From crossing state lines to crossing international borders, a company’s Duty of Care obligation is a compelling reason alone to keep close track of employees on business travel.
Need another great reason? Tax compliance!
A Critical Commonality
Business travelers can span the full range of an organization’s company ladder, from C-suite executives, recruiters and salespeople to in-the-field technicians, drivers and interns visiting different facilities. Methods of employee travel will also consist of various forms of transport getting to a destination.
Once they arrive, however, all share a critical commonality: they and their employers are subject to the tax laws, rules, and regulations of the local jurisdictions where they work.
Companies typically differentiate “business travel” from “short-term assignments” based on the number of days an employee is expected to travel and be on the ground in a specific location. Yet, internal company policies or travel definitions might not fully or consistently address all destination tax obligations and/or reporting requirements.
As more nations and states seek to collect income tax on the earnings of visiting business travelers to increase tax revenue opportunities, tracking and reporting employee movement has become significant.
Recognizing Risks & Reducing Surprises
Employees and employers must carefully adhere to various requirements to allocate and report income and withhold and remit taxes on business travelers’ earnings, but the ability to provide consistent, comprehensive travel reports for analysis is an obstacle many companies still face internally.
An NEI global tax partner, Deloitte, points out that surprises can be reduced by 1) recognizing the risks emanating from a mobile workforce; and 2) working collaboratively to answer the following questions for further action:
- Who are the organization’s business travelers?
- In which jurisdictions are they working?
- What compliance obligations are generated?
Reporting on the whereabouts and business activities surrounding company business travelers is either frequently inconsistent or not addressed within most companies due, usually, to no specific group or stakeholder having the knowledge and capability to comply with the countless unique regulations by location.
Taking the lead to get one’s company in compliance – or in a better shape to comply – may seem a daunting task. The next question becomes who is best to lead the quest to answer the above three questions and proactively address the consequences of regulatory enforcement?
The answer will vary by company, but a senior executive sponsor is key for momentum, oversight and decision making, as is forming a cross-functional, collaborative team with members from Human Resources and Talent Management, Mobility, Payroll, Finance, Tax and Corporate Travel departments – those who understand the issues and can work together to mitigate risks.
Data In = Data Out
This collaborative team will be responsible to review the business analytics around travel data for improved compliance efforts, but what if available data is sparse or inconsistent?
Some companies may find it seriously challenging to generate required travel data and reports for analysis. In addition to understanding how travel details for each individual employee can be consistently obtained, the Global Tax Network, an NEI global tax partner, suggests that meaningful reports for analysis would need to show whether:
- Business travel actually was taken on all days indicated on the report.
- The employee used part of the time at the destination location for personal reasons.
- The employee booked a business trip outside of the company’s travel department.
- The employee listed on the report was the one who traveled or did another employee(s) travel in their place.
With technology advancements and departments sharing more information – such as travel and workday calendars, smartphone tracking apps, relocation travel reports, and more – the capability to track business travelers has come a long way compared to two-to-five years ago. This can prove helpful to track business travelers and analyze the data for risks.
Awareness of an employee’s work location and enforcement of business traveler compliance has become a more prominent issue since work-from-anywhere became popular and travel has increased again following a sharp COVID-related decline.
Despite increased administration costs and some initial hurdles, business travel compliance is much less stressful and costly than any noncompliance and expensive tax surprise consequences to either the employee or employer. Addressing business travel in such a manner also supports Duty of Care issues and knowing where all employees are should a crisis occur.
NEI understands there are many questions companies have and challenges faced when it comes to reporting for compliance regarding business trips, whether for tax, immigration, insurance, or countless other topics. If you would like to discuss business travel or other compliance trends, please contact your NEI representative.
The above article is provided for informational purposes only, and is not intended to provide, and should not be relied on for tax, legal, or accounting advice. Please consult your own tax, legal, and accounting advisors before making any decisions or transactions.