Warning over corporate mobility tax exposure from overseas workers

As mobility evolves and more organisations see talent moving internationally, many businesses are facing a growing challenge to understand where in the world their people are working and what they are doing, with potential significant implications for their tax affairs and exposure to reputational risk, according to a survey by PwC.

The OECD’s Base Erosion and Project Shifting (BEPS) project has sharpened the focus on the risks posed by employee mobility as it aims to ensure profits are taxed in the territory where business activity is performed. However, the PwC report - ‘Managing mobility in a changing landscape’ - found that 31% of companies say they don’t know the exact number of their employees working internationally.

Whilst 58% of companies surveyed are aware the BEPS recommendations have significant implications for mobility and their tax position, they are unsure how best to deal with the challenges. The majority recognise the need to make changes and would like to do so before the rule changes are enacted.

PwC suggests that the ‘informally mobile population’ comprising business travellers, cross border commuters and international virtual workers, pose particular challenges and risks to employers. Almost a quarter, 23%, of respondents, do not know who has responsibility for business travellers and only a third of companies feel their tax and mobility teams work closely together to monitor this.

Ben Wilkins, global mobility partner at PwC, said: “Global work is increasing sharply and as people move in more fluid and informal ways, it creates complex mobility challenges for their employers. Companies must develop an understanding of who their mobile people are, where they are going and what they are doing, to be best placed to identify the risks.

As tax authorities worldwide pay closer attention to where an organisation is deemed to be undertaking its business, almost a quarter of companies surveyed (24%) have received challenges relating to permanent establishment in the last two years. Wilkins added: “Organisations across the world are coming under ever increasing scrutiny from tax authorities and the financial and reputational risks of falling foul of international tax legislation can be punishing. Tax is no longer an issue purely for the tax function and companies must work across functions to manage the corporate risks of mobility.”

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