Working Abroad Is Easy. Taxes Aren't

More companies make remote work a job perk, but that can mean a paperwork nightmare

Imagine for a second that the pandemic is over. Global travel has resumed, Covid-19 hot spots are a thing of the past, and companies are keeping a promise some have been making lately to attract top talent: to allow remote work from anywhere in the world, at least for a few months a year.

Then envision a Londoner, a New Yorker, and a Hong Konger walking into a bar. Let’s say it’s in Rio de Janeiro. They all make the same salary—$100,000—and have been allowed to work remotely from Brazil for two months.

Once they’ve put down their caipirinhas and returned home from their stints abroad, who will owe the most in taxes? According to Robert Salter of tax and advisory firm Blick Rothenberg, our remote worker from New York could face the highest bill, while the Londoner could have nothing extra to pay. This assumes, however, that all three fill out their Brazilian taxes on time in accordance with regulations and—perhaps most important, to avoid costly mistakes—in Portuguese.

And Salter warns of a worst-case scenario for this new generation of jet-setters: being required to file multiple tax forms in different countries while also losing any benefits from tax treaties between jurisdictions. “It could be a disaster,” he says. “You could have to do four or five tax returns.”

Employees who work abroad even for just a few weeks may find themselves liable for taxes in overseas jurisdictions, Salter says. Many countries have double-taxation agreements in place to avoid excess taxation. But such agreements may apply only to federal taxes and not to city or state obligations that are common in many parts of the U.S. or social security liabilities common in Europe.