Remote workers and digital nomads working in different EU Member States

Dec 12, 2022

A person who is normally self-employed in two or more Member States is subject to (a) the legislation of the Member State of residence if she/he pursues a substantial part of her/his activity — e.g. 25% or more — in that Member State; or (b) the legislation of the Member State in which the centre of interest of her/his activity is situated if s/he does not reside in one of the Member States in which s/he pursues a substantial part of her/his activity. The criteria taken into account to determine whether the activity can be considered “substantial” shall be: (i) the turnover; (ii) the working time; (iii) the number of services rendered; and/or (iv) the income. Marginal Activities, eg activities accounting for less than 5% of the worker’s regular working time and/or less than 5% of his/her overall remuneration are not taken into account.

The above rules apply only to EU nationals, who have the right to move freely within the European Union. Non-EU nationals who have the residency and right to work in one EU country cannot work freely in other EU countries.


What is a digital nomad?

According to OECD, the term digital nomad refers to a “location-independent, technology-enabled lifestyle”. Enabling technologies are associated with the global deployment of high-speed internet, and video conferencing tools as well as online collaboration platforms for teams and cloud solutions. Working remotely may enable one to access a higher quality of life environment and choose a more favourable tax regime. The fact that income is earned from foreign sources distinguishes a digital nomad from other categories of working migrants, including cross-border workers and intra-corporate transferees. 

Digital nomads in the EU

There is no harmonised definition of “Digital Nomads” at EU level, and even persons who exclusively rely on semi-passive or passive income may also be considered digital nomads under some new regulations. Some definitions can be found in the national legislations of some countries that have implemented a digital nomad visa, among them:

Croatia: a third-country national who is employed or performs work through communication technology for a company or his own company that is not registered in the Republic of Croatia and does not perform work or provides services to employers in the Republic of Croatia.

Estonia: a third country national (TCN) whose purpose of temporary stay in Estonia is to perform work duties in Estonia as a location-independent employee or an entrepreneur, who has a business/company registered abroad or a freelancer providing services to contract-based clients from abroad.

Latvia: persons who are employed by an employer registered abroad or who are self-employed persons registered abroad and perform their work remotely, e.g., consultancy, translation services, information technology services, etc.

Spain: International teleworkers who stay in Spain to carry out remote work or professional activity for companies located outside the national territory, by means of the exclusive use of the computer, telematic, and telecommunication means and systems. In the case of exercising an employment activity, the holder of the visa (i) can only work for companies located outside Spain; (ii) can work for a company located in Spain, provided that the percentage of such work does not exceed 20 % of his total professional activity.

What legislation applies to digital nomads and remote workers who work in two or more EU Member States?

A person who is normally self-employed in two or more Member States is subject to:

(a) the legislation of the Member State of residence if s/he pursues a substantial part of her/his activity in that Member State;

(b) the legislation of the Member State in which the centre of interest of her/his activity is situated if s/he does not reside in one of the Member States in which s/he pursues a substantial part of her/his activity.

Marginal and ancillary activities that are insignificant in terms of time and economic return, shall not be taken into account for the determination of the applicable legislation.

When the activity is “substantial” and must be taken into account for the purpose of determining the applicable legislation? 

A ‘substantial part of self-employed activity’ pursued in a Member State of residence means that a quantitatively substantial part of all of the activities of the self-employed person is pursued there, without this necessarily being the major part of these activities. For the purposes of determining whether a substantial part of the activity of a self-employed person is pursued in a Member State, account must be taken of: (i) the turnover; (ii) the working time; (ii) the number of services rendered; and/or (iv) the income.

If in the context of carrying out an overall assessment it emerges that a share of at least 25% of the above criteria are met, this is an indicator that a substantial part of all the activities of the person is pursued in the Member State of residence

Example: Bricklayer X performs activities as a self-employed person in Hungary, where he is also residing. Sometimes during the weekend he also renders his services as a self-employed person to an agricultural company in Austria. Bricklayer X is working 5 days a week in Hungary and a maximum of 2 days a week in Austria. X, therefore, performs a substantial part of his activities in Hungary and the Hungarian legislation is applicable.

When activities can be defined as “marginal and ancillary”?

Marginal activities are activities that are permanent but insignificant in terms of time and economic return. It is suggested that, as an indicator, activities accounting for less than 5% of the worker’s regular working time and/or less than 5% of his/her overall remuneration should be regarded as marginal activities. Also, the nature of the activities, such as activities that are of a supporting nature, that lack independence, that are performed from home or in the service of the main activity, can be an indicator that they concern marginal activities.

What procedures must be followed by a self-employed person in the event that s/he is working in two or more member states? 

A person normally employed in two or more Member States must notify this situation to the designated institution of the Member State in which s/he resides. The competent institution of the Member State whose legislation is determined to be applied shall without delay inform the person concerned of this fact. The institution can either use a letter or the Portable Document A1 (certificate attesting to the applicable legislation).


References

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