GTN Mobility Tax Blog

Tax equalization is a policy widely used by companies with mobile employees. At its core, tax equalization is a mechanism to ensure that an employee is neither better nor worse off financially, from a tax perspective, for having accepted an international assignment. However, there are many misconceptions about what exactly it means to be “tax equalized.” As one example, some companies will try to avoid the policy because they think it will automatically lead to high company costs and administration.

Whether you manage business travelers, short-term international employees, or remote workers, you have no doubt heard about the “183-day rule.” Both globally and domestically, many tax jurisdictions expect an employer (as well as the employee) to track and report non-resident business travel. However, simply applying a “183-day” threshold does not always work to ensure tax compliance. Here we will take a deeper dive into the impact of income tax treaties on the tax cost of business travel, short-term assignments, and remote work scenarios.

If your auditor doubles as your company’s mobility tax services provider, you may have found benefits from this seemingly convenient arrangement.

It’s not unusual to see companies using the same firm to provide multiple kinds of accounting and tax services, especially for emerging and fast-growing companies. However, it is important to be aware of the challenges that may arise in this situation and understand why it may be beneficial to use different firms for your auditing and mobility tax needs.

By understanding your specific needs and the service limitations that can exist for audit firms, your organization will be in a better position to assess and select a vendor that will provide the experience needed for your mobility program and employees.

When it comes to payroll reporting and withholding for equity compensation, companies don't always realize they may be non-compliant if they have a mobile workforce. These companies may be unaware of the rules in the various jurisdictions their employees have worked, and they may not have processes in place to allow for the tracking of employees. For these reasons, the payroll reporting and withholding, related to equity income, may be handled as if the individual had only worked in one location. However, this approach is often not appropriate for mobile employees working in multiple locations since reporting and withholding rules can vary for each jurisdiction.

For many companies, the new workforce norm has shifted to virtual and remote employees. However, for several businesses, there remains a need to have employees working in-person on multiple projects across the country or around the world. Business travel, while still not up to pre-pandemic levels, is making its way back as a standard way of working.

While typical mobile workforce structures such as permanent and long-term assignments are generally managed through a defined HR or mobility function, management of short-term business travel tends to be less defined. Yet, understanding and actively managing the tax risks of short-term business travelers can greatly reduce costs and a variety of risks for both your organization and business travelers. Therefore, developing a structure to oversee this area is imperative.

As the future of work continues to evolve, providing a “positive employee experience” is top of mind for companies. While some organizations have gone back to in-office working arrangements, many have retained a full or partial remote workforce culture. These businesses see the provision of a flexible workplace as critical to not only retaining key employees, but also in recruiting top talent to fill essential job duties. And while this incentive is a benefit for the employee and employer, there are important duty of care responsibilities that need to be considered when you have a remote workforce.