If you work for a company in Portugal but have the option for remote work and are considering moving abroad, this article is for you. Notícias ao Minuto consulted experts on the legal, tax, and labor challenges that international remote work can present, especially in temporary scenarios.
It is important to note that employees may be subject to double taxation if they stay more than 183 days in another country, as they may be considered tax residents in that territory. Additionally, they remain covered by Portugal’s Social Security scheme but only if they work less than 50% of their time outside the country.
There are also limitations: companies can refuse remote work outside the country based on operational, legal, security, or fiscal criteria, provided such terms are previously agreed upon in writing.
PRA – Raposo, Sá Miranda & Associados, represented by Ana Cardoso Monteiro, a senior associate in the Labor department, and Rita Pinto Guimarães, a trainee lawyer in the Tax area, addressed some common queries on the topic, whether from the standpoint of company or employee obligations.
The situation of remote work abroad has been equated, for communication purposes to the competent authorities, with posting.
What are the company’s duties towards the ACT and Social Security?
The legal provisions specified in the Labor Code are silent on this matter. However, the situation of remote work abroad has been equated, for communication purposes to the competent authorities, with posting. In this respect, the employer must: notify the ACT five days in advance of the identity of the employees to be posted abroad, the user, the place of work, and the anticipated start and end of the posting. Moreover, a portable document A1 should be requested from Social Security before the start of the posting to ensure that contributions are made in Portugal.
In terms of Social Security, and without prejudice to further details in the answer to the second question, according to the Multilateral Framework Agreement establishing a new specific regime for non-permanent telework situations, signed by 17 countries including Portugal, in cases of telework, employees are not necessarily subject to the Social Security legislation of their State of Residence (as per the general rule) but to that of the employer’s State, provided that cross-border telework in the State of Residence is less than 50% of the total telework time.
Ana Cardoso Monteiro and Rita Pinto Guimarães© PRA – Raposo, Sá Miranda & Associados
Are there risks of double taxation or fiscal non-compliance?
From a tax perspective, various issues arise. Primarily, in terms of income taxation, double taxation problems can occur when a summer stay extends beyond 183 days (whether consecutive or interpolated), since most double taxation treaties adopt the length of stay in a state’s territory as a criterion for determining tax residency.
Thus, the core issue, though initially not apparent, is the employee’s tax residence. If the stay in a foreign country extends beyond 183 days, the individual may be deemed a tax resident of that country, which may give that state the authority to tax the income derived from the employee’s salary, along with any associated declarative obligations.
Such an extended stay could result in double taxation issues, where income is subject to tax both in Portugal, as the country of origin of the income, and abroad, where the work is performed (albeit partially).
At this point, it is essential to note that Portugal has entered into several Double Taxation Avoidance Agreements with various countries, establishing rules to determine which one has the right to tax the income.
After examining the employee’s side, some considerations concerning the employer must be made, particularly regarding its obligations towards Social Security.
If the summer stay is in a European Union Member State (“EU Member State”), the provisions of Regulation (EC) No 883/2004 (in its latest version) must be noted, establishing the general rule that, when work is carried out in an EU Member State, the employee is subject to the social security legislation of the State where they perform their professional activity.
According to Regulation (EC) No 883/2004, when work is carried out in an EU Member State, an individual is subject to the social security legislation of the State where they carry out their professional activity. Thus, if an employee performs their duties (in this case, remotely) in a different EU Member State than where the company is located, the social security legislation applicable is, in principle, of the EU Member State where the work is carried out.
Conversely, if the holiday destination chosen is outside the European Union, social security contribution issues must be resolved using bilateral agreements that establish rules on which legislation is applicable. The general rule is that the legislation of the country where the employee is present applies, even if the individual resides or the employer’s main office or domicile is not in that territory.
In the absence of a bilateral agreement, the social security legislation of the destination country applies, and both the employee and employer may be obliged to contribute to a foreign country’s Social Security.
The employer may limit the specified workplace, provided that such limitation arises from operational, safety, health, or fiscal issues.
Can the company refuse or limit remote work outside the country?
This is one of the most debated questions in the context of international telework: the challenge of balancing an employee’s freedom to choose their work location with the employer’s obligations and operational limits of the employment relationship. For example, how to reconcile remote work outside Portugal with the provisions of Article 169-A of the Labor Code: “1 – Remote work meetings and tasks requiring precise timing and cooperation with other workers should occur during working hours and be scheduled preferably 24 hours in advance. 2 – The employee must attend company premises or other employer-designated locations for meetings, training, and situations requiring physical presence, notified at least 24 hours in advance” and the employer’s duty to “reduce employee isolation by promoting regular in-person contact with supervisors and other employees, as per the telework agreement or, if omitted, at intervals not exceeding two months,” as per Article 169-B, paragraph c).
The Labor Code does not specify that telework must occur only in Portugal, nor does it guarantee the employee an absolute right to telework abroad.
As required by law, there should be a written agreement between the parties regarding the usual work location, which will be considered the workplace for all purposes. Nonetheless, it is believed that the employer can limit the specified workplace if such limitation arises from operational or fiscal security and health concerns.
How does the work accident regime apply abroad?
Here, again, the definition of the workplace is crucial for this purpose, as it must be included in the agreement for telework arrangements and communicated in advance to the insurance company responsible for work-related accident liabilities, ensuring coverage for occurrences within this scope. It is also pertinent that the insurer is informed of the duration of the telework agreement at that location or locations.
What contractual clauses may or should be applied in these cases?
Besides mandatory mentions required by Article 166 of the Labor Code, it is deemed relevant to include the following:
- The location(s) for work under this arrangement, which is particularly relevant for foreign activity;
- The duration of the activity abroad;
- The tax and contribution responsibilities regarding this matter, as well as adapting the provisions of the aforementioned Articles 169-A and 169-B of the Labor Code.
- Terms for terminating the telework agreement, which are already stipulated by law.
- The work accident compensation regime.
