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Five ways a global mobility partner can help with international tax legislation

If your organisation is expanding into new territories, one of the main areas of concern is likely to be tax. Tax compliance is one of the biggest challenges for today’s global organisations. For short term business visitors, remote workers, assignees, and permanent transfers, each work arrangement is different – and each location will come with its own set of tax laws to understand.

It’s not just income tax, social security and payroll that require consideration – the categories of worker listed above can also mean corporate tax and indirect tax analyses are required for full employer tax compliance in a country.

If you’re struggling to manage tax legislations in different locations, read on to find out how a global mobility partner can help navigate the complexity.

They are experts in national and regional tax laws

Whenever you dispatch an employee cross-border, it’s essential that you abide by national tax laws. Each country will have its own statutory requirements that are often detailed in the local language, and you will also need to keep up with changing rules and regulations, too.

Additionally, different regions and municipalities within each country will also have their own laws and tax deadlines to comply with. For example, in Mexico, new hires need to be registered with the government within five days, whereas in Spain, registration must occur before the employment begins.

When implementing a global mobility programme, you not only need to understand each of these different regulatory requirements, but you must also consider the implications of each regulation for your employees too.

Non-compliance with such laws and deadlines can result in penalties and even legal action – so enlisting the help and expertise of a global mobility partner with specialist knowledge in the national and regional and tax laws of each new market is paramount to the success of your expansion.

Some can provide advice outside of income tax, social security, and payroll

With globally mobile employees, it’s important to look beyond employment taxes. Essentially, when an employee moves to another country, you increase the possibility of creating a permanent establishment (PE), and fixed establishment (FE – for indirect taxes, e.g. VAT). This can impact payroll withholding obligations, but more fundamentally, where a PE / FE is created it will directly impact the corporate tax and VAT reporting for the group.

Whether an employee is on a short-term assignment, a long-term contract, or makes a continuous return to a certain location, depending on facts and circumstances, they can create a significant PE risk. Typically, the more senior the employee, the higher the risk. That said, moving a collection of individuals or an entire department cross border will also increase the risk. Where a PE / FE is created, the company will have a need to register the company as a taxpayer, file local country returns, and pay corporate and / or VAT (all in addition to operating payroll for the individual employees themselves).

Failure to pay such taxes could lead to interest, penalties, and other sanctions, such as an increased reputational risk.

Lastly, there are local employment law and immigration requirements to manage. Everything stops when employees are not able to get into the country where their skills are required.

As such, it’s essential to remain as vigilant as possible and enlist the help of an expert global mobility partner to mitigate these risks.

They stay up to date with the changing tax landscape

In an ideal world, compliance would be a one-time concern. However, unfortunately, one of the key aspects of compliance is that it is always evolving – in fact, some tax regulation changes are made every year.

It’s vital to keep up with these rules in all the countries your business operates in. What’s more, regulators and tax authorities will expect you to implement these new laws immediately, which means time is of the essence.

Essentially, if your organisation is going to remain tax compliant in each location, you need to be as proactive as possible. Keeping track of such changes is an immense challenge.

This is where it pays to work with global mobility companies, who can help ensure that you stay on top of any changes to existing tax laws and regulations and make sure that your organisation continues to comply.

They can help create tax-effective compensation packages

Another important aspect of implementing a successful global mobility programme is ensuring that your organisation provides tax-effective compensation packages for your employees.

For example, if you are sending employees to a location with a high personal tax rate, such as China, you will need to consider how you will manage the tax impact on those employees by creating a benefits package that offsets the personal tax rate.

This is more complicated than it sounds: there are many considerations involved in creating tax-effective compensation packages, from the possibility of offering tax-equalisation policies to providing other tax-free allowances and ensuring that pay levels remain competitive for the location.

If you are struggling to put together a suitable package, a global mobility partner will be able to advise on all aspects of tax-effective compensation packages and help to create a package that works for everyone involved.

They will help you to strategically plan

Global mobility supports international growth. An effective mobility strategy means:

  • Employers can swiftly redeploy specialised talent to priority locations, increasing reactivity
  • and speed to market.
  • Employers can offer flexibility on location, providing a competitive advantage in recruitment.
  • Work location is removed as a barrier when hiring key growth talent.
  • Employers can onboard talent from new countries faster. This makes it easier to increase
  • local headcount to facilitate growth.

Put simply, an ineffective global mobility strategy will suffocate any growth ambitions.

HR plays a leading role in navigating international relocation and recruitment hurdles. However, it should not be left to HR alone to ensure success. Your business cannot expect HR teams to stay abreast of changing legislation in 100+ countries.

Collaborative global mobility strategies, informed by HR and talent acquisition objectives and supported by expert global mobility providers, create robust, agile frameworks from which global businesses are more likely to grow.

Helping with tax legislation in different markets

Providing the correct answer is a baseline requirement, regardless of which area of tax it’s addressing. Finding a company that can help with what has been discussed in the sections above is crucial, but there are also two points that set MCP providers apart:

  1. Having a payment service line. Not only to cover global mobility requirements but to also run payroll and pay employees in multiple global locations.
  2. Acting as a partner, not an advisor in order to ask questions to improve operations. This means signposting future considerations and answering not just the question that has been asked, but also the questions that haven’t.
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