Where should remote workers pay income tax?

March 27, 2024 - It’s up for debate. The surge in remote work has sparked discussions about a fair allocation of taxation rights between countries in respect of the employment income Article based on the current UN Model Convention.

The United Nations (UN) Tax Committee is reviewing the taxation of remote workers and is contemplating changes to the convention. This includes a proposed change to the taxation of remote workers, with a potential amendment to Article 15.

Under Article 15 of the United Nations Model Convention, primary taxing rights are allocated to the country in which the employment is exercised, with secondary taxing rights to the country in which the employee is resident.  In contrast, under Articles 16 (director and senior management fees) and 19(1) (government service employees), the primary taxing right is allocated to the contracting state where a company is resident or to the contracting state that is the employee’s employer, irrespective of where the employment is exercised. 

The UN has outlined four options for reform in respect to the provisions of Article 15 of the model convention:

  1. The number of days an employee can spend in a state they are non-resident in before they are liable to tax in that country on their employment income could be reduced from 183 to 60 or 90 days.
  2. Granting taxation rights to the state an employee’s employer is resident in even if the employee is not resident in that state and does not undertake any employment duties there.
  3. An alternative provision could be added to the commentary on the UN Model Convention to deal with situations where the number of employees resident in one contracting state and working for employers who are resident in the other contracting state are relatively equal for both states.
  4. The commentary could be modified to add guidance about the treatment of remote workers, given that the existing commentary on Article 15 does not contain any consideration to this effect. The additional commentary would explain the situations in which the state the employer is tax resident in is entitled to tax the employment income of their employees that are tax resident in another country. 

What are the key drivers behind this amendment?

Loss of revenue

Remote workers typically pay income tax in the country where they are working. As such, where employees are legally employed in a different country to where they physically work, there is a loss of tax revenue to the country where their employer is resident.


Since the COVID-19 pandemic, there has been a boom in international remote working. A common theme is the preference to work from jurisdictions with sunnier climates and often lower tax rates and cost of living. As countries compete for tax revenues, there is an argument to support affording taxation rights to the country which benefits/profits from the employee’s duties.


Where the Article 15 approach applies, this can create complex compliance issues and the need to consider double tax relief.

Our thoughts

We welcome the UN Tax Committee's proactive response to the challenges posed by remote work.

However, the current proposal raises more questions than answers:

The interaction with domestic tax rules

The proposed changes to Article 15 contradict the fundamental principles of most countries' domestic tax rules. In other words, most countries would not look to tax the employment income of a non-resident who does not perform any employment duties whatsoever in that country.

A ‘tax grab’

The changes may be viewed as a ‘tax grab’ by the more developed countries and result in tax losses for the jurisdictions where remote workers are based, including developing countries which are in need of the tax revenue.


The application of an amendment to Article 15 to traditional secondments is unclear. For example, if an employee is seconded to a host country for two years and breaks tax residence in their home country, will the home country have the taxation rights over 100% of their employment earnings? It remains to be seen.

What happens next?

The next session of the UN’s Tax Committee will take place from 19-22 March 2024. The intention is to finalise the proposed amendment to Article 15. However, even if an amendment is finalised in March and is included within the UN’s Model Tax Convention, there is no obligation for countries to adopt this in their double taxation agreements with each other.

There are several practical challenges for the UN’s Tax Committee to overcome before an amendment to Article 15 is finalised, and it will be interesting to see how this evolves over the coming months. Will the proposed changes influence the decision making of remote workers or their employers in the meantime? Watch this space.

Consequences in the Netherlands

Based on Netherlands tax law, residents of the Netherlands pay taxes on their worldwide income.

There is no clear definition of “residence” in Netherlands tax law which states that a residence is to be determined “according to the facts and circumstances”. Based on the case law, the following facts and circumstances are considered particularly relevant: the availability of a permanent home, the place where the partner and children live and the place of employment. In addition, residents of foreign countries who receive an income sources in the Netherlands are also taxed on that income. To prevent double taxation, the Netherlands has a large network of bilateral tax treaties.

Netherlands bilateral tax treaties are mainly based on the OECD Model Tax Convention based on which an employee must pay taxes in the country where their employment is exercised, even if the employee lives in a different country. An exception is made if the following three conditions are met:

·        The employee is not present in the other country for more than 183 days in total;

·        The salary is paid by an employer that is not located in the other country; and

·        The salary is not paid by a permanent establishment of the employer in the other country.

The permanent establishment risk of having remote workers in other countries is a surging topic for internationally operating companies. In a recent example, Belgium clarified its position on situations wherein cross-border teleworking could give rise to foreign companies disposing of a taxable material PE in Belgium based on the relevant Double Tax Treaty concluded.’

In the cases mentioned above, the income will be taxed in the country where the employee resides and not in the country where their employer is based

Up until now, article 15 of the UN Model Tax Convention and OECD Model were the same. Although, the potential amendments could change this, there were no official statements indicating that countries or the OECD will follow the newly proposed article 15 of the UN model. Finally, any changes in the future need to be embedded in a tax treaty in order to be binding for the contacting states.

As for the Netherlands, the government has stated in its tax treaty policy from 2020, that it would be willing to accept some components of the UN Model, especially when it comes to tax treaties with developing countries. Thus, the impact of the potential changes the article 15, remains to be seen and the developments should be closely monitored.

Want to know more about the proposed amendments?

Would you like to know more about the tax rules relating to teleworkers? If so, please contact Alexander Rasink by e-mail or by phone: +31 (0)88 277 16 15, or contact one of our specialists from our Employment Taxes and Global Mobility department. They will be happy to help you.