Recent initiatives by the OECD could change how global corporates pay tax, placing an increased burden on global mobility teams to monitor international assignees in order to ensure profits are allocated and taxed to specific jurisdictions accordingly.
While much was written about the recent Apple Tax ruling against the Irish Government there was underlying commentary about recent initiatives by the Organization for Economic Cooperation and Development
(OECD) that ‘would change how global corporates pay tax’. The Base Erosion and Profit Shifting reports
(BEPS) that were presented to the G20 group of nations near the end of 2015 lay out guidelines for national governments to transpose into law. The aim of these reports are to standardize the approach to taxing global corporates and to remove the possibility of companies playing off one jurisdiction against another and seeking to move profits from high tax locations to low tax locations.
After many years of austerity policies there is an emerging political and citizen will to see global corporates pay their fair share of taxes in the markets where they generate the profits.
While many of the guidelines are complex, Action 7
and Action 13
could have the biggest impact on global mobility and business travel.
A corporation tax risk could potentially be created in the new marketAction 7
seeks to reduce the threshold by which a ‘Permanent Establishment’ (PE) is created. This effectively means the obligation to pay corporation and other taxes in a jurisdiction. In the past many companies were able to work at arm’s length in some countries and sign contracts with clients in the area of lower corporation tax – effectively moving the profits to the low tax PE.
The new rules however will mean that tax must be paid where the ‘essence’ or ‘value’ is created. In this way the tax on profits will now be paid in the market where the profits are created. This means that the employee base or the business travellers to that market will effectively create a potential corporation tax risk in the new market.Action 13
requires companies to submit detailed country by country reporting indicating the scale of their operations in those markets and the movement of employees and contractors in that market. Initially this will only apply to companies with global revenues exceeding 750 million euro but will likely flow down to companies of all sizes.
What this means for global mobility teams will be an increased requirement to monitor business travellers and assignees to particular jurisdictions. This increased administrative burden will be requested by the C Suite in order to ensure that profits are allocated to individual markets and taxed accordingly.
In parallel to this new tax imperative there is also evidence of greater information sharing between national immigration and taxation authorities. This will mean a greater focus on business travellers entering markets with the correct short and long term visas.
If these new areas of focus were not enough to add to the administrative and compliance burden, there is an increasing requirement to track business travellers and assignees for Duty of Care obligations. In the increasingly difficult security environment today employers need to know where their people are at any stage and be able to assist in times of security incident or natural disaster.
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What if you could track these three risks in one single smartphone App?
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The GT Global Tracker tracks business travellers and assignees as they carry out their daily business and records the length of time spent in each jurisdiction. Double Tax treaties are checked and alerts are sent as a particular threshold occurs. In this way the HR or Global Mobility team can keep accurate records of time spent in each location and assist Finance teams in allocating profits to specific jurisdictions.
Visa validity and expiry is also checked and alerts are sent if travellers are pushing the limits of certain visa types.
In the event of a security threat the traveler can be located by GPS and assistance offered by internal or external security or rescue teams.
So if you are looking for a solution for all or any of the above threats have a look at the GT Global Tracker at www.GTGlobalTracker.com
or contact Liam Brennan at firstname.lastname@example.org