Why Pillar 2 & DAC9 Matter for Remote/Borderless Work
The EU’s Pillar 2 Global Minimum Tax Directive establishes that multinational enterprises (MNEs) must ensure a minimum effective tax rate on profits, including foreign subsidiaries. Under DAC9, filing obligations now encompass top-up tax information and central filing requirements for such MNEs. (taxation-customs.ec.europa.eu)
For remote workers or digital nomads embedded in or working for entities with cross-border activities, changes under DAC9 may affect their employers or the structure of services provided.
Key Implications for Individuals & Employers
- Employers may need to provide accurate information about where services are performed, financial flows, and whether their compensation or payments trigger reporting or minimum tax provisions.
- Remote workers operating under contracts with clients in another EU country might become subject to withholding, state of residence taxation, or benefit from tax treaties depending on revised direct taxation rules.
- Companies that employ digital nomads must maintain compliance data for DAC9 (e.g. top-up tax returns) and understand which jurisdictions might treat certain income or entities as being part of an MNE group subject to Pillar 2.
Practical Steps to Stay Compliant
- Determine your employment & residency status clearly**. Where you live (or your tax home) can change which jurisdiction has taxing rights, and whether treaties apply.
- Track income streams and where services are delivered: including remote work you do in multiple EU member states may require tax filings or withholding in multiple places.
- Review whether your employer or clients form part of an MNE group: if so, top-up tax returns & reporting under DAC9 might require your cooperation.
- Use tax advice & tools to plan ahead: structure contracts, invoices and entity setup (if applicable) to minimize compliance risk, without violating rules.
Example Scenario
A software developer resident in Portugal working remotely for clients in Germany and France could find that:
- Under current direct tax rules, income is taxed in Portugal; withholding may apply in Germany or France depending on the type of service.
- With reforms under the Direct Tax Omnibus (once adopted), withholding tax on cross-border payments between companies may be removed; but DAC9 top-up and Pillar 2 implications may increase reporting disclosures.
Looking Ahead: What to Monitor
- Final adoption of the Direct Taxation Omnibus Directive and implementation schedule across member states.
- Guidance on how Pillar 2 applies to “company-sized entities” clients vs individuals doing business themselves.
- Updated treaties or bilateral agreements post-implementation for cross-border work.
Category: Digital Nomad taxHome: EU
Who benefits most: Freelancers, remote workers, digital platforms, HR or payroll teams for distributed teams.