Global Tax Network business traveler and remote worker solutions global practice leader David Livitt has more than 18 years of experience in the area of mobility taxes.
Business travel is changing before our eyes as employees flock to remote work. However, as travel re-opens, the push toward a global workforce is creating a riskier tax landscape.
Businesses and employees face new tax complications, and combined with improved trends in technology, these could lead to tax violations. By spotting tax hazards early and making proactive moves, company leaders can protect their global workforce from tax nightmares.
Remote Work Poised to Upend Business Travel
Remote work exploded in recent years, and the pandemic accelerated the trend. A June 2020 Gartner survey of 127 company leaders found that 82 percent plan to let employees work remotely at least part time when the pandemic subsides.
What does that mean for business travel?
Most immediately, it means more employees will be working as they travel to or permanently reside in cross-state or international locations. “Business travel” could start to mean traveling to company headquarters from scattered locations abroad. However, not all businesses and employees realize that these changes mean higher risk of breaking tax rules. Avoiding tax pitfalls will take diligent efforts from companies to monitor corporate and income tax issues, payroll withholding obligations, social security risk and compliance both pre- and post-travel.
Technology Increases Tax Compliance Scrutiny
The days when employees could state a permanent address, work in other countries and skirt by undetected are coming to an end. According to the Worldwide Employee Relocation Council, countries across Latin America, Asia-Pacific, Europe, Sub-Saharan Africa, North Africa, and the Middle East in 2019 all launched or enhanced digital immigration systems.
Because international governments now are able to communicate information between jurisdictions, the international paper trail is growing. As the travel industry inches toward technology solutions like digital passports, health passports, invitation letters and proof of social security status to work in a new country, governments will identify mobile employee tax violations more swiftly than ever.
Managing Tax Risks and Compliance Requirements
Most business leaders understand noncompliance with tax requirements can cause problems for both the company and employees. The consequences can include reputational damage, disincentivizing of travel, company fines and ongoing audit frustrations.
However, there are several ways businesses can navigate tax risks and promote compliance amid this new environment for business travelers.
Chisel out a clear business travel policy. Businesses can pave a clear path to tax compliance by following these steps to craft proactive policies for global employees:
- Write out business travel policies. Lay out what it means to be a business traveler, the number of working days it takes for employees to transition from business traveler to global employee, and what they’re entitled to.
- Create an FAQ document. Your FAQ document should help business travelers and mobile employees understand exactly what they’re responsible for and how they can operate within the rules.
- Broadcast a broader communication strategy. Once the business comes up with a plan for managing its global workforce, nail down a timeline and map out how you’ll roll out that vision.
Pin down the process. You’ll need a team to carry out these policies through effective processes. It may be tempting to dump this responsibility on a single designated employee, but that’s not best practice. It’s best to create a brain trust to divide and conquer process creation. Those leaders should decide what actions need to be taken.
Embrace tax technology. The final piece of the puzzle is implementing technology that enables you to accomplish your goals. Most urgently, that technology needs to track where your people are. It should also alert you to the areas of risk that your company and employees could be exposed to, including immigration conflicts, duty-of-care concerns and budgetary issues.
Companies and employees cannot ignore the shifting tax trends that business travelers face. They can rise to meet those challenges through policy, process, and technology, but not one of those areas will work as a standalone solution. Instead, each needs to work together in unison. Although it may seem like a lot of work, implementing changes immediately could insulate both companies and employees from tax compliance situations in the future.