Managing mobile employees comes with more than just logistical and HR challenges. It also requires careful coordination between your global mobility and corporate tax functions. Mobile employee activity can trigger corporate tax exposures such as permanent establishment risks or tax reporting obligations. At the same time, your company’s corporate tax position can directly impact the individual tax outcomes for your mobile employees.
In many organizations, corporate tax and mobility teams operate in silos. Without open lines of communication, critical tax compliance issues can be missed, leading to financial exposure, employee dissatisfaction, and costly surprises.
Establishing a strong partnership between these two functions is essential to building a globally compliant and cost-effective mobility program. In this article, we’ll explore the key areas where corporate tax and global mobility need to align, and how coordinated planning can reduce risk, increase efficiency, and support business goals.
Key areas of focus for global mobility and corporate tax collaboration
When corporate tax and global mobility teams communicate regularly and share information early in the planning process, companies can reduce tax risk and improve compliance outcomes. Below are several critical areas where collaboration between the two functions can make a meaningful impact.
Identifying potential permanent establishment risks
If your company were to set up a physical office or facility in another country, it probably wouldn’t be surprising if that physical presence resulted in a taxable presence or “permanent establishment” (PE) for your organization in that country. However, it is not the only trigger. In many jurisdictions, a PE can be created through employe activity and presence, even without a formal business location.
Mobile employees may trigger a PE if they:
- Have the authority to negotiate or conclude contracts in the Host location on behalf of the Home country employer.
- Provide services in the Host country, individually or as part of a team, for an extended period, often exceeding specific time thresholds.
- For example, in Canada, a deemed PE may arise if employees of a US company work on a single project or connected projects in Canada for 183 days or more within any 12-month period.
When a PE is triggered, a portion of the company’s income may become taxable in the Host country. Note that through appropriate transfer pricing, the company may still be able to get a deduction and minimize tax.
Once established, the company’s taxable presence may also impact the tax position for your mobile employees traveling to the Host country. A PE generally removes access to income tax treaty exemptions that can apply to employment income for the mobile employee, resulting in your mobile employee having an income tax liability in the Host country – potentially increasing their personal tax liability and the company’s payroll compliance obligations.
That’s why early coordination is critical:
- The global mobility team should notify corporate tax about employee presence and activities that may present a PE risk.
- The corporate tax team should inform global mobility if a PE already exists in a country.
Preparing for compliance requirements in a new country
Deploying employees to a country where your company doesn’t yet have an established legal presence can introduce a range of compliance challenges, often beyond what’s initially expected. These may include immigration requirements, local tax obligations, employment law considerations, and payroll reporting.
For example:
- Immigration: Certain visa categories may require sponsorship by a locally registered employer.
- Tax compliance: Without a local entity, companies may need to engage third-party providers to handle payroll registration, tax withholding, and reporting obligations.
- Regulatory needs: Local employment law may require formal contracts, registrations, or employment documentation.
These requirements aren’t just administrative hurdles – they can delay assignments, create legal exposure, and/or increase costs if not handled correctly.
That’s why involving your corporate tax team early in the planning process is essential when sending mobile employees to a new country. They can help assess:
- Whether a local entity or registration is needed
- What tax and regulatory obligations will arise
- How to structure the arrangement to remain compliant while meeting business needs
When global mobility and corporate tax teams collaborate from the start, your organization is better positioned to support mobile employees while avoiding compliance pitfalls.
Putting the right documentation in place
Comprehensive documentation is essential to protect both the company and the mobile employee, especially when navigating complex tax, immigration, and employment law issues across borders. Proper documentation helps support compliance, reduce risk, and clarify responsibilities across all parties involved.
Before an employee begins working in a Host country, the following documents should be reviewed collaboratively by the global mobility and corporate tax teams:
- Assignment policies: Define compensation, benefits, and allowances for different types of mobile employees. These policies should be reviewed for both Home and Host country compliance and legal appropriateness.
- Tax reimbursement policies: Outline the level of tax support provided to employees, such as tax equalization, gross-ups, or no support. Alignment here impacts both the employee experience and compliance strategy.
- Assignment letters: Formalize the agreement between the company and the mobile employee. Key details should include:
- Assignment duration
- Specific compensation, benefits, and allowances
- Applicable assignment and tax reimbursement policies
- Employee responsibilities and key terms and agreements
- Intercompany agreements (secondment agreements): Define how the Home and Host entities will allocate costs and responsibilities. These agreements are often used to mitigate PE risks by defining the role of the mobile employee.
- Employment contracts: As required by local law, these contracts ensure legal employment frameworks are in place for both Home and Host countries.
- Payroll documentation: Forms or certifications may be needed to reduce or eliminate double withholding, claim treaty relief, or satisfy Host country reporting requirements.
Coordinating these documents across both the corporate tax and global mobility teams helps reduce the risk of compliance issues and provides a clear foundation for the assignment.
Coordinating tax planning opportunities
When it comes to global mobility, timing and proactive communication between the global mobility and corporate tax teams can significantly influence the overall tax and cost outcomes of an assignment.
Tax planning should begin early – ideally before the assignment structure is finalized. Many decisions, such as whether to use a secondment agreement or how to handle compensation charges between entities, can have ripple effects on both corporate and individual tax liabilities.
For example:
- A secondment agreement, where the Host company reimburses the Home company for employee costs, can help reduce PE risk. However, this structure typically eliminates the employee’s ability to benefit from income tax treaty exemptions in the Host country.
- On the other hand, not using a secondment agreement may allow the employee to qualify for treaty relief, potentially lowering their individual tax burden. But this choice may raise PE risk or corporate tax implications for the company.
These kinds of trade-offs require thoughtful analysis and collaboration. The goals are to support business needs by getting top talent to specific countries, while addressing compliance requirements, managing costs, and promoting a positive employee experience, all with legal ramifications in mind.
Together, with the guidance of a mobility tax provider, both teams can evaluate options and choose the structure that best balances compliance, risk, and cost.
Tips for building an effective partnership
A successful global mobility program depends on early and ongoing collaboration between the corporate tax and global mobility teams. While their day-to-day priorities may differ, their goals are deeply connected, and aligning those goals is key to managing risk, maintaining compliance, and supporting the business.
Here are a few best practices to help foster that partnership:
- Engage early and often. Involve both teams at the start of any assignment planning process, especially when entering a new location or structuring a unique arrangement. Early communication allows for a complete picture of tax, compliance, and business implications.
- Recognize differing objectives. The global mobility team and corporate tax team may have different objectives in mind. Acknowledging these perspectives helps facilitate productive conversations and better decision-making.
- Leverage your mobility tax provider. Your mobility tax partner can serve as a bridge between teams, translating technical tax implications and helping align priorities. They can bring clarity to complex issues, such as tax equalization, payroll obligations, treaty relief, and PE risks, and guide conversations toward mutually beneficial solutions.
At GTN, we frequently help our clients navigate these cross-functional conversations. With deep experience in global mobility tax matters, our team doesn’t just explain the issues, we help unify stakeholders, uncover practical solutions, and support both HR and corporate tax in achieving their goals.
