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BEPS: tax changes for internationally mobile employees

Peter Legge Peter Legge

Across a number of countries, the way internationally mobile employees are taxed is being shaken-up. This follows the G20/OECD-led Base Erosion and Profit Shifting (BEPS) Action Plan recommendations set out earlier this year.

This huge package of reforms is designed to bring tax liabilities more closely into line with the economic ‘substance’ of where and how value is created. For internationally mobile employees specifically, this may mean that corporate tax liabilities can arise in locations where the employee carries out activities, rather than just where they are legally employed or on the payroll.

The potential impact includes a sharp increase in the number of jurisdictions in which your company may be deemed to have a taxable presence (permanent establishment) and the complex tax registration, calculation and reporting demands that go with this. Failure to get to grips with the shift will increase your risk of tax investigation, dispute, penalties and potential reputational damage.

 Putting tax management for internationally mobile employees on a solid footing needs a more systematic approach to workforce tracking, strategic employee deployment, determination of home locations for employees with key roles, and tax filing for staff working across multiple markets. How can your business get up to speed?