The rapid spread of COVID-19 across the world has had a significant impact not only on our general lifestyle, but also on the global economy. Measures such as restricted travel, strict quarantine rules, and social distancing have become the norm, and, as the COVID-19 crisis transforms into an economic crisis, governments and world organisations have had to take prompt and concrete action to support businesses and individuals.
- An individual travelling to a country outside of the usual place of work (for holiday or short period of work) and not able to return to the home country due to travel restrictions: in some cases, under the domestic legislation, the individual may become tax resident in the country of presence. However, the guidance explains that under the treaty rules, generally, the individual would not become tax resident of that country.
- An individual undertaking employment activities in a host country and due to the COVID-19 situation returns to the home country: if the individual previously lost residence in the home country, even in the unlikely event where residence would be regained during the temporary return (based on the local legislation), the guidance explains that under the treaty rules, the individual would not become resident of that country due to the short period of return.
- So far, no specific guidance has been provided by the Romanian government with respect to such aspects. Therefore, existing legislation/double tax treaties should be observed.
- On the other hand, the OECD guidelines do not address all employment tax matters that could arise for an individual during these exceptional times, such as:
- Non-resident taxation could still arise in the country of stay, as per domestic legislation.
- Individuals working in a host country where they did not yet establish residency, upon temporary return to the home country, could be liable to salary taxation there, potentially leading to double taxation.
- Individuals who were supposed to leave their country for an employment/assignment in another country and would normally no longer be subject to taxation in the home country, if the departure date is delayed, could still be liable to salary taxation if they start working from the home country.
- Allocation of income for tax purposes, related to work exercised in two or more states could be complex, if the income relates to a longer period, including the pandemic, when the presence in various country did not follow the usual pattern.
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