The time and financial constraints associated with rotational or long-term assignments are pressuring many companies to solve their need for global talent mobility with short-term business travel. However, according to research by BAL Corporate Immigration, more than 80 percent of companies do not have formal policies in place to manage, support and monitor their traveling employees. If your company plans to use business travel as a global mobility option, it would make sense to have the global mobility team or a global mobility management company manage this function for compliance and efficiency. A lack of management and oversight places individual employees and companies at risk in the following areas:
Every country has its own visa requirements and restrictions. These specify how long business travelers may stay and what types of activities they may engage in when traveling on specific visa types. For example, a company may issue a business visitor visa that permits stays of up to 30 days for conferences, meetings and training. In general, a breach of these restrictions consists of extending a visit without renewing a visa or engaging in business activities that could be construed as gainful employment or providing services that directly benefit a client company. Unfortunately, managers and employees aren’t always informed about visa restrictions. This can result in ad hoc extensions of short-term visits or business travelers unwittingly participating in business activities that are prohibited.
It’s important to understand the precise conditions for each visa and each country. Especially since an increasing number of countries are tightening border controls, keeping accurate records is key to avoiding penalties for both individuals and employers.
Business travel can have significant consequences for tax compliance. The duration of an employee’s visit, the types of professional activities in which he or she engages during that visit and factors pertaining to remuneration need to be assessed to determine whether there’s a reporting requirement in the host country. If so, does this reporting requirement pertain to the employee, the employer or both?
Additionally, employers must be aware of the tax implications of and what creates a Permanent Establishment (PE) in a host country. Tests for determining whether a PE exists will vary by country, but generally the type of work performed and the length of time operating in the host country will be taken into account. It’s important to research and understand the host country’s Permanent Establishment laws to ensure compliance and minimize tax liability risk.
The international tax regulation and compliance landscape is complex. Moreover, considering current political changes in the U.S. and Europe, tax regulation and compliance are likely to keep developing for the foreseeable future. Employers need to ensure they’re always up to date on taxation thresholds and international treaties so they can take action to comply with reporting requirements for their employees and the corporation.
Many managers assume that sending employees overseas has no impact on those workers’ salaries. However, this can be a potential pitfall for both the company and its workforce. Depending on a business traveler’s visa and the length of the stay in the host country, payroll could very well be affected. Employers might have to assume the payroll obligations of the host country, for example by meeting local taxation and social security obligations.
Navigating payroll for business travelers can become an incredibly complicated matter for HR departments to manage.
Most companies establish some form of tracking for business travelers. This is intended to provide legal, HR, payroll and accounting departments with the information necessary to meet immigration, tax reporting and payroll requirements. Tracking data about flights, hotel bookings, rental cars and business expenses charged to a corporate credit card is generally considered to be a normal business practice that doesn’t affect a business traveler’s privacy. However, other tracking methods, such as GPS tracking data and/or collecting data from employee-owned devices can be construed as an infringement on an employee’s right to privacy. This is particularly important in areas like Europe, where individuals enjoy more privacy protection than in the U.S. However, even some U.S. companies find their need to track data conflicting with their corporate privacy policies.
Safety for the business traveler has also become a major concern, as we see rising numbers of terror threats, natural disasters, diseases and other potential dangers. It’s essential for employers to ensure their traveling employees’ safety and well-being. The employer must know where every traveling employee is at all times, and be able to reach them. This can be done by itinerary or by using GPS tracking technology.
BASE EROSION AND PROFIT SHARING
Base Erosion and Profit Sharing (BEPS) is a tax planning strategy used by multinational companies where they report or shift profits or income to low-tax or no-tax locations to avoid paying taxes elsewhere. Currently, there is a focus on tax rules and regulations to ensure that profits are taxed where economic activities generating the profits are performed. This has translated into a need for employers to not only track business travelers from a safety perspective, but also from a “purpose perspective.” For example, if an employee traveled to a different country for training, when no profit was generated, there would be no tax liability; however a sales employee traveling to finalize the signing of a new contract may result in the company being required to pay tax on the contract in the country of signing.