With the relative ease of travel across countries these days, the world has gotten smaller and smaller. Families and friends can just hop on a plane, get on a train or a cruise ship, or even just take a car ride to visit relatives and friends in other countries.
In the business world, companies see this ease of travel as an opportunity to explore and enter new markets. Once a company is set up in a new location, the usual practice is to send an expatriate to oversee operations and manage the new organization in-country. These expatriates stay for short or long-term assignments, ranging from a few months to several years.
Multinational companies that send a large number of expatriates to different countries even have systems in place to track where the expatriate is at any given period. Management of potential immigration and tax risks related to the expatriate’s assignment is among the primary concerns of employers in maintaining these tracking mechanisms.
Various stakeholders within companies, such as the Human Resources, Mobility, and the Finance and Accounting divisions take the lead in ensuring that assignee compliances are met. Lest the assignees run the risk of being deported or imprisoned, the right visas and permits should be in place. Moreover, given the possible shift in tax residency, the assignees are likely obliged to file tax returns and pay taxes in the host country.
In recent years, there has been a growing trend of sending individuals to other countries, not necessarily to manage the business or to stay in the host country for a substantial period of time. These business travelers are usually in the host country to visit suppliers or customers, work on projects, or attend meetings and engage in similar activities for periods of varying length. What is interesting and somewhat worrisome is that these business travelers are usually not monitored by the sending company. Hence, the individual’s residency likely remains in the home country and compensation is also likely paid out in the home country.
This lack of visibility increases the immigration and tax risks that the individual may not be aware of and the company, though presumably able to assist in mitigating these risks, cannot do so due to its lack of visibility.
In the recent 2017 Southeast Asia Global Employer Seminar conducted by Deloitte, the surge in the number of business travelers within the region who face possible immigration and tax risks was emphasized. This is in part due to the intensified level of enforcement and compliance risk within the region, as well as greater collaboration between agencies within the same country and across borders.
Following are some of the issues raised during that seminar: 1) Apart from the visa, is a working permit required of the business traveler, considering the limited scope of his visit? 2) If the purpose is only to attend meetings, trainings and conferences, is a work permit required? 3) As the individual’s salary is paid in the home country and taxes are withheld and already paid in the home country, is the individual still required to pay taxes in the host country?
Some answers differ across jurisdictions, but some are alike. Some are interesting, such as: Mere attendance in a conference, seminar, or meeting still requires a work permit as it is technically considered doing work; also, there is an obligation on the part of the individual to file a tax return and pay taxes in the host country, even if salaries are paid and taxes are withheld in the home country.
The bottom line is, companies should not take lightly, or for granted, the issues attendant to sending business travelers overseas or across borders. These movements have very real effects on the concerned parties. Companies, therefore, should carefully consider these plans to ensure that both immigration and tax risks are checked and mitigated, especially since it is the individual — the company’s precious asset in the host country — who would be most affected.
The author is a principal with the Tax & Corporate Services division of Navarro Amper & Co., the local member firm of Deloitte Southeast Asia Ltd. – a member firm of Deloitte Touche Tohmatsu Limited – comprising Deloitte practices operating in Brunei, Cambodia, Guam, Indonesia, Lao PDR, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam.