International tax authorities are telling companies that if employees or directors are stuck in another country becuase of COVID-19-related issues their businesses are not automatically taxable. The guidance was issued in the United Kingdom, Republic of Ireland, Australia and the islands of Jersey and Guernsey.
Guidance from the Australian taxation office was typical of the information provided. Australia will not consider a company to have a permanent establishment under the following conditions:
*The foreign company did not have a permanent establishment in Australia before COVID-19 hit. *There are no other changes in the company’s circumstances. *The unplanned presence of employees in Australia is the short-term result of them being temporarily relocated or restricted in their travel.
The Organisation for Economic Co-operation and Development says it is working on this issue as well as “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.”
The OECD noted in general in terms of quarantines and other temporary stays “ 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.”
