Tax Treaties – the impact of COVID-19

The Organisation for Economic Cooperation and Development (OECD) has recently issued a report addressing the tax implications that COVID-19 will have on cross border employment. Governments across the world (including Malta) have launched a number of packages to help employers which have been negatively effected by the pandemic, to maintain their employees on their books, as […]

Written By Stephen Balzan

On April 12, 2020
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The Organisation for Economic Cooperation and Development (OECD) has recently issued a report addressing the tax implications that COVID-19 will have on cross border employment.

Governments across the world (including Malta) have launched a number of packages to help employers which have been negatively effected by the pandemic, to maintain their employees on their books, as well as imposed certain restrictions with the aim of protecting its citizens and residents alike from the virus. What impact will such packages and measures have on cross border workers, on employees who are required to telework and on their employers?  

When a foreign employee is required to tele-work from his home country due to such exceptional circumstances, will this create a permanent establishment for the employer in that foreign jurisdiction?  Will this create new filings, tax registrations or other tax compliance obligations for the employer in that foreign jurisdictions

Which country has the right to tax wage subsidies when these are paid to employers as a stimulus so as not to make employees redundant? 

Will the tax residence of the employee change due to relocation or the inability to travel? 

If senior officials are meeting and taking effective decisions in a foreign country due to COVID-19 measures, will this lead the company to be resident in another jurisdiction, with the possibility for the it to be treated as a dual resident for tax treaty purposes?

Will a construction site constituting a permanent establishment, be regarded as ceasing to exist when work is temporarily interrupted due to the COVID-19 crisis?

How can we help?  

For further information, please contact one of the firm’s tax partners, Stephen Balzan on [email protected] or Elaine Camilleri [email protected]. ACT can help you understand the changes to the tax rules and how these can impact your business.  

Apart from its offices in St. Julian’s Malta, ACT operates from a second office in Gozo, which is situated in the capital city of Victoria.  For an appointment in our Gozo office, please call on 00356 21378672 or send us an email on [email protected].