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Implications of BEPS on Business Travelers Tax and Documents Compliance Requirements (video)

Sep 12, 2017
From the KPMG TaxWatch

Jill Hemphill, partner in KPMG LLP’s Global Reward Services practice, discusses what you need to know about the implications of BEPS on business travelers.


OECD BEPs is primarily a corporate tax issue, correct?

BEPS is primarily a corporate tax issue. The changes that the OECD has undertaken are the most significant changes in global tax policy that we've ever seen. And while they were targeted at corporate tax, and particularly transfer pricing issues, they have far-reaching implications for all aspects of taxation, including mobility and personal income tax.

We think this is the right time for our HR and mobility colleagues to join the discussion, if they haven't already, with their corporate tax colleagues.

What are the key aspects of BEPS that impact HR and mobility?

Of all the components of the BEPS initiative, there are two of the action points that are most significant for the HR and mobility world. The first is action 7 around the changes in the definition of permanent establishment, and the second is action 13, which is the country-by-country reporting requirements.

On the PE side, the OECD and through the BEPS initiative will be changing the definition of permanent establishment in a way that most global organizations will have more PEs around the world post-BEPS than they do today. And part of the ripple effect of those changes in the definitions will mean that we have more employment tax exposure around the world and are putting our business travelers in particular at a higher risk of taxation as they travel the globe.

The second key aspect of BEPS is action 13, which defines the country-by-country reporting requirements. The U.S. published its final regulations in June of 2016, so for a calendar year company based in the U.S., it will have to report its 2016 information in 2017 to the IRS. Those forms require two key pieces of data, profit by country and employees by country.

We expect that our HR and mobility contacts within U.S. organizations will play a really important role in both gathering and validating the employee information that goes on to these country-by-country reports. 

What is the expected time for these changes?

The timing for action 13 has a little bit longer tail on it. The definitional changes required by action 7 will have to work their way through the treaty network and sort of treaty provisions.  So they do take a bit longer. The timeframe there we're expecting is sort of late 2017 and into 2018.  So we have to stay tuned a bit on the precise timing for those changes.  

What steps do you recommend that HR mobility teams take now to prepare?

To get an understanding of where the organization believes it's headed from a PE perspective, so understanding where you are today in terms of your PE footprint and where you might be post-BEPS.

By understanding that, I think they will be able to better understand and prioritize where their business traveler concerns may be on the scale of prioritization over the next couple of years.

What does BEPS mean for business travelers?

Of all the implications of BEPS in the mobility space, I think business travelers are likely to feel the most impact, and particularly those who manage business travelers. With increasing PE exposure and some of the questions that come up on country-by-country reporting, business travelers are likely to raise the most sort of new compliance concerns.

Many organizations are already thinking about business travelers. I think BEPS is likely to move that to a much higher place on the agenda than it has been historically.

For more information on Global Reward Services, contact Jill Hemphill at jhemphill@kpmg.com.


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