Tax implications of cross-border remote working : a Maltese perspective

Abstract

Purpose: The main purpose of this study is to examine the tax implications of cross-border remote working, mainly for remote employees in Malta and their foreign employers. This study also analyses whether Malta is an attractive hub for such remote workers and also provides recommendations that tax professionals/officials and remote employees believe would help mitigate the issues created by such working arrangements. Design: To achieve the study’s objectives, a review of local and international literature was conducted, complimented with sixteen open-ended semi-structured interviews. The interviews included eight tax practitioners, one CFR official, and seven remote employees. Findings: The findings of the study highlight that the guidance issued by the OECD MTC is utilised by tax practitioners as a fundamental basis for the tax treatment of cross-border remote working. However, due to the novel nature of this working arrangement and the occurrence of practical complexities, a substantial number of conflicting interpretations has been noted amongst participants. The issues outlined in this study emphasise the need for clarification of these practical complexities that are not addressed in the guidelines, the desire for feedback from the tax authorities, concerns arising from the current state of such cross-border remote work. Conclusion: While such emphasis on clarification and the desire for certain issues and limitations to be addressed in the guidelines is needed, it concludes the fact that this is causing tax leakages and tax evasion in Malta as well as confusion amongst tax practitioners/professionals and remote workers. This study therefore concludes that the foundations of domestic and international law must continually be updated and clarified in order to create a harmonised framework that may satisfy all issues of cross-border remote working arrangements from all aspects, including legal, regulatory, and taxation. Value: This study primarily caters to tax practitioners servicing clients engaged in cross-border remote work and to remote workers themselves. Its objective is to enrich their understanding of the intricate tax treatment applicable to such working arrangements, ensuring they are well-informed about the comprehensive array of tax implications involved. Moreover, this research can also serve as a valuable resource for the domestic tax authority, offering insights into the dynamics, opportunities, and challenges associated with remote working in Malta.