For a remote workforce, new rules for business travel in 2021
Global Tax Network, the global leader in solutions for business travelers and remote workers, David Livitt, has over 18 years of experience in the field of mobility taxes.
Business travel is changing before our eyes as employees flock to remote work. However, with travel reopening, the push towards a global workforce is creating a riskier tax landscape.
Businesses and employees are facing new tax complications and, combined with improving technological trends, these could lead to tax violations. By quickly spotting tax risks and taking proactive action, business leaders can protect their global workforce from tax nightmares.
Remote work ready to improve business travel
Remote working has exploded in recent years and the pandemic has accelerated the trend. To June 2020 Gartner survey of 127 business leaders found that 82% plan to let employees work remotely at least part-time when the pandemic subsides.
What does this mean for business travel?
More immediately, this means more employees will be working when they travel to or permanently reside in states or international locations. “Business travel” could begin to mean traveling to company headquarters from locations scattered abroad. However, not all businesses and employees realize that these changes carry a higher risk of breaking the tax rules. Avoiding tax pitfalls will require diligent efforts on the part of businesses to monitor corporate and income tax issues, payroll deduction obligations, social security risks, and pre and post travel compliance.
Technology improves control of tax compliance
The days when employees could indicate a permanent address, work in other countries and go unnoticed is drawing to a close. According to the Worldwide Employee Relocation Council, countries in Latin America, Asia-Pacific, Europe, Sub-Saharan Africa, North Africa and the Middle East in 2019 all launched or improved digital immigration systems.
As international governments are now able to communicate information between jurisdictions, the international paper trail is growing. As the travel industry moves towards technological solutions such as digital passports, medical passports, letters of invitation and proof of social security status to work in a new country, governments will identify faster than ever tax violations by mobile employees.
Management of tax risks and compliance requirements
Most business leaders understand that failure to comply with tax requirements can cause problems for both the business and the employees. The consequences can include reputational damage, travel deterrence, company fines, and frustration during the audit.
However, there are several ways businesses can manage tax risk and promote compliance in this new environment for business travelers.
Develop a clear business travel policy. Businesses can lead the way in tax compliance by following these steps to develop proactive policies for employees around the world:
- Write policies for business travel. Explain what it means to be a business traveler, how many working days it takes for employees to transition from business traveler to international employee status, and what they are entitled to.
- Create an FAQ document. Your FAQ document should help business travelers and mobile workers understand exactly what they are responsible for and how they can operate within the rules.
- Disseminate a broader communication strategy. Once the company has a plan to manage its global workforce, set a timeline and define how you will deploy that vision.
Identify the process. You will need a team to implement these policies through effective processes. It may be tempting to assign this responsibility to a single designated employee, but it is not the best practice. It is better to create a brain trust to divide and conquer the process creation. These leaders should decide what action to take.
Embrace tax technology. The final piece of the puzzle is how to implement technology that allows you to achieve your goals. Urgently, this technology needs to track where your employees are. It should also alert you to areas of risk your business and employees might be exposed to, including immigration disputes, due diligence issues, and budget issues.
Businesses and employees cannot ignore the changing tax trends that business travelers face. They can address these challenges through policies, processes, and technology, but none of these areas will work as a stand-alone solution. Instead, everyone must work together in unison. While it may seem like a lot of work, implementing the changes immediately could isolate businesses and employees from tax compliance situations in the future.