HR seminar engineering across boundaries - Brussels 22 March 2013 - tax aspects of global mobility - Rene Philips

Tax Aspects of

Global Mobility

HR Seminar Engineering Across Boundaries

22 March 2013

René Philips

Carolien Van Echelpoel

© 2013 KPMG Tax & Legal Advisers civil CVBA, a member firm of the KPMG network of independent member firms

affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity.

All rights reserved.

1

Global Mobility

Global Mobility

Assignees

Law & Regulations

Policies

Business Needs

Getting the right people to

the right place at the right

time to support the business

needs and strategy




2

Cross-Border Personnel Moves Are Complex

LEGAL

• Employee Contracts

• Intercompany agreements

• Labor laws

• Employment laws

• Corporate law

FINANCE

• Budgeting

• Bookkeeping

• Financial Reporting

• Accruals

• Reconciliation

• Charges

TAX

• Corporate tax

• Individual tax

• Indirect tax

• Corporate structures

BUSINESS UNIT

• Logistics

• Communication

• Quality control

• Entry Barriers

• Administrative support

• Facilities

• Security

HR

• Compensation

• Benefits

• Payroll

• Policies

• Immigration

Actions are required in the home and host location for each of the following




3

Trends

Increased focus on short term business travelers

Governments are becoming more aggressive in tax cases

More and more anti-abuse rules are being introduced

More transparency required by (tax) authorities

More focus on information exchange

Recent shame and blame campaigns in media




4

Assignment Policies & Practices - Trends

Broadening Definition of

“Family”

Seeking Competitive Advantage

Tax Equalization remains a key

benefit

Keeping Assignees Save

Maximizing the impact of

international assignments




5

Creating a Competitive Advantage through Forward Thinking

Forward thinking is all about assessing/managing/anticipating risk

• Constantly evolving laws and regulations

• Expectations of business

• Increasingly mobile work force

• Lack of adequate tracking/administration systems

• Increased scrutiny by tax, social security and immigration authorities

But if done well, it can turnout to be a competitive advantage in the market place




6

Tax Challenges for Cross-Border Personnel Moves

Unrecorded liabilities

Indirect Taxes

Permanent Establishment (PE) Exposure

Transfer Pricing

Data Privacy Immigration Compliance

Payroll Related Tax Withholding and Reporting

Financial Reporting and

Proxy Disclosure

Employment Law




7

It is all about anticipation and tracking

Organizations with a global workforce struggle to manage unrecorded liabilities

associated with:

● Failure to accrue

– Expatriate taxes

– Pension costs

– Social tax costs

● Failure to track business travelers and short-term assignment lasting beyond

treaty relief periods

● Charging compensation costs to the host for short-term assignments




8

Budgeting & Assignment Approval

International Assignment

Process

Process Objectives Risk

Assignment Cost Estimate • Ensure cost is budgeted, cost

is minimized and corporate/

individual tax issues are

addressed

• Ensure polices are followed

• Ensure approval for

assignment cost and which

division will bear cost

• Establish accrual for

assignment costs

• Violation of corporate tax

policies and procedures

• Exposure of corporate entity

to law in a jurisdiction where a

business entity has not be

established

• Tax issues for both the

company (PE) and the

employee

• Exposure to tax penalties and

interest

• Unexpected cost due to non-

compliance

• Legal issues

• Bad publicity/reputational

damage




9

Immigration

International Assignment

Process

Process Objectives Risk

Immigration • Ensure application with

local government to legally

work in country

• Ensure application of

family (non-working) to

reside in country legally

• Employee begins working

in country prior to

obtaining work permit.

Family begins residency

before obtaining proper

authorization

• Bad press and possible

ban to establish business

• Imprisonment or ban from

ever working/entering in

country

• Tax costs are higher than

expected due to incorrect

work permit

• Immigration costs are

higher than expected




10

Immigration

• Common pattern but requirements differ from country to country

• The length of the trip, the scope of the activities and the personal situation

of the assignee are decisive for the type of document

• Do not rely on what may seemed like the quick solutions in the past

• Process is often longer than expected

–medical examination often required

–authenticated public documents, translated in local languages

–accompanying family members

• Authorities are more actively enforcing prohibitions against unlawful

employment - important to obey the spirit as well as the letter of the law

PLANNING AHEAD

Thank you

René Philips

Global Head of International Executive Services

[email protected]

+32 2 708 3807

Carolien Van Echelpoel

Executive Manager

[email protected]

+32 2 708 4796

mailto:[email protected]

mailto:[email protected]

© 2013, KPMG Tax & Legal Advisers civil CVBA, a

member firm of the KPMG network of independent

member firms affiliated with KPMG International

Cooperative (KPMG International), a Swiss entity. All

rights reserved

The KPMG name, logo and ‘cutting through complexity’

are registered trademarks or trademarks of KPMG

International Cooperative (KPMG International)

HR seminar engineering across boundaries - Brussels 22 March 2013 - tax aspects of global mobility - Rene Philips

Business

member firm

tax authorities

tax penalties

tax cases

tax challenges

swiss entity

established tax issues

corporate policies