Are you walking a tightrope?

International business travellers are front line ambassadors for organisations but there are serious risk implications.

Our research shows 96% of business leaders and 95% of global mobility professionals said it was important to have an internationally mobile workforce to meet strategic objectives. Almost 40% of respondents to the 2017 Santa Fe Global Mobility survey said it was mission critical.

There is no common definition and business travel can range from one day to six months. 183 days is often seen as a tax trigger (90 days for immigration), but organisations need to take a broader view of their travellers’ circumstances and intended duties. Dependent on the organisation, the international business travellers range from a few to thousands.

Business continues to see compliance to be important and is high on the agenda for many governments who place increasing penalties for non-compliance on business travellers and their employers.

Managing business travellers represents the biggest change expected in global mobility over the next five years (42%). Often, business travellers are left to make all their own travel arrangements and immigration requirements can be overlooked, placing them and the organisation at compliance risk. No surprise then that risk and compliance are such important factors to be considered when setting a travel policy.

Our research shows that 25% do not have a programme in place to ensure business travel is compliant. Of the 75% who responded that they do, 62% do so through technology.

Many Global Mobility teams, already resource constrained, find themselves the focal point of business travel – previously managed by the functions. Who has accountability compliance in immigration, employment and tax? Often the process is not integrated.

A major issue for employers is that business travel typically falls outside of existing risk monitoring and may be non-existent if an employee travels outside the mobility programme. Inadvertent non-compliance is rising for employees who take extended business trips, especially when effectively becoming short term assignments. Government use of sophisticated technology to monitor travel is increasing and a firm stand taken on a local compliance breaches.

Best practice demands that organisations have a robust policy for all types of business travel. Authorities do not accept ignorance as a defence. Penalties and fines can be imposed or even prosecution with consequences ranging from budgetary and business reputation risk, through to employee dissatisfaction.

Ensuring compliance for business travel is not always straight forward as there are no standard rules about what tasks each country considers ‘business travel’. It is critical to understand the specific rules of the destination country to ensure full compliance. Purpose rather than duration is the determining factor.

Taxation also needs to be considered and tax authorities have several years to conduct an audit, so tax risk may therefore not be immediately apparent.

Short Term Business Visitors (STBVs) were top of the list in the United Kingdom and employer tax compliance obligations are an increasing area of focus by the tax authorities. To help manage this, assume that the business traveller is likely to create a tax liability in the location visited. Then, look for options to exempt from taxation relating to the business visits. The views of tax authorities are also constantly and rapidly evolving.

To start, assess whether the host location will ignore certain types of business travel. For example, in the UK a concept of “incidental duties” exists. Such duties will be ignored for UK tax purposes. If not “incidental”, an examination of the employment income article of the relevant double tax treaty to explore whether an exemption from tax in the host location is possible. Interpretation of the conditions can differ between tax authorities.

Taking conditions at face value is fraught with risk, as interpreting them is not necessarily straightforward. Care and an expert eye is needed.

If no double taxation treaty exists between the home and host country, it is likely that no exemption would be available in the host country. The rules around what activities create a Permanent Establishment are evolving and vary by country. Do not rely on a historic practice.

To conclude, Organisations must address compliance and risk associated with business travellers and short-term assignments. Waiting for a breach to be found before addressing the non-compliance is walking a tightrope. There is no one size fits all solution and this article highlights the need for organisations to embed and normalise a different due diligence. Simply doing nothing and taking a chance is not an option. A clearly defined process for managing business travellers is an imperative.

Tracking your business travellers is the start of the compliance process. Typically, this is completed in-house or via an external solution to identify risks that may arise. Then, you need to assess how to effectively use the data to manage all compliance risks from your business travel programme, evaluating the best way to ensure it is managed proactively. Mitigate your risk with a robust policy and programme.