worker – “necessity” or “choice”?
During the first wave of Covid-19 back in the spring of 2020, many employers found themselves dealing with the issue of “remote workers” in significant volumes, for the first time. When “working from home”, means working from home in another part of the city or the country then the issues are more likely to be […]
State tax telework developments
It seems right now that most countries around the world are busy regulating certain telework arrangements cross border with a keen focus on taxation rights. The U.S. is no different. In fact, the U.S. has the matter pending before its highest Court for review. A decision will not only impact the states named but obviously […]
Welcome (bienvenidos, willkommen, karibu, bienvenue) to a world of tax incentives
The pandemic has led to many people choosing to relocate. Many are leaving densely populated cities to work remotely to where they feel are more desirable locations for themselves and family. Others are holding steadfast to their crowded city dwellings. Either way, geographies are challenged to retain (or welcome) existing residents and newcomers. Many are […]
The new year brings new social security challenges post- Brexit
What is the issue? With Brexit talks still ongoing, employers should be planning for the impact of a hard Brexit on social security coverage and benefit provision for their employees who travel between the UK and EU (including EEA & EFTA countries and Switzerland) for work. HMRC’s October employer bulletin provided a welcome update on […]