Work from home, hybrid work arrangements, remote workers and Taxes

The article above raises a few interesting questions on hybrid work arrangements for :

  • allowances
  • CPF contributions
  • Taxability – your location of work, where you are based, and where you are considered liable for income tax.
  • Labor Laws applicability
  • Workmen’s Compensation

Home Office Expenses

Another consideration is the ability to claim home office expenses. In the USA, the tax rules allow for a portion of your home expenses (including rent / mortgage) to be claimed as deductible work expenses if you run a home office. The Inland Revenue Authority of Singapore has allowed certain utility bill increases and internet charges to be claimed as a tax deduction but only to the extent of the increase in the bills incurred pre-covid. If an internet connection was pre-existing before work from home began, unfortunately those internet bills cannot be claimed.

Remote Work

With the increase in remote work there are now a number of companies that provide a framework for local statutory compliance for local employment in-country where the resources are based but where the overseas employer/principal does not have a local legal entity setup. In a sense the remote work companies offer a legal entity shell for which a nominal monthly charge is billed to the client and the fees are fairly low on a per headcount basis as opposed to the salary paid to the resource. Under traditional transfer pricing practices, where an overseas parent entity has a subsidiary in-country and where the subsidiary hires employees, lets say for the purposes of software development, the standard practice is to markup the salary costs by a margin that would satisfy the local tax authorities as arms-length markup. With remote work, the local company is completely unrelated to the client entity that hires, manages and controls the resource and in this case the traditional markup is unsustainable. As remote work gains prominence, tax departments around the world will need some solutions and a simple taxation framework that is economically feasible for such entities.