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Tax Risk Increasing For Firms With Employees Working Abroad

by Ulrika Lomas,, Brussels

15 December 2016

Companies face greater scrutiny over their tax affairs as more employees are working internationally, with 24 percent of businesses reporting a recent challenge from tax authorities, says PwC.

According to PwC, the OECD's base erosion and profit shifting (BEPS) project has sharpened the focus on the risks posed by employee mobility as international bodies and governments aim to ensure profits are taxed in the territory where business activity is performed. 31 percent of companies say they don't know the exact number of their employees working internationally, PwC's global survey "Managing mobility in a changing landscape" found.

While 58 percent of companies surveyed are aware the BEPS recommendations have significant implications for mobility and their tax position, they said they are unsure how best to deal with the challenges. The majority reportedly recognize the need to make changes and would like to do so before the rule changes are enacted.

According to the report, the informally mobile population (business travelers, cross-border commuters, and international virtual workers) pose particular challenges and risks to employers. Almost a quarter (23 percent) of respondents said they did not know who has responsibility for business travelers and only a third of companies feel their tax and mobility teams work closely together to monitor this.

Ben Wilkins, Global Mobility Partner at PwC, said: "Global work is increasing sharply and as people move in more fluid and informal ways, it creates complex mobility challenges for their employers. Companies must develop an understanding of who their mobile people are, where they are going and what they are doing, to be best placed to identify the risks. As tax authorities worldwide pay closer attention to where an organisation is deemed to be undertaking its business, almost a quarter of companies surveyed (24 percent) have received challenges relating to permanent establishment in the last two years."

"Organizations across the world are coming under ever increasing scrutiny from tax authorities and the financial and reputational risks of falling foul of international tax legislation can be punishing. Tax is no longer an issue purely for the tax function and companies must work across functions to manage the corporate risks of mobility."

TAGS: tax | business | employees | audit | legislation | Expats | Global Mobility | Tax | BEPS

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