Tackling complexity of people on the move
We wanted to understand better how organisations are tackling the challenges of global mobility and managing the risks posed by the BEPS recommendations; our survey of informal mobility management completed by 224 companies in 26 countries suggests that there’s still important work to be done.
Mobility is evolving, driven by advancing technology, transformations in the way people and organisations work and by a fundamental shift in the regulatory environment.
In particular, the OECD’s Base Erosion and Profit Shifting (BEPS) project has sharpened the focus on the risks involved in global mobility. Where an organisation’s people work and the activities they perform – even short term business visitors – can have far reaching tax implications.
There’s been a revolution in the concept of global mobility. People are moving in more fluid and informal ways, creating complex mobility challenges for their employers; mobility is increasing sharply, with a greater emphasis on short-term assignments and visits.
The OECD’s BEPS project – intended to make sure profits are taxed in the territory where the value-creating activity is performed – has been by far the most significant tax development for global mobility. Tax authorities are paying closer attention to Permanent Establishment risk – under BEPS the PE thresholds have been lowered meaning they could capture more of the activities of globally mobile employees, particularly senior decision makers and international sales staff.
The incidents of challenges from tax authorities related to PE requirements have increased sharply in the past two years. 24% of our survey respondents say they’ve received a PE challenge recently.
In this world, it’s important to know not just where your employees are, but also what they’re doing. 31% of companies don’t know the exact number of their employees working internationally and 17% don’t know who has responsibility for short-term business visitors.
From the perspective of mobility, there are numerous areas where mobility decisions –whether sanctioned internally or not – could increase PE risk.