United States

Global and Domestic Business Travelers Tax and Documents Compliance Requirements (video)

Biographies

 

Transcript

Why do global mobility and business travel require such focus these days?

Roger Koferl:  When you look at business travelers today, you really need to break it down into two different groups. One is global travelers who are traveling international, and then you have travelers who are traveling within the United States state to state. So I'll take the question from the global side and then ask Scott to look at it from a U.S. state-to-state perspective.

With the ever-increasing number of business travelers, the scrutiny that these travelers are coming under from foreign taxing jurisdictions is increasing on a daily basis. Many of the travelers travel without the proper work documentation or immigration documentation and you really have a perfect storm of potential obligations created by these travelers for themselves and for their organizations.

So based on that, it's incredibly important for these organizations to track their travelers and deal with any obligations they might create.

Scott Schapiro:  On the state side, the issues are basically the same. When you've got individuals who are traveling across state borders, most states have an obligation for the employer to withhold for the time spent in the jurisdiction. It creates really two issues. One is a pure compliance issue. The laws are there. They're mostly clear. Companies need to comply.

On the second side, you've got an audit imperative at the state level where a lot of states are recognizing this untapped revenue source and coming after it in the sense of auditing companies who have people coming in out of the jurisdiction without paying for their business traveler tax.

 

What happens if an organization fails to identify and comply with its tax obligations?

Roger Koferl:  If an organization fails to identify and comply with the obligations created by their business travelers, there are a number of different risks that are associated with that travel, the first being financial risk, unpaid income taxes at the individual level, unpaid payroll or untimely filed payroll, and also corporate tax issues created by travelers who might create a permanent establishment for their organization in the host jurisdiction.

More important than that, the companies face a reputational risk issue in which their organization is painted as a non-complier, which is very, very difficult to -- for an organization to resolve once they have garnered that reputation as being noncompliant.

Scott Schapiro:  And on the state side, you have the same, again, basic issues there. It's a little bit more simplistic at the state level. There is not a corporate income tax issue. It's primarily a payroll tax issue.

You do have the same reputational concerns, but it becomes primarily a financial issue, people moving from state to state and the company failing to withhold as appropriate, that turns into a corporate tax liability, as opposed to an individual tax issue.

 

How can organizations anticipate potential tax liabilities of complex regulations across multiple jurisdictions?

Roger Koferl:  What you have to do in order to anticipate these obligations is first get your employees to raise their hand and let you know that they're traveling, where they're traveling to and what they're doing while they're in that jurisdiction. So that's step one, identifying where you are, where your employees are and what they're doing while they're there.

So once you've identified where your travelers are and what they're doing, it's very important then to receive the proper advice as to the obligations they've created and how to resolve those obligations.

Scott Schapiro:  In the U.S., the key to anticipating compliance obligations is really developing and implementing and maintaining policies and procedures designed to capture your mobile employees, to track them accordingly and to tax them accordingly.

There are a number of different ways to get there, whether you develop processes in-house, whether you outsource, but the key is to build a system to put policies in place that make sense for you as an organization and help you maintain compliance with state laws.

 

How can KPMG Link Business Traveler help companies manage these issues?

Roger Koferl:  KPMG Link’s business traveler system provides a very easy way for companies to identify and then track their business traveler population.  Employees raise their hands, so to speak, through the system and let the company know before they travel where they're going to and what services they're going to provide while they're there.

This allows the system to prepare an assessment which documents whether there will be any immigration concerns, personal income tax concerns, social tax concerns or even corporate tax issues.  Once those issues are identified, the company can then move towards solving the obligations or even stopping travel should the obligations or concerns be that significant.

Scott Schapiro:  Domestically, the issue is not as complex.  You don't have immigration and some of the global concerns there.  But what KPMG Link does is it provides employees with a system -- with a calendar-based system to be able to put their time into in terms of their U.S.-based travel that can then link their particular travel in jurisdictions directly into a payroll system that allows the company to then withhold appropriately for individuals, satisfy state compliance requirements and put the company on good footing in terms of their state reporting. 

_____________________________

This information is not intended to be “written advice concerning one or more Federal tax matters” subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230.

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation.

The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International.