A Look at Tax and Compliance
CapRelo's Phil Goodman, Senior Director of Client Compensation Services, partners with domestic and multi-national companies to take on the complex challenges of tax and compliance for HR professionals and CapRelo clients alike.
Our idea of the normal work environment and operating procedures has been upended in response to the COVID-19 pandemic. The uncertainty has placed incredible strain on Human Resources (HR) professionals to develop and implement strategies testing versatility among entire organizations. The response efforts that followed, and continue to remain in place, have been effective in terms of continuity of services, but also provide a window of opportunity to evaluate internal compliance policies and procedures related to employee mobility.
The global nature of the pandemic drove, and continues to drive, urgency and uncertainty which may have revealed gaps within the organization.
As we move out of crisis management and forward into realization, the focus must shift towards reviewing the impact of the virus to identify areas for improvement. Changes in working arrangements, including the rollout of widespread remote capabilities, have facilitated movement with little or no visibility to employers. For example, employers may find employees who have chosen to relocate to either another state or country in an effort to move away from coronavirus hotspots. While this movement falls outside a company’s formal mobility program, mobility and HR professionals will need to collaborate to manage the associated compliance risks. Of particular concern are payroll tax withholding and corporate tax implications.
In general, payroll tax withholding is required based upon the location where employees perform services.
When employees are working remotely, they may be in locations that are different than their primary work location. The result is employers may also find they have payroll reporting and tax withholding obligations for these employees, whether through a local entity or as a non-resident employer. The associated obligations that fall on the business need to be understood to ensure continuing global compliance, but they could result in additional complexities and tax costs. It should be noted both income and social security tax must be considered in all cases.
In addition to payroll, the movement of employees on a global scale warrants a discussion on corporate tax.
Those individuals working from a country remotely or in a country where the company does not have an existing corporate entity, there is the risk of unintentionally creating a taxable presence for the organization in that country (commonly referred to as “Permanent Establishment”). The actions of a single individual are all it takes and, with remote capabilities now spanning entire companies, the process used by mobility teams to track and review these cases may need to be revisited to ensure capability of handling a much larger volume than they were designed for.
Mobility is a key component of an organization’s global strategy.
HR and mobility professionals play a critical role in successful execution and with the changing global landscape we will continue to see the increasing importance of mobility in many organizations. The future holds a tremendous amount of uncertainty and those who execute in embracing and adapting to the new normal will prevail.
Key takeaways: The uncertainty surrounding COVID-19 presents a window of opportunity to evaluate internal compliance policies and procedures related to employee mobility.
- Work arrangements are rapidly evolving primarily driven by widespread remote working capabilities.
- Employers need to evaluate payroll reporting and tax withholding obligations through enhanced tracking and reporting.
- Mobile and remote employees may unintentionally create a taxable presence for the company at the corporate tax level.
- Continued focus on employee mobility is key to execution of global strategy.
Learn more about Phil Goodman and how to get in touch with the CapRelo team. We are here to help you navigate complex global mobility tax and compliance challenges.
After over ten years in the mobility space, including his time working for KPMG LLP’s Global Mobility Services tax practice, Phil understands the identification and mitigation of risk and compliance issues associated with businesses expanding their global presence.
Phil has completed an international assignment in Singapore focused on policy structuring, vendor relations, assignment management and implementing cost-savings strategies.
Phil holds a Bachelor’s degree in Economics from Binghamton University and is an Enrolled Agent licensed by the Internal Revenue Service.
Global Compensation Related Questions:
Phil.Goodman@CapRelo.com or Direct 571.325.4313
Global Mobility Program Related Questions:
Info@CapRelo.com or Direct +1.833.227.7356 or +1.833.CapRelo
Other Mobility or COVID-19 Related Resources:
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LEGAL DISCLAIMER: The statements above are not intended as a substitute for legal and/or tax advice. CapRelo is not responsible for any loss or implication arising from reliance on these statements.