Colleagues, peers, mobility professionals, and even my kids have asked me if COVID-19 means the end of business travel. And over the past two months, the traditional questions being asked have changed from a focus on business travel issues, the need to track business travelers, and how to manage the process, to questions about working through country travel bans, tax exemptions, and the immediate mobility tax risks of employees being in a location they might not have expected to be in. While we don’t have all the answers, we are working through these questions, determining next steps, and creating solutions together that can be used well into the future.
While business travel is currently restricted due to COVID-19, it has not come to a complete standstill. Employees are still taking essential business trips, but plans are needed just in case unforeseen and unplanned circumstances arise. Before business returns to a “new normal,” now is the perfect time to review policies and procedures so you can be ready for those unplanned circumstances and be in a position to successfully manage your program when people start to travel on a more regular basis again.
How to plan for current business travel
When thinking through current business needs, it is likely business leaders are currently focused on two things:
- In countries that have already issued guidance on COVID-19, fully understanding the impact and reporting requirements for its business travelers and mobile workforce.
- Looking towards the future and how their mobile workforce may need to be more agile and open to different working arrangements. This means implementing tracking capabilities for their workforce, understanding the risk potential in certain locations, and setting up internal policies and processes to cope with a new normal.
Here are some examples of the guidance that has been issued to date on how some countries and political territories are treating business travel during this pandemic period:
United States (US)
The IRS issued its cross-border tax guidance related to travel disruptions arising from the COVID-19 emergency on April 21, 2020. The guidance included the following Revenue Procedure:
Revenue Procedure 2020-20 provided that under certain circumstances, up to 60 consecutive calendar days of US presence will NOT be counted for purposes of determining US tax residency. These circumstances are presumed to arise from travel disruptions caused by the COVID-19 emergency.
In addition, individuals looking to meet the conditions under an income tax treaty to allow an exemption from income tax for personal services performed in the US will be presumed unable to leave the US on any day during the individual’s COVID-19 emergency period. As such, these days will not be counted in determining whether the individual has surpassed the treaty’s physical presence threshold (i.e., days during the COVID-19 emergency period would not be considered in applying the “183-day test” found under most US treaties).
Many US states have turned their attention to teleworking and telecommuting as businesses asked their workforce to “shelter in place.” Here are some of the questions businesses may need to consider when it comes to a telecommuting workforce:
- Has the state issued COVID-19 guidance with respect to who has the taxing right during this pandemic period? This guidance will impact payroll reporting, tax return filing, and potentially any internal tax reimbursement policy. A state by state review may be needed of your mobile workforce.
- Some states look at telecommuters creating a nexus (i.e., taxable presence) for the company in that state. Does your corporate tax department know if nexus has been considered based on where their workforce is located?
- There are six states that have “Employer of Convenience” rules in place. How will this interact with COVID-19 when times return to “normal” and your workforce is more agile? Has the business reviewed and updated its internal policy and guidance to whether an employee can work from anywhere?
- Reciprocal agreements (agreements that allow residents of one state to work in neighboring states while continuing to pay income tax only in their resident state) are in place between several states to ease the burden of reporting. This could reduce administrative costs for income tax reporting and withholding purposes, but companies should still consider any unemployment insurance requirements.
United Kingdom (UK)
As the pandemic may impact an individual’s ability to move freely to and from the UK, or require them to remain unexpectedly in the UK, the UK issued guidance in March 2020 with an update in April on how to treat these days of presence in the UK and whether or not days spent in the UK can be disregarded due to exceptional circumstances. The circumstances are considered as exceptional if the individual is:
- Quarantined or advised by a health professional or public health guidance to self-isolate in the UK as a result of the virus,
- Is advised by official government advice not to travel from the UK as a result of the virus,
- Is unable to leave the UK as a result of the closure of international borders, or
- Is asked by their employer to return to the UK temporarily as a result of the virus
For more information, please see https://www.gov.uk/hmrc-internal-manuals/residence-domicile-and-remittance-basis/rdrm11005
European Union (EU)
In March 2020, the EU issued a communication covering cross-border travel and movement aimed at clarifying travel for essential workers. The guidance generally holds that businesses should abide by the Host location rules in determining if their employees should travel.
For more guidance, please see https://ec.europa.eu/transport/sites/transport/files/legislation/c20201830_en.pdf
As many countries have issued (and are continuing to update and issue) guidance around the pandemic, it is important to work closely with your mobility tax provider as well as your other strategic vendors to determine the best strategy to handle each individual situation.
What should you do next?
For mobility professionals deciding what to do next, the first step before implementing any new solution will be to know where to get the data to analyze your mobile workforce and to continue to track the travel arrangements of your mobile employees. What things should you be considering? Now is the time to re-focus your approach to business traveler risk management:
Re-view – your current arrangements. What are you doing to track your mobile workforce? Do you need to track them? Is it time to review 2019 and year-to-date data? What is your risk profile and where are your risks?
Re-consider – if you are tracking your mobile workforce, is it adequate for your reporting purposes? How do you know where your employees are and what they are doing? Have you managed your company’s risk?
Re-design – if you have a program in place, where are the gaps? What are the risks in your process? Have you rolled this out globally or just to certain countries?
Re-purpose – what are your strategies both as a mobility professional and as a company for tracking your mobile workforce? Do you have the right budget? Do you have the correct team and expertise?
Re-align – do the objectives of your business traveler tracking (whether you do them or not) match the strategy and risk operations of your business as a result of the pandemic? Do you need to realign policy and process with your company’s business continuity plan? Are you moving towards a remote worker policy and arrangement and, if so, do you know how to start designing and implementing this new working arrangement?
Bottom line, business travel is not dead; it is just taking a pause. So, take this time to review and rethink your approach to your business traveler strategy so you can be ready for those unplanned circumstances and be in a position to successfully manage your business travel program when people start to travel again. As always, if you have questions related to your business traveler program or your mobility program in general, we are here to help. Schedule a call with our team to discuss your specific situation.