Global interests mean mobile workforces and more complicated tax obligations
On the corporate level, mobile workforces can affect tax obligations and cross-border employment structures, withholding and payroll compliance, deductions for stock-based compensation and whether a company will have a permanent establishment.[xvi]
Even employees who frequently travel overseas may have to pay individual income and employment taxes in the host countries, and the corporation also may be subject to income and value-added taxes. A host country also may seek to classify the company as a permanent establishment, subject to a range of new taxes, because of the mobile workforce.
The key to effectively managing these scenarios is to plan ahead, monitor business travel and mobile workers, ensure that documentation is complete, and do regular risk assessments. Treaties offering relief from personal income taxes for workers on short business trips may be complex, and require complicated and costly documentation for compliance.
Prepare for increased scrutiny of the digital economy
A significant emerging international tax development is revision of the rules on cross-border taxation, prompted by increasing digitalization and globalization of business. In February 2019, the OECD Inclusive Framework, a group of more than 130 countries assembled to consider global tax changes, released a consultation document addressing the tax challenges of the digitalization of the economy. The consultation document details potential options for changing international tax rules under two main “pillars”: profit reallocation and nexus issues; and global anti-base-erosion rules.
In October, the OECD published a Pillar 1 proposal to rewrite international profit allocation rules in ways that, if ultimately implemented, would fundamentally alter the current international tax system. In November 2019, the OECD released a Pillar 2 proposal for a global minimum tax as well.
US-based healthcare organizations with operations abroad may find themselves in the middle of shifting regulations and laws around taxation as nations grapple with the question. Unilateral measures, which some countries have adopted or are considering, would subject many companies to double taxation, with a chilling effect on global investment and economic growth. The goal of the OECD project is to prevent, or ultimately roll back, such unilateral actions.