How global mobility has become a corporate tax issue

18 October 2019

Your people, and particularly your Internationally Mobile Employees, tell a story about how your business operates and where and how it creates value and profit. Whether they are providing training, managing projects, chasing deals and signing contracts, growing new ventures or simply developing their own careers, they are a visible, demonstration of how your business works.

Why does this matter? Because it creates compliance and reporting issues and because it will affect your value chain story and your transfer pricing and tax strategy.

For employers and employees, all the traditional issues are still there; tax, social security, immigration, reporting and duty of care. You need good services and processes to look after your people. But the challenge has changed and that is no longer enough.

1.Global Mobility is a growing issue for more businesses than ever

There has been a step change in the world of Global Mobility. The last decade has seen a 50% increase in the number of Internationally Mobile Employees. There are now 480 million business trips taken every year and this is set to grow as younger employees travel more than their older counterparts.

Global mobility now covers a greater variety of types of Internationally Mobile Employees. The more traditional long term transfers within firms have been joined by short-term assignees who travel to manage projects, deliver training or set up new ventures. Cheap travel has created another new group; the international commuters who live and work in different countries, living in Spain but working in London for example.

Finally, as emerging markets grow, IMEs are travelling further and to more diverse destinations. China is set to overtake the US as the top destination. India, Brazil and others will also attract increasing numbers of business travellers. This makes compliance more complicated than in the past when most business travel was to the US and Western Europe.

2.Reporting of Internationally Mobile Employees

Have you got your reporting right? Are you tracking the right data and sharing that in the right way? For instance, for short-term business travellers, many business will only track and report the number of days that a person spends in a country. But is this enough? Do they also need to report on the seniority, role and activities of short-term business visitors to ensure that they meet the terms of the relevant tax treaty if there is one. Conversely, you may be reporting extensive and detailed data that while it ensures compliance with tax treaties does not support your business’s transfer pricing.

At the most basic level, where and when people from your business travel, they are revealing something about your operating model.

3.The risk of permanent establishment

As businesses operate internationally their people will work across multiple countries. The issue is that even if they work from a regional headquarters, they may be selling and contracting for products and services in several countries. There is a risk that their actions in doing business may trigger permanent establishment. This creates compliance and reporting requirements and may also create tax liabilities. This may be part of your strategic plans but often the salespeople are not aware of the tax issues that their activity is creating for the business.

4.International assignees and VAT

As your people move between markets delivering services, how the business charges and re-charges for those services is a crucial part of your transfer pricing policy. An issue that can be overlooked and cause problems is VAT. It is important to know and understand what the registration requirements are for every market you operate in and the thresholds that are relevant.

How do we get Global Mobility right?

The key to successfully managing your people’s business travel and assignments is to understand that it also a tax issue. Your HR department who have traditionally looked after issues such as income tax, social security and immigration must now make the effort to understand how and why your Finance and Tax functions are shaping the overall tax strategy and how their decisions may support or undermine that strategy.

Your Finance and Tax teams must give careful consideration to how the tax strategy can create compliance and reporting risks for the HR function and the business’s people who travel to make the business successful.

As well as integrating your own functions and bringing them closer together you should look for advisers who will do the same. Your adviser should be able to understand how global mobility and tax strategy interact and tell the story of your business operating model.

BDO QuickTrip

BDO QuickTrip is a technology platform that tracks the movement of your global business travellers. Backed by our expatriate tax specialists in over 162 countries, Quicktrip;

  • Provides an easy to use smartphone app for management of business travellers
  • Enables tracking of business traveller movement via GPS or manual entry of trips
  • Enables a variety of management reports
  • Provides a series of tax, social security and immigration alerts to warn of unintended liabilities

Find out more