Leading the Way is a column written by PwC's professional staff. It appears in the Business section of the Bangkok Post twice monthly. The column provides specialised advice to corporate decision-makers in Thailand on global and local business trends.
This article appeared in the August 1, 2012 issue of the Bangkok Post.
By Napaporn Saralaksana
Global business expansion and the need to rapidly mobilise a talented workforce across from traditional short- and long-term borders have sparked a shift relocation assignments to a more heavy reliance on frequent business travel.In addition, companies are often shifting staff across borders to help meet key strategic needs and overcome talent constraints.
As a result, today's business traveller is ready to go at a moment's notice,often travelling from location to location for short periods of time and this creates a whole new set of considerations. The result: human resources and tax departments are often unaware of the employee's whereabouts.
Compliance responsibilities trigger liabilities: The activities of a business traveller can create numerous personal and organisational compliance responsibilities including permanent establishment obligations with possible tax consequences. Frequency of travel,length of stay, the nature of the business being conducted and the repetitive nature of trip patterns all factor into the type and level of exposure a business traveller and his company encounters.
Depending on the country, even an occasional business trip can trigger liabilities. Business travel can lead to personal income tax filing obligations,corporate tax registration requirements,employer withholding obligations related to the traveller's earnings and immigration and work permit requirements. Thailand has doubletaxation agreements with many countries, but not all. In some countries,frequent business travellers can claim a short-stay exemption but not in Thailand. This could be a painful process to both the company (host and home locations) and the business travellers.
Data gathering: Most companies initially look to passive approaches to data gathering such as expense reports and time-capture sheets. While these can be a good start, they are often insufficient to sustain a compliance programme.
The alternative is active data collection, a method that gets the business travellers involved in the process. An active compliance approach helps capture information in real o r nearly real time. It uses technology,for example asking employees to maintain their calendars on a companysponsored site or through their smartphones, or using GPS capabilities on mobile phones to collect and send information regarding tax jurisdictions.
Once the information is gathered,it's aggregated in a way that alerts the appropriate company parties when a traveller is about to reach a threshhold that might trigger compliance responsibilities. The ultimate goal is to obtain the information in time to not only ensure compliance, but also avoid undesired obligations.Furthermore, the time saved by simplifying the evaluation process can translate into added operational cost savings.
Process ownership: Another hurdle in planning new data-gathering and tax compliance programmes relates to process ownership. The process touches on the roles and responsibilities of various departments. HR often has a role in administering expatriate assignments, but likely not short-term business travel. Tax departments have a vested interest in evaluating tax liabilities and the issues at stake if those liabilities are not addressed. Payroll has a role in establishing compliance with reporting and withholding obligations in multiple jurisdictions.
Establishing process ownership can quickly become confusing when so many business functions have something at stake. For this reason,it's vital for organisations to be clear about the primary issue and pinpoint a leader. However, once ownership is established, functions must still cooperate to ensure success.
Improving frequent travel monitoring: Executives who think the organisations might be at risk should consider the following:
Developing policies and procedures for frequent business travel is a proactive approach that all organisations should be taking. Adding policies to current expat programmes to include frequent business travellers is a trend that's gaining momentum.
For example, equalising pay in order to neutralise the tax burden of business travel can be a significant incentive to keep employees willing to embark on frequent trips. If not, companies risk losing talent once employees start to realise their business travel comes at a personal financial expense.
More and more firms are taking the reins, developing clear standards and guidelines that will be applied across the company and help keep employees from falling through the cracks.
There isn't one right answer for every organisation. However, many are embedding commuter and flexible expat options into their business travel policies, giving the business and assignees greater choice in mobility matters. When planning policies and guidelines, be sure to consider:
Improved data collection methods and updated policies and procedures will have a significant impact on a company's compliance efforts. Perhaps more importantly, they will also help retain a company's good business standing, help foster employee relations, improve retention and possibly attract more skilled talent ready to become globally mobile.
Napaporn Saralaksana is a senior manager and Prapasiri Kositthanakorn is a partner at PricewaterhouseCoopers International Assignment Services (Thailand). We welcome your comments at email@example.com