Release date: August 22, 2016
Guest: Teresa Smolski
Running time: 10:28 minutes
In the first episode of our “Moving people with purpose: Short term business travellers governance” podcast series, Teresa Smolski discusses how the landscape is evolving for organizations with short term business travellers and the challenges companies face when managing their mobile workforce.
Through interviews with prominent PwC tax subject matter professionals, Tax Tracks is an audio podcast series that is designed to bring succinct commentary on tax technical, policy and administrative issues that provides busy tax professionals information they require.
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Brandi: Hi, this is Brandi Scales of PwC Canada and I would like to welcome you to our “Moving people with purpose” podcast series, where we will discuss some of the top challenges employers face when managing their short term business travellers.
Here with me today is Teresa Smolski. Teresa is a Senior Manager in our Global Mobility Services practice in Vancouver. Welcome Teresa. Today, we will get an introduction to the topic of short term business travellers and the issues that they bring to the forefront for their organizations.
Teresa: Thank you Brandi.
Brandi: Teresa, in order to meet the challenges of today’s global marketplace, many companies require their employees to travel internationally. Lately there seems to be a growing focus on short term business travellers. Can you please explain more about what is driving this change?
Teresa: Certainly, Brandi. Recent studies have shown that global mobility will continue to increase straight across the board. However, studies are also showing a more significant growth towards short term business travellers. Traditionally, global mobility programmes have ignored short term business travellers as they were considered to be low risk. However, the tide is quickly changing as more and more countries are starting to either introduce new legislation or enforce current legislation, which looks to govern these types of travellers.
Brandi: What is the definition of “short term business traveller”?
Teresa: The term short term business travellers, or visitors - as they are called sometimes - refers to globally mobile employees who travel to perform short-term professional duties in a particular country. Typically, they are highly skilled employees travelling to attend business meetings, work on specific projects, or are individuals with regional and global roles.
Brandi: What are some of the challenges faced by modern global mobility programs in managing business travellers?
Teresa: The reality is most mobility teams do not have the budget or the resources to adequately begin to manage this population without a significant operational overhaul. A company first needs to assess if their HR and mobility teams have the required mandate, accurate business information, sufficient budget, qualified resources, and the appropriate infrastructure to help meet the evolving business demands and manage the growing number of internationally mobile employees. Today, leading global organizations are transforming their global mobility programs. Mobility programs must ensure business focus, flexibility, and alignment with business strategy.
Brandi: Thanks Teresa. You mentioned companies need to be flexible – can you please elaborate?
Teresa: Yes, companies need to be flexible because the environment in which they operate is constantly changing. For example, recently there have been significant changes to immigration laws in many countries around the world as a result of ongoing global and political events.
Also, the economic growth locations are changing, and so are the destinations of the business travellers. The focus of global investment and growth is shifting away from seven of the world's most industrialized nations. The rise of the BRIC economies of Brazil, Russia, India and China, as well as “frontier markets”, means that companies need to adapt and plan for resources in changing circumstances.
Rapid advances in technology and virtual operations led to the realization that existing international tax rules are outdated. As a result, the Organization for Economic Cooperation and Development (the OECD) has introduced an action plan to address these issues known as Base Erosion and Profit Shifting. The objective of this initiative is to ensure that profits are taxed where business activity is performed and value is created.
Brandi: Well, it’s clear the landscape is changing. Teresa, why do companies struggle with short term business travellers compliance?
Teresa: Often, compliance with the host country’s tax laws may be difficult to manage. For example, in Canada foreign employers must withhold Canadian taxes from wages paid to non-resident employees performing short-term employment duties in Canada from day one. There is no “de minimus” exception and, while a tax treaty may ultimately provide an exemption from tax, it does not exempt the employer from the withholding obligations.
For years, businesses have been asking for changes in this area to address the overwhelming burden this regulation creates.
Brandi: And are we finding that governments are receptive to change some of these burdensome rules?
Teresa: There is some progress, but changes don’t seem to keep in pace with the quickly growing demand for cross border employee mobility.
Recently the Canadian Department of Finance introduced draft legislation which provided some foreign employers with non-resident employees temporarily working in Canada some relief from payroll withholding obligations. In response, the Canadian government introduced a new employer certification program which would allow an exemption from the Canadian income tax withholding requirements in certain circumstances. Specifically, a "qualified non-resident employer" paying remuneration to "qualified non-resident employees" for services rendered in Canada would be exempt from Canadian income tax withholding and the requirement to file for tax waivers. The key being an employer and employees must be “qualified” and the rules for “qualifying” are very specific.
Notwithstanding, this is significant progress and welcome relief for many companies. I also want to note - we will discuss the new employer certification program in more detail in a later episode in this podcast series.
Brandi: What is the role of technology in helping employers manage the mobility programs?
Teresa: Increased use of technology can improve management of short term business travellers’ tax compliance. Several tracking and reporting tools and mobile apps are currently available to help manage short term visitors and collect relevant information. Despite this, according to a recent survey, only 25% of the participants say they are using technology to help meet their needs.
Brandi: I believe the survey you are referring to is PwC’s 2014 ‘Modern Mobility’ survey. I know that this was a survey of almost 200 executives from organizations across the globe who are in charge of global mobility. Can you share with us some other findings from the survey?
Teresa: Sure. The survey looked at how businesses across the globe are dealing with the challenges of global mobility and what is being done to address these challenges.
The majority of survey participants agreed that short term business travellers play a fundamental role in helping their organizations to achieve their business objectives, and emphasized the strategic importance of the internationally mobile workforce.
89% of the survey participants indicated that their companies plan to increase the number of internationally mobile workers in the future. Yet, based on the survey results, only a few companies are currently on top of their mobility issues. Only 17% of the respondents have policies and processes in place to track and manage short term business travellers.
According to the survey results, more than 30% of the participants were not sure how many of their employees work abroad each year.
Brandi: That’s very interesting Teresa. Now, one final question for you. What are the most common risks associated with business travellers?
Teresa: Paying the right amount of tax and social security contributions in the right jurisdiction is very important. Also, immigration rules are getting more complex and the authorities around the globe have increased their focus on mobile employees.
In addition to the traditional risks such as tax, social security and immigration, the employers need to be aware of other risks, such as reputational risk.
My colleagues will be addressing some of these issues in more detail during upcoming podcasts.
Brandi: Thank you for joining us today Teresa and providing insights on the challenges of short term business travellers’ programs.
Teresa: My pleasure Brandi.
Brandi: For any questions, Teresa’s contact details are available on our PwC podcast website which is www.pwc.com/ca/taxtracks.
I encourage our listeners to stay tuned for upcoming podcasts in this series.
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