Perspectives

Business traveler tax compliance

Making the case for action

This article discusses three key steps in building a solid business case for taking action, including forming a multifunctional team to understand and address the problem, analyzing historical travel data and use it to model solutions, and obtaining leadership endorsement for compliance efforts. It was originally published by Bloomberg BNA in International HR Decision Support Network.

Making the case for action

The HR director groggily reached for the phone. “Who could be calling at 3 a.m.?” he thought. The irritated voice of the CFO whisked away the sleep fog. “The team sent to strike the deal in Shanghai has been detained by the authorities. The deal we have been negotiating for months is in jeopardy. Figure out what has happened. And fix it! You are first on the agenda at the 7:30 a.m. leadership team briefing.”

Business travelers are a diverse lot: the C-level executive, the hard-charging sales representative, the technician sent to handle a customer crisis. Road warrior travel experiences vary widely, of course, from the comforts of a G650 corporate jet, to the middle seat on a puddle jumper, to a rental car and an endless highway in the windshield. But once they reach their destinations, business travelers share an important characteristic: They are subject to the rules and regulations of the jurisdictions where they work. This includes tax laws. Increasingly states or countries seek to collect income taxes on the earnings of business travelers visiting their jurisdictions.

The requirement to allocate and report income, as well as withhold and remit taxes on the earnings of business travelers, impacts employees and their employers. These reporting requirements are frequently unaddressed as no one function within an organization has the knowledge and capability to comply with the regulations. This can, unfortunately, come to light in an unwelcomed fashion, such as a predawn call relaying the rage of a C-suite executive impacted by an unanticipated regulatory action.

The likelihood of such incidents can be largely reduced by recognizing the risks emanating from a mobile workforce and working collaboratively to take action to answer the following questions:
  • Who are the organization’s business travelers?
  • In which jurisdictions are they working?
  • What compliance obligations are generated?

Leadership of such an initiative will probably come to rest upon the shoulders of those in either the HR or tax departments, as these functions will likely be responsible for addressing the consequences of any regulatory enforcement. While leading an organization to a higher level of compliance can be perceived as having limited upside, proactively undertaking this challenge may be the preferable alternative to fielding the fallout from a 3 a.m. phone call.

This article discusses three key steps in building a solid business case for taking action:
  1. Form a multifunctional team to understand and address the problem;
  2. Analyze historical travel data and use it to model solutions and
  3. Obtain leadership endorsement for compliance efforts.

Taking these steps can help establish priorities, provide momentum for change, and make the process manageable.

About the authors

Lorraine E. Cohen
Tax Partner
Deloitte Tax LLP
+1 415 783 6329
lcohen@deloitte.com   

John Jennings
Tax Partner
Deloitte Tax LLP
+1 312 486 4306
johjennings@deloitte.com    

 

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