Employees working abroad poses tax challenge for businesses in Ireland

Dec 19, 2016

As mobility evolves and more organisations see talent moving internationally, many businesses are facing a growing challenge to understand where in the world their people are working and what they are doing, which can have huge implications for their tax affairs and pose reputational risk, according to PwC’s global survey, Managing mobility in a changing landscape.

The changing international landscape is expected to increase scrutiny on the tax exposures created by employees working internationally, and almost a quarter of companies, 24%, have seen a recent challenge from tax authorities.

60% of organisations already have, or recognise the need to, make changes to the way they manage mobility to ensure they are ready to comply with the OECD's BEPS action plan to reshape international tax rules.

The OECD’s Base Erosion and Project Shifting (BEPS) project has sharpened the focus on the risks posed by employee mobility as it aims to ensure profits are taxed in the territory where business activity is performed. However, nearly a third (31%) of companies don't know the exact number of their employees working internationally.

Whilst over half (58%) of companies surveyed are aware the BEPS recommendations have significant implications for mobility and their tax position, they are unsure how best to deal with the challenges. The majority recognise the need to make changes and would like to do so before the rule changes are enacted.

The informally mobile population (business travellers, cross border commuters and international virtual workers) pose particular challenges and risks to employers. Almost a quarter, 23%, of respondents, do not know who has responsibility for business travellers and only a third of companies feel that their tax and mobility teams work closely together to monitor this.

Mary O'Hara, Tax Partner, PwC, said: “Global work is increasing sharply and, with the many international businesses in Ireland, 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, including in Ireland, pay closer attention to where an organisation is deemed to be undertaking its business, almost a quarter of companies surveyed (24%) have received challenges relating to corporate tax presence, referred to as 'permanent establishment', in the last two years.

Mary O'Hara concluded: “Organisations in Ireland and around 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 employee mobility.”

ENDS


 

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