Beach home office? Crowds can also leave Hungary

If the coronavirus epidemic turns out positive, remote work and home office growth will most likely stand out. It is common worldwide that since the arrival of COVID-19, most of the companies that have been able to do so based on their activities have ordered to work from home to protect the health of workers and minimize the risk of contagion. From an employment law perspective, home office and telecommuting are separate categories. There is no recent data on how many people work in home offices in Hungary or how many teleworkers they currently employ.

According to the CSO analysis published in 2020, based on data from the first quarter of 2018, 3.7% of employees, 144 thousand people worked remotely, most of them, 89%, worked from home. By now, presumably, many more people are working outside the office. Several countries have seen opportunity in the trend: in July in Barbados, August in Estonia announced a new call digital nomad visa the opportunity for workers who can do their work remotely online. In the last month of summer Croatia joined In addition, it will be attractive to many to be able to work in favorable conditions, even from the beach, splashing between two tasks.

Who can seize the opportunity?

Dr. Csaba Magyar, tax expert, CEO of Crystal Worldwide Zrt He told Portfolio, while there are many tempting options to choose from that are not tied to an office, it is also important that we are aware of our responsibilities.

For example, there are many who travel to a country on a tourist visa, stay half a year and travel most of the time, relaxing, but also working. However, officially, you usually wouldn’t be able to do this even if they weren’t working for a local company. No one is dealing with this yet because those involved are “under the radar”

– said the expert, who stressed that all those who plan to work from abroad as digital nomads and plan to spend more time in a given country than the duration of a tourist visa, it is worth consulting an immigration specialist and a tax advisor before entering.

Fortunately, EU citizens have the right to be employed or self-employed in any Member State without a work permit.

However, some Member States require them to inform the authorities upon arrival.

Failure to do so may be penalized by the Member State concerned. The situation is much more complex when EU citizens try their luck in third countries or when non-EU citizens come to a Member State. The nomadic digital visas described above offer a great solution for this.

„Many often associate the digital nomadic way of life with the avoidance of the rules. Most of the image lives on in people’s minds that these tramps don’t pay taxes anywhere. This case also occurs, but its legitimacy depends on several factors. This is worth paying attention to, because these types of operations will gain more and more ground, in which the coronavirus epidemic also acts as a catalyst.”Dr. Csaba Magyar said, adding If someone is employed, they must also inform the company about the permanent foreign head office., where you work, because after a certain period of time you have to pay taxes (also) in the country of residence.

In these difficult to judge cases the question of tax jurisdiction too key, why

The country in which a person is a resident for tax purposes can, in most cases, tax all of that person’s income, regardless of whether the income comes from the country or from abroad.

Here, it is important to emphasize that the address (which is not necessarily the same as the address card) and the center of vital interests are the most important factors in evaluating tax residence. Citizenship and the “183 day rule” are often just many aspects of determining tax residency.

One month here, three months there, but to which country do I have to pay taxes?

There is no data on how many Hungarians live as digital nomads. However, we can assume that employees with permanent contracts are unlikely to change their place of residence too often. Anyone who is self-employed and does not have a permanent job, or rather works by project, can easily do so by spending a month in a particular country and then moving on. In this case, you have a greater opportunity to schedule your time according to your own needs, you can also decide what job to take on and you can say no, while an employee may have a more difficult time doing it.

In fact, anyone can be a digital nomad with a laptop ready to work, a decent and stable internet connection, and a clientele that covers the cost of living. There are occupations that are more common among digital nomads because they fit better with this lifestyle, such as being an online language teacher, software developer, social media manager, project manager, or even someone who trades, exchanges, or even plays cryptocurrencies. .

If a Hungarian becomes a digital nomad, it is also worth checking to what extent Hungary has something to do in the tax field, as it is easy for its taxable income to be generated in Hungary as well.

– said dr. Csaba Magyar, adding that of course this can be overridden by double taxation conventions, so it is advisable to inquire about this as well. The expert also mentioned that

The massive, cross-border spread of telecommuting could lead to a “tax storm”, as states and taxpayers will not be able to track who should tax where.

This can lead to that in the long run taxpayers disappear en masse from one country, while in another this can generate additional tax revenue. For this reason, Hungary’s position on this issue doesn’t really matter, as a special tax or visa favorable to digital nomads can solve this problem, at least in part.

The kata type of tax, for example, is also very attractive among digital nomads who temporarily choose Hungary as a destination because it involves relatively few administrations and the monthly amount to be paid was well planned. Budapest was especially popular, perhaps because of this, among digital nomads.

„The question, however, is what effect the kata hardening will have”Said the CEO, who said that countries that respond quickly in this period of rapid change, such as Estonia and Croatia, which were already mentioned, will do well, but this field will also be strengthened by Cyprus and Malta, which are also attractive. . A visa for digital nomads, along with transparent regulations, could attract large numbers of people, who in addition to paying some taxes, will also spend a large part of their income within national borders.

The digital nomad movement has a progressive trend that followers of the flag theory. This proclaims total financial independence free from the influence of the state.

Somewhat simplified, the essence of the principle is that people need to fly their flag where the state treats them best and where they are given the most freedom. On the other hand, that is why they step on several countries where conditions are favorable (geo-arbitration). Followers of the trend find it problematic that in the basic case most of the securities (real estate, bank account, insurance, etc.) are concentrated in one country, so if something goes wrong they can lose everything at once . Instead, they establish their life in several countries that offer them favorable conditions at the same time: they set up a company where, for example, they do not have to pay any foreign income tax, they register their residence in a country where taxes are also low. bank account, maintained in various banks.

Therefore, countries that offer the right conditions to people who take finance and taxes into account can do well, because there may be a stratum that, if it pays little or no tax, still spends its income in those countries.

The publication of this article was supported by Crystal Worldwide Zrt.