1. What is definition of a business trip?
A business trip is not to “conduct business”. A business trip that is exploratory, business development, attend a training or general meeting where you will not be making any decisions, directing any business or doing any productive work is considered a true business trip. All others could be considered a working business trip.
2. Why is it important to know the difference between the two?
All countries try to protect their labor force from losing jobs that could be conducted within their borders by one of their citizens. In order to give a training, perform maintenance, and conduct briefings or work on a project (even for short periods of time), a work permit most likely would be needed for the country.
3. What about a business visa waiver program?
There are over 36 countries that now have business visa waiver programs with the United States. These programs are for activities conducted in Number 1 above. All others need a working visa. This includes business travelers into the US as well.
1. We perform services for a client in another location and they agree to pay for the use of our resources, is this an issue?
This is a typical business setup and is correct for the corporation and the business. However, this affects an individual employee as well. Once a charge for salary, time, expenses, benefits, etc are sent for an individual that is performing any services in another country is backcharged from the sending company to the receiving company, the employment relationship has also shifted and the receiving company has just begun to bear the costs of remuneration of an employee, thus causing employment relationship and payroll tax issues for the employee and the receiving company.
1. Does it matter where I am paid?
Individuals earn their salary wherever they are physically performing those services. This could be in your home country, your home state or other locations. Jurisdictions have the right to tax income earned within their borders. It has no bearing on where the funds are delivered.
2. How is this tracked?
Many countries, including the US have a withholding system that tracks income earned and withholding taxes that must be reported to the taxing jurisdiction. These are set up for the domestic population that work and live within the borders of that country. However, non-residents of a country could trigger a taxing obligation by physically performing services within a country, thus allowing the foreign jurisdiction to tax the earned source income.
3. How would a foreign country even know this if I don’t have a payroll in the foreign location?
Immigration and customs share their data with taxing authorities in most countries. In a day of technology, the minute your passport or especially your visa, is scanned into the immigration system for admittance into the country, that information is also sent to the taxing jurisdiction to track number of days in country and look for potential taxes.
4. Does my visa cause a problem with this?
Having a working visa to allow you to perform certain services within a country, tells the authorities how much you will be making and the job you are doing. You are liable for taxes and if your employer is sending you, they are jointly and severally liable for the taxes as well. It is not just a personal tax obligation. A visa states that you agree to abide by the laws of the country you are working in and this includes taxation.
5. If I’m not required to have a visa, then will I still be liable for taxes in the country?
It depends on the country, but immigration and taxation are not aligned, they only share information. Often an individual is liable for taxes as a non-resident even though the work they are performing in the jurisdiction does not lead to a working visa requirement.
6. If I’m not in the country more than 183 days, I thought I didn’t have a tax requirement?
This is a mistaken concept that many individuals rely on. There are treaties between countries that help to avoid double taxation, and 183 days is one to determine whether or not an individual is a resident of a country, and thus liable for taxes. However, this is only for resident taxation, which is on worldwide income (employment, investments, etc). Corporations cannot be a non-resident of a company and often individuals are grouped into this corporate tax logic. Individuals can be taxes as non-residents under dependent personal services clauses in treaties, which states if certain conditions are met (depends on the country) the individual would be subject to non-resident taxation of their earned source income in the country.
Are there ways to mitigate all of these?
Yes, while it is burdensome to be compliant, it is essential to keep your company and your employees safe from working illegally, becoming tax evaders and loss of reputation for the company as well as employee confidence. All of these issues are routinely managed by PZI International for many companies. With over 20 years experience in international individual taxation, immigration, relocation, benefits, accounting, budgeting, travel program setup, safety and security, we have been helping companies with the resources and designs needed to work internationally quickly, efficiently, and cost effectively.