It is no secret that businesses of all shapes and sizes have ambitions to operate on an increasingly global basis - and are finding it ever easier to do so thanks to new technological developments.
But opening shop abroad generates a raft of challenges when it comes to handling contractors and their payroll issues across borders. In my last article, the focus was on exploring how employment tax and regulation varies in different European Union member states, but the aim of this one is to look at what payroll professionals need be aware of in other particularly complex territories around the rest of the world:
Switzerland
While Switzerland is widely viewed as an important hub for international business, it is also a challenging location in which to operate. In the first instance, simply getting workers into the country is often a struggle.
Foreign nationals seeking short-term residency must apply for an L-permit before they relocate. But only a specific number of these visas are allocated each year, and this allocation is increasingly falling short of demand. In fact, to highlight the seriousness of the issue, canton-specific permits for 2017 ran out in March, with federal reserves soon following suit.
On top of this permit challenge, restrictions have also been imposed on some foreign nationals, with a cap now having been introduced for Romanians, Croatians and Bulgarians. This situation is due to high numbers of professionals from these countries moving into Switzerland in recent times, with annual allocations for 2017 having been surpassed early on in the year.
Managing contractors and their payroll issues can also be a complex undertaking due to the country’s intricate makeup. With 26 separate cantons and around 2,250 municipalities each levying their own taxes, one of the biggest hurdles payroll professionals face is simply identifying which authority an individual is governed by and subsequently managing their various allowances on that basis.
Organisations are also likely to face strong requirements to use local Swiss-based payroll services, adding yet another management layer.
Singapore
Singapore also operates a number of tricky entry restrictions. Any foreign professional seeking to move to the city-state for work will need to obtain an Employment Pass (EP) but must meet specific criteria.
They will need to earn at least S$3,600 per month (US$2,700) – a requirement that only came into force in early 2017 but also carries an age limit. As a result, older workers often need to earn a higher salary to qualify.
This means it is vital to assess each candidate individually when applying for an EP to ensure they conform to the relevant criteria. In most instances, contractors will need to work in managerial, executive or specialised roles, or hold an ‘acceptable’ qualification such as a university degree.
In addition, overseas employers with no registered office in the country that wish to apply for an EP for a given individual will need to find a locally-registered firm to act as a sponsor and apply on their behalf. In other words, it is incredibly difficult to obtain EPs in Singapore.
India
When dealing with an international contractor workforce in India, payroll professionals need to follow the rules carefully as mistakes can have long-term repercussions. Any non-Indian national being sent to the country under any form of employment contract will require a work permit.
The specific requirements for these permits vary depending on an individual’s nationality and so will have to be assessed on a case-by-case basis. In general though, it is necessary to apply for a work permit in the worker’s country of origin, and each application requires a justification letter outlining why they, rather than a local person, should be hired.
If using contract staff, be aware that, if they come into India on a business visa, they could be detained by the local authorities for having incorrect documents. If this happens, they will have their passport stamped to indicate they are prohibited from travelling to the country for work in future.
Finally, services provided to organisations from outside of India are subject to a tax charge of 14.5%, which is not recoverable and so will need to be factored into overall costs.
Russia
Russia has in place a number of permit and tax requirements for foreign contractors, which vary based on their employment status and nationality. For example, self-employed consultants (known as ‘IPs’) require a permanent residency permit and need to register as an IP in order to work in the country.
While the application process is relatively quick (around five to seven days), individuals have two tax options that their employers need to be aware of:
- A 6% flat rate of tax payable on total income/revenue;
- A 15% flat rate of tax payable on profits.
Foreign workers registering as employees with a local Russian company require a work permit unless the individual is a resident of Belarus. A residency permit is also necessary in some instances, but not if the professional in question is classified as a ‘Highly Qualified Specialist’. Workers coming in on a residency permit are also required to deregister at the end of their contract by sending a letter to this end to the tax authorities.
It is also worth bearing in mind that the Russian tax year is January to December, but given the sheer complexity of the work permit and tax liability situation, it is always advisable to seek expert advice to guide you through.
Michelle Reilly has almost 20 years’ experience in contractor management. She joined CXC in 2009 to set-up its global Europe, Middle East and Africa business, and last year led a management buyout of the recruitment agency side of the organisation. Michelle is now chief executive of 6CATS International, which provides compliant contractor management solutions.
