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Thinking Beyond Borders - KPMG publication on business travels and tax planning

Extended business travel, with executives working across a number of countries, is now more and more common.

At the same time, the traditional pattern of an expatriate being sent on a posting for two or three years is becoming rarer, as companies try to make efficiency savings by deploying staff only where and when they are strictly needed. So the work pattern for many of today's executives often involves visiting several countries and spending short periods in each- perhaps a few days each month, or a few weeks each year. This type of staff deployment brings many benefits, particularly at a time when finances are tight, but can also generate some complex tax issues. These days, governments throughout the world are under increasing pressure to protect budget revenue, and so they are much more vigilant in carrying out checks to make sure companies and individuals comply with their tax obligations. So it is even more important that companies which send their staff on foreign postings- whether short term or long term- should look carefully into the tax implications.

The latest edition of KPMG International's regular publication Thinking Beyond Borders: Management of Extended Business Travelers aims to help companies and individuals address some of these issues. As Madalina Racovitan, Director in KPMG in Romania's Tax Department and head of International Executive Services explains; 'This publication gives detailed information on individual income tax and social security in over 70 countries, including Romania. So it is a valuable work of reference for all companies which send their staff abroad.'

As Racovitan continues: 'Many people are under the mistaken impression that if an executive spends less than six months in a foreign country, there is no tax to be paid there. While this may generally be true in certain instances, there can be all sorts of other tax implications which can arise even from a very short visit. For example, some types of extended business travel can generate a Permanent Establishment of the foreign company, which can lead to tax liabilities. This depends on the type of services performed, and the level of authority the employee has. In the last few years, the Romanian tax authorities have not only tightened the law on Permanent Establishments, but have also been much more eager to enforce it. So this is a particularly important issue for any foreign company thinking of sending its executives on a mission here.'

Moreover, the recently enacted changes to the Fiscal Code, in force as of 1 July 2010 specifically eliminated the conditions under which non-resident individuals carrying out dependent activities in Romania may become liable to Romanian income tax. Thus, whereas before 1 July 2010, a non-resident individual carrying out dependent activity in Romania if he/she spent more than 183 days in Romania during any 12-month period, or the remuneration was paid by or on behalf of a Romanian resident employer or the remuneration was borne by a Romanian permanent establishment, as of 1 July 2010, any non-resident individual performing work in Romanian for only 1 day may become liable to Romanian tax. Of course, individuals can benefit from protection under applicable tax treaties, however, additional administrative burden is now imposed on these individuals.

As Mark Gibbins, Head of Tax Department at KPMG in Romania adds; 'In the past, business leaders have tended to leave expatriate taxation to the Human Resources department or the compliance officer, thinking that this is a simple administrative issue without significant implications for the company's bottom line. In the present climate, with companies adopting increasingly complex staff deployment strategies and tax authorities doing their best to raise revenue, it is a mistake for top management to neglect this issue. If companies fail to do their homework on expatriate tax, they risk facing unpleasant surprises, which can not only be costly in financial terms but can also harm the firm's reputation.'

As Racovitan concludes; 'The tax implications of short term business travel have become a very important issue for top management to consider. I encourage all business leaders, and any individual who travels abroad regularly for business to read this KPMG publication.'

Sursa: http://www.actmedia.eu

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