An increasing number of employees are temporarily working from abroad, for example from another EU Member State or even from third countries. Many companies now offer so-called “workations”. To prevent legal or tax risks associated with mobile working from abroad, it is essential that employers and employees are familiar with the key rules in advance and take the necessary preparatory steps.
Temporary stay abroad: holiday + work = ?
The term workation is a combination of the English words work and vacation. It refers to a situation in which a person temporarily works from a location that would normally be considered a holiday destination. Although workation is not a legal term, this phenomenon generally differs both from traditional dispatching (see below) and from permanent or regular cross-border remote working by frontier workers (see for example, the GIP information page: Living in the Netherlands, working in Germany – working in multiple states).
As EU citizens benefit from the freedom of movement within the EU, they generally do not require additional residence or work permits, provided they have sufficient means of subsistence (different rules apply to third-country nationals). However, particular attention must be paid to issues relating to health insurance, social security, and taxation.
The information provided by the Cross-Border Information Points (GIP) focuses on border regions with the Netherlands and is therefore limited to legal situations within the European Union (EU). The information below therefore does not cover workation stays outside the EU.
1. Social security when working abroad – which rules apply within the EU?
Which country is responsible?
Within the EU, Regulation (EC) No. 883/2004 on the coordination of social security systems applies. In principle, a person can only be insured in one Member State at a time (unlike tax liability).
To ensure that employees remain covered by social security in the country where they normally work during a workation, each situation must be assessed individually to determine under which conditions this is possible. The duration of the stay abroad is particularly relevant. In this context, the employer must apply for an A1 certificate.
The competent national authorities provide practical information on the following websites:
- Application for an A1 certificate (electronic procedure) via the information page of the German Liaison Office for Health Insurance Abroad (DVKA) of the National Association of Statutory Health Insurance Funds (GKV-Spitzenverband).
- Application for an A1 certificate via the website of the Dutch Social Insurance Bank (SVB).
- Application for an A1 certificate via the online “Social Security” portal of the Belgian public social security institutions (OISZ), the Public Planning Service for Social Integration (POD MI), and the Federal Public Service Social Security.
Dispatch
A workation is generally considered a form of dispatch. For posting within the EU, European posting rules also apply. In the case of temporary employment abroad of up to 24 months, social security coverage often remains in the country where the employee normally works.
However, employers must also assess whether any notification or reporting obligations apply in the country where the employee is temporarily staying. For more information, the European Commission’s online portal Your Europe can be consulted. The GIP information page Living in the Netherlands, working in Germany – Dispatching also provides useful additional details.
It is also recommended to use the European Health Insurance Card (EHIC). This card provides access to medically necessary healthcare during a temporary stay in another EU country. Further information is available on the relevant European Commission information page.
2. Tax law in a workation – double taxation treaties within the EU
In principle, the country of residence has the right to tax an individual’s worldwide income. However, since work during a workation is performed abroad, the country where the work is physically carried out may also obtain taxing rights.
Most EU Member States have double taxation treaties in place. These often provide that taxation remains in the home country (with exceptions for frontier workers – see below), as long as the so-called 183-day rule is not exceeded.
Taxation by two countries when stays exceed six months, and sometimes even for shorter stays
When an employee stays in another country for more than 183 days within a 12-month period, the host country may tax the employment income. Depending on the applicable double taxation treaty, tax obligations may also arise for shorter stays, for example if the employer has a permanent establishment in the host country or if other conditions are met.
The 183-day rule means that someone working abroad for fewer than 183 days is generally taxed only in the country of residence—provided this is also the country of main employment. However, this applies only if certain conditions are met.
If an employee works abroad for a longer period, or if the salary is paid by an employer in the host country, that country may also levy taxes. In such cases, so-called salary splitting may occur. For the relevant tax year, the country of residence then taxes the portion of income relating to work performed there, while the host country taxes the portion relating to work performed within its territory.
For frontier workers planning a workation in a third country—broadly defined as individuals living in one country and working in a neighbouring country—multiple bilateral tax treaties may apply. On the one hand, the tax treaty between the country of residence and the country of main employment applies, and on the other hand, the tax treaty between the country of residence and the temporary work country applies for the duration of the workation.
Further information and contact points
The following government institutions provide overviews of international tax treaties concluded by their countries:
- Information page of the German Federal Ministry of Finance
- Information page of the Dutch Tax and Customs Administration
- Information page of the Belgian Federal Public Service Finance
Depending on the destination country and the duration of the planned stay abroad, it is advisable to check in advance what tax implications a workation may have.
For questions regarding specific situations, the following authorities can be contacted:
- The competent local tax office (Finanzamt) in Germany
- For the Netherlands: Tax Information Line for International Matters: (+31) (0) 55 53 85 385
- For Belgium: Belintax: (+32) (0) 25 76 34 70
3. National labour law
The risks of creating a permanent establishment or triggering foreign employment law are generally low for short-term workations but should be assessed for longer or more structured work abroad, even though EU guidance such as Your Europe provides a general framework.