It is no secret that businesses of all shapes and sizes have ambitions to operate on an increasingly global basis - and are finding it ever easier to do so thanks to new technological developments.
But opening shop abroad generates a raft of challenges when it comes to handling contractors and their payroll issues across borders. In my last article, the focus was on exploring how employment tax and regulation varies in different European Union member states, but the aim of this one is to look at what payroll professionals need be aware of in other particularly complex territories around the rest of the world:
Switzerland
While Switzerland is widely viewed as an important hub for international business, it is also a challenging location in which to operate. In the first instance, simply getting workers into the country is often a struggle.
Foreign nationals seeking short-term residency must apply for an L-permit before they relocate. But only a specific number of these visas are allocated each year, and this allocation is increasingly falling short of demand. In fact, to highlight the seriousness of the issue, canton-specific permits for 2017 ran out in March, with federal reserves soon following suit.
On top of this permit challenge, restrictions have also been imposed on some foreign nationals, with a cap now having been introduced for Romanians, Croatians and Bulgarians. This situation is due to high numbers of professionals from these countries moving into Switzerland in recent times, with annual allocations for 2017 having been surpassed early on in the year.
Managing contractors and their payroll issues can also be a complex undertaking due to the country’s intricate makeup. With 26 separate cantons and around 2,250 municipalities each levying their own taxes, one of the biggest hurdles payroll professionals face is simply identifying which authority an individual is governed by and subsequently managing their various allowances on that basis.
Organisations are also likely to face strong requirements to use local Swiss-based payroll services, adding yet another management layer.
Singapore
Singapore also operates a number of tricky entry restrictions. Any foreign professional seeking to move to the city-state for work will need to obtain an Employment Pass (EP) but must meet specific criteria.
They will need to earn at least S$3,600 per month (US$2,700) – a requirement that only came into force in early 2017 but also carries an age limit. As a result, older workers often need to earn a higher salary to qualify.
This means it is vital to assess each candidate individually when applying for an EP to ensure they conform to the relevant criteria. In most instances, contractors will need to work in managerial, executive or specialised roles, or hold an ‘acceptable’ qualification such as a university degree.
In addition, overseas employers with no registered office in the country that wish to apply for an EP for a given individual will need to find a locally-registered firm to act as a sponsor and apply on their behalf. In other words, it is incredibly difficult to obtain EPs in Singapore.
India
When dealing with an international contractor workforce in India, payroll professionals need to follow the rules carefully as mistakes can have long-term repercussions. Any non-Indian national being sent to the country under any form of employment contract will require a work permit.
The specific requirements for these permits vary depending on an individual’s nationality and so will have to be assessed on a case-by-case basis. In general though, it is necessary to apply for a work permit in the worker’s country of origin, and each application requires a justification letter outlining why they, rather than a local person, should be hired.
If using contract staff, be aware that, if they come into India on a business visa, they could be detained by the local authorities for having incorrect documents. If this happens, they will have their passport stamped to indicate they are prohibited from travelling to the country for work in future.
Finally, services provided to organisations from outside of India are subject to a tax charge of 14.5%, which is not recoverable and so will need to be factored into overall costs.
Russia
Russia has in place a number of permit and tax requirements for foreign contractors, which vary based on their employment status and nationality. For example, self-employed consultants (known as ‘IPs’) require a permanent residency permit and need to register as an IP in order to work in the country.
While the application process is relatively quick (around five to seven days), individuals have two tax options that their employers need to be aware of:
- A 6% flat rate of tax payable on total income/revenue;
- A 15% flat rate of tax payable on profits.
Foreign workers registering as employees with a local Russian company require a work permit unless the individual is a resident of Belarus. A residency permit is also necessary in some instances, but not if the professional in question is classified as a ‘Highly Qualified Specialist’. Workers coming in on a residency permit are also required to deregister at the end of their contract by sending a letter to this end to the tax authorities.
It is also worth bearing in mind that the Russian tax year is January to December, but given the sheer complexity of the work permit and tax liability situation, it is always advisable to seek expert advice to guide you through.
Michelle Reilly has almost 20 years’ experience in contractor management. She joined CXC in 2009 to set-up its global Europe, Middle East and Africa business, and last year led a management buyout of the recruitment agency side of the organisation. Michelle is now chief executive of 6CATS International, which provides compliant contractor management solutions.
