OECD issues recommendations on implications of the COVID-19 crisis on cross-border workers and other related cross-border matters

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The COVID-19 pandemic has forced governments to take strict and in some cases unprecedented measures to protect their citizens, economies and societies, such as restricting or stopping travel and implementing strict quarantine requirements. In this difficult context, most countries are putting stimulus packages in place, including measures to support employment, for example, taking on the burden of unpaid salaries on behalf of companies suffering from the economic downturn resulting from the COVID-19 pandemic. As a result of these restrictions, many cross-border workers are unable to physically perform their duties in their country of employment. They may have to stay at home and telework, or may be laid off because of the exceptional economic circumstances.

This unusual situation is raising many tax issues, especially where there are cross-border elements in the equation; for example, cross-border workers, or individuals who are stranded in a country that is not their country of residence. These issues have an impact on the right to tax between countries, which is currently governed by international tax treaty rules that delineate taxing rights.

The exceptional circumstances of the COVID-19 crisis call for an exceptional level of coordination and co-operation between countries, notably on tax issues, to mitigate the potentially significant compliance and administrative costs for employees and employers. The OECD encourages countries to work together to alleviate the unplanned tax implications and potential new burdens arising due to effects of the COVID-19 crisis. 

At the request of concerned countries, the OECD Secretariat has issued guidance on these issues based on a careful analysis of the international tax treaty rules.

This guidance deals with concrete situations. Take these two examples:

  • Mr. X, is stranded for a period in a country that is not his country of residence due to the travel restrictions and quarantine measures. The challenge here is to determine the place of residence of individuals for tax purposes. In this case, the OECD Secretariat’s general view is that, under the bilateral tax treaty between the two countries, Mr. X’s residence will not change due to such temporary dislocation. The OECD recommends countries of temporary residence to apply their domestic rules accordingly.
  • Ms. F, who is a cross-border worker, is quarantined in her country of residence and temporarily out of work due to the COVID-19 crisis. Thanks to the stimulus package adopted in the country of her employer, she continues to receive her salary from her employer. The challenge in this case concerns the taxation of her salary received due to a stimulus package. In this case, the OECD Secretariat’s general view is that her income will continue to be taxed as it was prior to the COVID-19 crisis, that is in the country where she used to exercise her employment.

The guidance also deals with issues affecting the residence of companies for tax purposes, where their management is carried out in another country due to the travel and quarantine restrictions. It examines teleworking, for instance, and the implications for companies of having cross-border employees telework in their home country and therefore performing their duties there. In these situations, the OECD Secretariat’s general view is that these special circumstances should not affect the residence status of companies under the international tax treaty rules.

The OECD has announced it is urgently working on other concerns raised by businesses, taxpayers and tax administrations due to the COVID-19 crisis, on the taxation of cross-border workers teleworking in their home country and individuals affected by countries’ domestic residence rules triggered by the impacts of travel and quarantine restrictions. 

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Tackling COVID-19 Tax

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Pascal Saint-Amans

Director, Centre for Tax Policy and Administration, OECD

Pascal Saint-Amans took on his duties as Director of the Center for Tax Policy and Administration at the OECD on 1 February 2012. Mr. Saint-Amans, a French national, joined the OECD in September 2007 as Head of the International Co-operation and Tax Competition Division in the CTPA. He played a key role in the advancement of the OECD tax transparency agenda in the context of the G20. In October 2009 he was appointed Head of the Global Forum Division, created to service the Global Forum on Transparency and Exchange of Information for Tax Purposes, a programme with the participation of over 100 countries. Mr. Saint-Amans graduated from the National School of Administration (ENA) in 1996, and was an official in the French Ministry for Finance for nearly a decade. He held various positions within the Treasury, including heading the supervision of the EU work on direct taxes and overseeing legislation and policy on wealth tax and mergers and spin offs. He was also the head of tax treaty negotiations and mutual agreement procedures. In this capacity, he participated in the OECD Working Party No. 1 of the Committee on Fiscal Affairs as the delegate for France before being elected Chair of WP1 in 2005. He was also a member of the UN Group of Experts on International Co-operation in Tax Matters, becoming a “rapporteur” in 2006. Before leaving government service, he was Deputy Director in charge of litigation at the Direction Générale des Impôts. Mr. Saint-Amans also served as Financial Director of the Energy Regulation Committee between 1999 and 2002 and was responsible for the introduction of new electricity tariffs. Having earned a degree in history, Mr. Saint-Amans also received a degree from the Institut d’études politiques of Paris.