With the steady increase in demand for a highly flexible and mobile workforce, Companies are growing concerned about a number of risks when it comes to business travel.
These include employees using business visas to circumvent work visa obligations, violations of tax laws, the inability of their company to track length of trip stays, and employees misrepresenting their business travel activities. In this post, I’ll present statistics that demonstrate the urgency of the situation, identifying red flags and recommendations for overcoming the obstacles in managing extended business travelers.
A recent survey (2015) sponsored by NFTC and conducted by the law firm Berry Appelman and Leiden revealed the following statistics:
- Although about 60% of companies reported that their employees take over 500 international business trips annually, only one third of all respondents has a written business visa travel policy.
- The overwhelming majority of respondents (77 percent) would like to have improved capability to track business visa travel. Today, only one in ﬁve global mobility pro grams track all business visa travel.
- Authorization for business travel is generally approved by the business unit or employee manager in the employee’s home country. Companies then rely on a variety of resources (e.g. law ﬁrm, visa processing company, internal resources) to process the business visas.
In response, we felt it appropriate to create what we consider to be the Best Practices for extended business travelers. To get started, it makes sense that your company understands your areas for exposure, engages in due diligence and identifies specific risk areas:
- What are the common work locations and travel patterns?
- Is the travel project-based or otherwise?
- What are the rules in each work location? What are the impacts of a tax treaty?
- Who is travelling, where to, and in what role? What is the business need (e.g., expanding to new region?)
- What are applicable rules and are there filing requirements?
- Are board members, executives, value drivers travelling?
- Are activities not taxable from a corporate perspective because they are preparatory and auxiliary under a treaty?
- Do sales reps or other travelers have authority to conclude business and contracts for the home firm?
- Do board members attend meetings away from their home jurisdiction?
Then, determine which entity will bear the compensation cost
Consider the impact of recharge or “allocation of costs”
- A global allocation of costs, for example, could result in unanticipated tax liabilities
- What is the impact to host country personal income tax obligations?
Evaluate the reimbursement of living expenses
- Local reimbursement could give rise to local tax liabilities
Manage the timing of travel to the extent possible. May be difficult given business needs
After creation of the EBT policy, a final critical step is creating, implementing and communicating your policy, and enforcing it. For detailed information on best practices in this area, feel free to email me at email@example.com.