While COVID-19 continues to impact the world of business travel, there are still many companies with mobile workforces. Essential business trips didn’t stop when the pandemic hit for employees who continued to travel due to the nature of their job responsibilities. And in the current world climate, “mobile workforce” now includes remote working, work from anywhere, and commuting—all of which have seen an increase in popularity during the pandemic. While these work situations may be somewhat temporary, there are still tax risks and compliance requirements that need to be addressed.
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A mobile employee moving from their Home country to an overseas location usually discovers fairly quickly that their tax situation has become far more complex as a result of the move. If the employee is moving from a low-tax location to a country with a high income tax, that employee may be facing a major increase in tax liability as a result of the move. Additionally, the mobile employee may encounter tax issues related to the sale or rental of their home, moving expenses for state reporting purposes, state residency issues, and a number of other issues they may not be prepared to handle on their own.
New technologies and improved communications have made it easier than ever for businesses to participate in the global economy through the use of business travelers, international assignments, or permanent transfers. However, tax compliance for overseas employees can create unexpected challenges for both the employee and company. Working in another location for as little as one day can create tax filings for the individual, as well as tax reporting and withholding obligations for the company in the Home and/or Host location. Failing to comply with those obligations can lead to unexpected tax bills, increased audit costs, financial penalties, and legal and reputational risks for your company and the employee.