A secondment is where an employee temporarily transfers to another job for a defined period of time for a specific purpose, to the mutual benefit of all parties. A secondment job can be full-time, part-time or job share. Given the need for induction and training, it is unlikely a secondment of less than four months would be effective. In a typical secondment an employee will be seconded by their employer (“A”) to a third party (“B”). The intention is generally that the employee will remain employed by A for the duration of the secondment, and will return to A’s business at the end of the period of secondment. In addition, the employee usually continues to be paid by A, and continuity of employment with A remains unaltered.

During the posting, the employee keeps his or her employment contract with the home company and remains an employee of the home company. At first glance, only the place of work is temporarily changed. However, many other legal issues may come into play and need proper preparation and well-drafted paper work.

The European Union upholds the fundamental principle of freedom of movement of persons. This guarantees European Union citizens the right to live and work freely in another Member State. However, in some countries transition measures may still impose limits on the free movement of employees from new EU Member States.

Non-EU nationals need authorisation to work in Europe. Work permits are still a national matter, meaning that a separate work permit is needed for each country where the employee will work. Some countries may provide for exemptions for short-term assignments or business travel.

The income tax systems are based on national law. There are significant differences in the level of income tax on salaries and wages amongst the different Member States. When an employee is on a cross-border secondment, the tax law of at least two states is involved, i.e. the tax law of the state of residence and the tax law of the work state (also known as the ‘state of source’). Therefore, it is important to verify whether a bilateral tax treaty exists between the two countries to avoid double taxation.

Income and capital gains arising in Malta are taxable in Malta irrespective of the characteristics of the person who received such income or gain. Income arising in Malta is taxable in Malta even if the recipient of such income is a non-resident, a non-domiciliary or a temporary resident. Additionally, Malta also exercises jurisdiction to tax on chargeable income and gains arising outside Malta and derived by persons who are ordinary resident and domiciled in Malta. Furthermore, Malta exercises jurisdiction to tax foreign source chargeable income derived by persons who are resident, ordinarily resident or domicile in Malta but not ordinary resident and domiciled in Malta, to the extent that such income is received in Malta. It is important to note that income derived from a contract is taxable in Malta if the relevant contract is executed in Malta and the recipient of such income establishes some form of presence in Malta.

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