UN Global Mobility Focus Addresses Tax Asymmetry, Competition

In the past few years, the mobility of employees and global workforces has come into focus for global tax regulators. Recognizing the changes in post-Covid working arrangements and the needs of both employees and their employers to operate across borders, regulators such as those in the Organisation for Economic Cooperation and Development and the United Nations are, mid-workstream, looking to address key tax issues and challenges to support various, sometimes competing, aims.

Two years after the UN Tax Committee met in New York to kick off their workstream addressing mobile workforce tax challenges, it returned on March 24, 2025, with the mandate to approve draft content for the Model Double Tax Treaty Commentary. However, the breadth of mobility issues and the focus of the Tax Committee has led to a stalemate and split with a minority group of developing economies putting forward changes that are causing concern.

What Has Been Proposed?

The UN’s Tax Committee’s focus on employee mobility narrowed as it progressed to the 30th Session in New York on March 24-27. Two core issues were identified by developing economies as needing to be addressed – tax asymmetry and tax competition.

Tax asymmetry describes a circumstance when an individual lives and works in “Country A” but has an employer in “Country B.” In this example, Country A has the right to tax the individual’s employment income because that is their country of residence. However, an employer in Country B takes a deduction against profits for employment income, which means authorities in Country B lose out on both individual and corporate income taxes.

To mitigate the impact, the proposed tax treaty Commentary allows Country B to tax the employment income in addition to Country A. If the tax rate in Country B is higher than in Country A, the employee would have to pay the higher amount. The latest draft Commentary provides two clarifications. First, the right to tax the employment income in Country B should be capped at a tax rate in which those countries mutually agree. It also clarifies that this only applies if the employer in Country B takes a deduction for the employee’s remuneration.

By contrast, tax competition addresses scenarios where an employee relocates to benefit from a beneficial tax regime in another country and a lower overall tax burden. In this situation, Country A would levy little or no tax, and Country B, where the individual resides, would lose out on individual income tax. To mitigate the impact, the proposed treaty Commentary seeks to disincentivize employees from leaving their employing country by giving Country B the right to tax the employment income at its normal tax rates.

In both cases, double taxation needs to be relieved as shown below:

Challenges Facing the UN’s Proposals

Defining Mobility
For the 30th Session, the Committee has stated that the two Commentary clauses apply only to employees and not to other forms of individual and employee mobility, including digital nomads and digital freelancers. The draft clauses are not, however, written in a way to narrow the focus with any specificity, meaning they remain applicable to a wide range of mobile employee situations, including digital nomads. Without a definition of a what a mobile workforce is and what population of mobile employees the Committee seeks to address with the new Commentary and clauses, or how these scenarios tie to other treaty and corporate tax exposure associated with remote working, progress remains slow.

Issues with Tax Asymmetry
While tax asymmetry seeks to address genuine loss of tax revenues in a country where an individual is employed, there are issues that either counteract or quantify the limited loss. If an employee creates a corporate taxable presence ꟷ a permanent establishment (PE) ꟷ in the country where they are living, then the remuneration costs will be treated as an expense of the PE. This may occur based on the nature of their work and role, the duration and location of their work, or the fact they are providing services from another country. The new clause in the Commentary would not apply and the employing country would lose its taxing right. Even where the taxing right remains, the tax at stake may be negligible. For an employee working remotely earning $50,000, this could result in a loss of tax revenue in the country where they are employed, and where the remuneration is deducted, of approximately half the deduction taken (based on an average corporate tax rate in the OECD of 21.1% and average individual tax rate of 34.8%). The World Economic Forum (WEF) estimates that 4% of jobs can be performed remotely, and while that may represent millions of employees globally, many will be restricted from working remotely on a long-term basis by employment policies at the company where they work.

The Focus on Tax Competition
The focus of the draft Commentary is also a concern for some countries. Little data has been published that shows meaningful outflows of tax revenue from developing economies associated with employee mobility that the tax competition scenario counters. The tax competition clause therefore targets a likely insignificant subset of employees who are able to relocate and work remotely on a long-term basis. This may also intentionally or unintentionally affect other populations within a global workforce. Employees who are hired remotely, whether on a short or long-term basis by a foreign employer, would find themselves subject to tax there even if they’ve never stepped foot in the country.

Progress Is Progress

Both businesses and governments have vested interests in improving the tax rules and landscape to better accommodate new and future modes of cross-border working. With employers seeking to manage compliance, attract and retain talent, and expand in new or existing markets, incremental progress in negotiations between countries is still progress. Though the discussions at the UN haven’t yet produced concrete output and may not for some time, countries are actively discussing tax issues affecting employee mobility, engaging with businesses and other stakeholders on the challenges, and surfacing differences in policy and approaches to regulating global workforces.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Richard Tonge is a principal in the New York Human Capital Services practice and leads the Global Mobility Services practice in the United States.

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