Global Tax Compliance is Critical in Mobility Management
Mobility tax compliance is a surefire way to keep your global mobility program in the IRS’s good graces, but it’s often easier said than done.
Anyone involved in tax management understands the importance of tax compliance. As a result, responsible tax professionals dedicate countless hours to guaranteeing continued compliance through practices like staying current with regulatory changes and regularly updating company policies.
For companies with an international workforce, compliance becomes especially involved. For example, unfamiliarity with immigration policies, home and host tax disparities, and multinational tax treaties can leave companies vulnerable to noncompliance.
What is tax compliance?
In brief, tax compliance involves observing the state, federal, and international tax regulations and provisions established by tax legislation and taxing authorities.
According to these laws, failure to heed, accurately report, and remit taxes has significant repercussions for individuals and companies alike. These repercussions may include fines and additional penalties. Noncompliance can also cause your company reputational harm and damage the tax liability standing of your assignees.
How does having an international workforce change tax compliance?
The compliance requirements for individual taxpayers and businesses differ in conditions and complexity. Companies must coordinate their finance and filing processes around different tax regulations than those applied to individual taxpayers. When a business has a globally mobile workforce, the tax processes become even more complicated.
Global mobility tax compliance can’t be an afterthought; taxation compliance strategies should be evaluated during the entirety of an assignment.
To establish compliance, mobility programs must account for many factors such as:
- Foreign tax codes
- Multinational tax treaties
- Relocation remunerations
- Local social tax responsibilities
- Taxable presence conditions
- International payroll reporting requirements
- Foreign-earned income and tax credits
Because there are so many elements involved in keeping an international company compliant, it’s recommended that you partner with tax professionals who specialize in the field.
Risking permanent establishment on foreign soil
One of mobility programs’ most significant compliance risks is their assignments accidentally triggering permanent establishment (PE). A company might be unaware of how installing a transferee in a foreign jurisdiction may produce an unintentional taxable presence for the business.
It’s a frequent misunderstanding that capping temporary assignments under six months or less can ensure a company avoids establishing PE. However, any length of global assignment may influence an enterprise’s tax liability. Generally, the terms for PE are defined by income tax treaties between the host and home countries.
How can your mobility company ensure global tax compliance?
Because noncompliance can cause considerable tax liability problems for companies and their employees, it’s essential for mobility programs to utilize any measure available to avert potential compliance consequences.
Luckily, protecting your compliance status is simple if the proper steps are taken.
Enlist the support of relocation industry tax experts
Ideally, involving relocation tax professionals should happen at the development stage of your mobility program. A mobility tax professional can help you build a scalable mobility program that functions with continued compliance in mind. You’ll create a solid taxation strategy and foundation for all future international assignments.
Practice proactivity and stay organized
As surprising as it may sound, it’s easy to lose track of international assignments in the fray. Without committed and continuous monitoring of assignments, essential information involved in the tax filing process can slip between the cracks.
Regularly checking in with transferees and maintaining current data is indispensable for reporting accuracy, correctly processing taxes, and safeguarding your company’s tax compliance.
Proactivity also extends to keeping current on the ever-changing tax legislation globally. Again, as having a dedicated internal accountant familiar with all international taxation regulations isn’t necessarily feasible for many mobility programs, enlisting the services of mobility tax professionals is ideal.
Take advantage of mobility tax technology solutions
Technology plays an integral role in ensuring global tax compliance. A reliable global mobility software solution is truly a mobility program’s best friend regarding payroll accuracy, reporting, and tax management.
An integrated system can provide an accurate and organized solution for assignment data management. Your global mobility software should streamline the payroll and compensation process while helping you keep track of and view changes made to employee files, often in real-time. Mobility software should also include comprehensive reporting capabilities to help you collect the required information for tax management.
Effective global mobility software, such as Ineo’s TechSuite, will make the efforts necessary for maintaining tax compliance significantly more manageable.
Clear-cut tax compliance in your global mobility program
Comprehending each country’s income and social tax responsibilities is essential to executing a compliant and cost-efficient global mobility program. Understanding the dynamic landscape of international tax compliance requires a broad scope of expertise.
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