Tax News & Views International Weekly: Telecommuting and Taxes

Remote work has been with us since the days of Marco Polo, but since the pandemic it’s become an entirely new dynamic. Today, the ease and availability of working from anywhere for many professions has changed the concept of work itself.

That this would lead to tax issues may seem obvious. The range of issues it raises may be less obvious, though. Cross-border disputes about the personal income tax are the first that come to mind. But it’s also an issue for corporate taxation, when the location of employees–and whether they’re key decision-makers, value-creators, or among the rank-and-file–can be a factor in determining if a company has a taxable presence in a jurisdiction.

It’s still a bit too early for global standards to develop, but the process has begun. The Organization for Economic Cooperation and Development issued a call for feedback last week on issues related to worker mobility. The OECD may be best-known for its global minimum tax project, but its traditional role is to set tax guidelines on international tax issues, which countries often choose to adapt.

In this instance, the OECD is requesting input from stakeholders on several issues related to worker mobility. Those include not only questions about personal income and corporate residence, but how to apportion income across national borders once a taxable presence has been determined. The location of workers, especially key employees in the value chain, can be a factor when countries decide how much profit should be recorded in their jurisdictions. In today’s economy you hear a lot about intangible assets–but those intangibles are ultimately created by people, and even when they’re shifted elsewhere their initial location matters.

The OECD’s consultation request also asks about “frontier workers”--people who live in one jurisdiction and commute or travel to another for work–and “digital nomads,” people who aren’t strictly employees but do contract or freelance work across borders.

While these issues haven’t yet generated the controversy that the OECD 15% global minimum tax has, they could end up being just as important as the global economy shifts further online.

Noteworthy Items This Week

World Economy Surprisingly Resilient to Tariffs, OECD Says – William Horobin, Bloomberg Tax ($):

The global economy is weathering Donald Trump’s trade tariffs better than expected as activity gets a boost from strong investment in artificial intelligence and supportive fiscal and monetary policies, the OECD said.

The Paris-based organization raised its US and euro-area growth forecasts for this year and next, and made small upward adjustments for other major economies in its latest outlook.

Still, it continues to predict global growth will slow to 2.9% in 2026 from 3.2% in 2025 as the full effects of levies on trade have yet to be felt.

Countries Press On With Global Minimum Tax Adoption – Stephanie Soong, Tax Notes ($):

Three European countries are progressing with the implementation of global minimum tax rules, with Switzerland and the United Kingdom amending their pillar 2 laws and Montenegro consulting on draft pillar 2 legislation.

Switzerland's Federal Council adopted an amendment to the ordinance providing for the partial implementation of the OECD global anti-base-erosion rules, the Swiss Federal Department of Finance announced November 26.

The ordinance implements the qualified domestic minimum top-up tax (QDMTT) and the income inclusion rule to ensure large multinational enterprise groups are subject to an effective tax rate of at least 15 percent wherever they operate. The measures are part of pillar 2 of the OECD’s two-pillar global tax reform plan.

Rationalizing the Post-OBBBA International Tax Rules, Part 2 – Mindy Herzfeld, Tax Notes ($):

The OBBBA’s changes to section 951A are deceptively minor but still require revisions to existing regs. Besides changing the rate under which GILTI (now NCTI) is taxed (as a result of modifying the deduction allowable under section 250), the OBBBA eliminated the exemption for qualified business asset investment, translated into the net deemed tangible investment return at the shareholder level. The current regulatory guidance under section 951A includes details on calculating the inclusion that take into account the exemption.

The guidance plan includes as a priority the issuance of rules implementing the OBBBA changes to section 951A and related provisions.

In the Line of Duty: Custom-Made Solutions – Carrie Brandon Elliot, Tax Notes ($):

Ideally, the value of a given good should align under the transaction value (for customs purposes) and the CUP (for transfer pricing purposes). In practice, lack of reliable CUP comparables or other transaction methods often leads to applying the transactional net margin method (TNMM). Also, although the transfer pricing analysis should be done on a transaction-by-transaction basis, the lack of reliable comparables frequently results in the necessity of using a combined transaction analysis.

It seems obvious that the transfer pricing setup should influence the transaction value of a good, but the abovementioned differences in the approaches taken for tax and customs purposes could create distortions in which transfer pricing and customs values would not necessarily align.

GOP 2025 Tax Law Changes to US Minimum Tax Hamstrung by Tax Code – Lauren Vella, Bloomberg Tax ($):

Multinationals are seeking rule changes from Treasury allowing them to take more credits against taxes they pay abroad on their income.

Although Republicans recently changed parts of the US’s minimum tax on foreign-earned income to be more advantageous to companies, practitioners say the benefit they received is hamstrung by the way the new changes interact with other parts of the US tax code.

Without intervention from the Treasury Department, companies will continue to pay a similar amount of tax on their foreign-earned income as they did before Republicans changed the law.

Public Domain Superhero of the Week

Every week, a new character from the Golden Age of Comics, who’s fallen out of use.

This week’s entry: Red Rube

Debut Year: 1943

Debut Publication: Zip Comics #39

Origin Story: A runaway orphan, he discovered an old castle haunted by his ancestors, who gave him supernatural powers.

Superpowers: By yelling out "Hey Rube," he turns from a young boy to an adult with powers like super-speed and invulnerability.

Eide Bailly's International Tax Team and our affiliates at HLB, The Global Advisory and Accounting Network, stand ready to assist with your worldwide tax needs.

Tax News & Views International Weekly: Telecommuting and Taxes

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Alex Parker