In this mobile age, your employees are just as likely to work with clients from a desk down the hall as they are to work from different facilities halfway around the world. This makes keeping track of your organization’s business travelers a challenge—one that could potentially add complexity, costs, and risks.
According to the 2020 International Business Travelers Benchmark Report, 71% of companies reported either no tracking or inadequate processes for tracking their business travelers. In addition, even companies with a well-defined process for tracking mobile employees find their business traveler programs are so focused on the requirements of long-term assignees that they neglect the tax and compliance obligations of travelers on short-term business travel assignments. But steps can be taken to address this oversight.
Adding Best Practices to Your Program
Regardless of how long your employees are away on an assignment, compliance is possible. By incorporating a few best practices into your business traveler program, your company will be good to go anywhere and anytime there is a need for mobile employees.
#1: Understand how the rules change with the destination
Whether employees are traveling on business across state lines or international borders, you can incur tax-related and regulatory obligations. From an international perspective, a number of factors can impact whether an employee’s business travel will result in additional compliance requirements, including:
- Days of presence by the employee (for business or any purpose)
- Income attributed to the project
- Duration of the project
- Cost recharge position taken by the company
- Absence of a tax treaty or protection from a reciprocal agreement
- Availability of de minimis compliance thresholds under local Host country law
- Nature of employee activities in the location (as interpreted by the Host location tax authorities)
The solution is to maintain a master outline for each country’s local requirements. This way, before your employees travel, it’s easier to plan for and comply with regulations and anticipate the related costs. For an example of what to include in these documents, refer to our Business Traveler Planning Matrix.
#2: Know your employees’ itineraries
Through pre-trip planning and assessment, take a more proactive approach to managing your workforce. Whenever employees, their managers, or your internal travel specialists arrange for business travel, make sure you are alerted. This way, you can start the process of setting up the proper documentation. That should include meeting any requirements for immigration, social security certificates, and potentially payroll reporting and withholding.
#3: Educate your business travelers and their managers
Especially with short-term assignments, employees and managers may be unaware that they have tax reporting or registration duties. Hold periodic webinars or seminars to alert new employees and managers to the requirements and remind those who infrequently travel—or are used to long-term engagements—of their responsibilities. This will help avoid preventable compliance or regulatory lapses before they ever leave the office and while they are on the road. Beyond creating greater awareness, the key is for your business travelers to provide you with enough time to plan and conduct the necessary immigration assessments and to identify and proactively implement any tax planning opportunities.
#4: Offer after-travel support to employees
Because employees may be in a Host country or state long enough to trigger a tax liability or withholding due to their activity, income, or cost recharge, they may be required to file an annual income tax return in that Host country or state. This could lead to double taxation if they are required to report full income as a resident in their Home jurisdiction and income in the Host location related to their nonresident workdays. Knowing what credits are available to them and how to manage their tax liability will be highly beneficial. Other issues to alert them to include the possibility that per diem amounts may not be tax-efficient in some countries and that the definition of compensation (e.g., bonuses and equity in addition to base compensation) may vary from one location to another.
Leverage Expertise and Technology for Mobility Program Compliance
When you choose to work with a global tax specialist, you ensure that you’re incorporating best practices into a business traveler solution that will help you proactively plan and comply with regulatory requirements. It will also help you standardize policies for employees and set up educational resources to help coordinate compliance with your program throughout your organization.
Our Business Traveler Solution can help you understand the tax risk and compliance requirements associated with employees working internationally. It can also track their location while coordinating their itineraries with their expenses and ensure proper withholding for any necessary taxes.
By providing you with a comprehensive understanding of compliance requirements, we can help you coordinate your company’s policy, communications, and technology to ensure the risks your company’s mobility program faces are addressed, even for short-duration assignments.