As companies send employees across borders to conduct business, Extended Business Travelers (EBTs) and Frequent Business Travelers (FBTs) are often the solution to meet both company and employee needs when a relocation or assignment is not an option. Such business trips are also looked at as requiring less expense, administration and oversight.
The numbers of these travelers are clearly on the rise and are expected to continue to grow. In fact, some predict we haven’t even seen the tip of the iceberg for such activity going forward.
Depending on the unique circumstances involved, both EBTs/FBTs and their companies could unknowingly be taking risks that could spell trouble during, or even after, such trips.
Let’s examine these and how to avoid them.
Identifying EBT/FBT Globetrotters
Commonly, EBTs are identified as those employees on company business trips for 10-to-90 days. FBTs are considered those on frequent trips to the same location or multiple destinations throughout the year. Both sets of employees often share two stealth-like qualities that can prove frustrating for their employers:
they are challenging to track for tax, visa, and immigration compliance; and
they don’t typically follow company-directed EBT/FBT policy.
For these globetrotting employees, accomplishing their business mission and being as productive as possible are usually their most pressing concerns. Helping the company track them, focusing on tax/immigration compliance or adhering to a (commonly non-formal) policy is usually not their highest priority. However, the last thing they want is trouble at a foreign border or a future tax authority audit from simply performing duties abroad on their company’s behalf.
As tax and immigration scrutiny have increased, so have the potential consequences that EBTs/FBTs and their companies face. Entry requirements while travelling on business – and even the classification of “doing business” – can differ drastically from country to country. Potential non-compliance concerns can affect both the employee and the company.
From an EBT/FBT employee standpoint, non-compliance could result in:
Immigration issues: Employees might be questioned – or worse, indefinitely detained in a country’s port of entry – because of improper immigration paperwork;
Tax issues: Employees crossing borders may prompt a host country to require detailed foreign account and assets reporting and to demand tax filings.
From a Company standpoint, non-compliance could result in:
Immigration issues: Countries can enact penalties on individual companies for immigration non-compliance, which can also vary significantly, companies could be temporarily banned from future immigration programs, thus greatly impacting the ability to deploy employees in the future for business in that country;
Tax issues: The activities of an EBT/FBT travelling and working in a country could create a “permanent establishment” (i.e., a “taxable presence”) for the company and substantial fines, taxes, interest, etc., could result.
A common misconception for companies or managers is the assumption that the country an employee has travelled to has exactly the same rules and treaties as with what they are familiar.
They may also mistakenly assume that there are no tax consequences if an employee spends less than 180 days in a particular country. Therefore, companies might not be properly tracking EBTs/FBTs and their activities when visiting various countries.
Clearly, non-compliance is not an acceptable option, but what might be done?
Tracking Stealthy Travelers
The importance of tracking EBTs/FBTs abroad can be painfully obvious to some companies if a disaster or act of terrorism occurs and they need to identify their employees’ locations quickly to determine if they are safe.
Tracking EBTs/FBTs is also critical for compliance purposes and often falls on the shoulders of Global Mobility or International HR with travel partners, tax partners and/or relocation partners playing key roles too. Companies need to have answers to key questions such as:
Who… are our EBTs/FBTs exactly and to which department of the company do they report?
What…is the nature of work the EBTs/FBT is conducting on the trip?
Where…are employees doing business and to what countries are they travelling?
When…is each business trip beginning and ending, including side trips to neighboring countries and the purpose of those diversions?
How…many times and for how long has the employee visited a country on business during each trip?
A suggestion is to integrate an online tracking calendar for use by EBTs/FBTs to record their daily travel. Such reporting software would be accessible by one’s Global Mobility or International HR department to identify which EBTs/FBTs are where, when and why. Such reporting can also facilitate proactive planning and provide actual paper tracking records if ever audited by tax authorities.
Reducing Risk Exposure
To reduce your risk exposure for EBTs/FBTs compliance issues, companies should consider:
securing buy-in from key company stakeholders and global service partners to plan for, identify and track all EBT/FBT movements;
educating EBTs/FBTs on company business policy/practice and the importance and expectation of daily tracking while abroad;
creating an EBT/FBT tracking system that can help answer key questions at a moment’s notice (Who, What, Where, When and How);
conducting simulated, regularly scheduled audits to help ensure compliance;
developing a strong, active working relationship with one’s global tax and immigration partners to receive country updates on changing laws or regulations, asking them to suggest compliance recommendations to avoid issues before they happen, and/or have those partners track the business travel history of company EBTs/FBTs;
consulting legal counsel for risk assessment/ management and integrating their input when developing business-related travel policies that may impact EBTs/FBTs; and
striving to make the EBT/FBT travel policy in line with other formal global mobility policies in scope, mission and consistency. This can be challenging considering the nuances and scope, but the investment in time might improve and formalize one’s EBT/FBT benefits and the expectations that go along with them as it is done with relocation policies;
Above all, proactive planning, rather than reactive responding, is truly important to making a well-oiled and audit proof EBT/FBT program – especially for companies that have limited resources and are growing rapidly in the global marketplace.
Here to Help
It is part of a company’s duty of care culture to ensure compliance, tracking, and risk-management programs have been established to support their employees wherever they go on the company’s behalf.
Please contact your NEI representative to discuss this important issue and learn more about getting these stealthy employee travelers back on the radar.