The immigration policies of most countries offer two distinct choices for companies sending staff on international assignment. For staff engaged in longer or more involved assignments a work permit is typically required, while shorter visits can be covered with a normal business visa.
When making an assignment, a company is faced with selecting the best method under the circumstances, and there are a number of factors that must be considered for workers that have mobile positions. Immigration department are increasing their scrutiny of the use of business visas and work permits
to ensure that companies are not attempting to circumvent established rules for entry.
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The risks of having the wrong type of immigration permissions for business activity can include:
- Civil and criminal penalties for the company, as well as risk to their business presence in country
- Penalties for customer and client sites if the workers are on another companies premises at the time they are found to be in breach
- Questioning, detainment and denial of entry to workers without the required permits for substantive business activity
- Non-compliance with local statutory withholding and employment requirements
- Triggering ‘permanent establishment’ via employee activity, resulting in corporate tax liability
- Business Travel and Extended Visits
The classic business trip of a few days to several weeks, is typically covered by a business visa that is available in most countries. The low cost and simple application process makes this an attractive option for shorter trips, especially for businesses that are exploring opportunities in a new market. Activity under a business visa may be limited to marketing, research, attending meetings, conferences or training events, and there are limitations on substantive business activities. The exact requirements and limitations of business visas vary from country to country so it is important to check with an immigration specialist.
Other business visa activities can include:
- Customer and vendor meetings
- Information gathering for sales efforts
- Contract negotiation (but actually concluding a contract may have other implications)
- Periodic visits to foreign offices for project or progress reviews
There is a question that arises for ‘extended business travel’ where an assignment may last longer than a month, but still utilizes a business visa for entry to the country. If the worker’s assignment involved any type of management or other substantive activities, then there can be a risk of non-compliance with the restrictions of the business visa, and the work performed would be classified as activity that required a work permit.
Still, many companies choose to take this risk for extended assignments rather than shoulder the cost and time of a work permit. If discovered, the company could face a host of problems including deportation of the worker, fines for the company or host, black listing with the immigration department and potentially tax and social security issues.
Immigration departments are cracking down on the use of business visas for extended or frequent stays that may be more suited to work permits
. There is a belief that a history of using business visas will guarantee future entry, but there is a new and significant risk of questioning and detainment, as well as penalties for the business sponsor.
There is an increased interest in a new visa class to cover this type of mid-range assignment by offering a ‘short-term work visa’, which would allow for longer stays and more involved work activity.
However, until that type of immigration reform occurs, the sole legal route for long term or substantive worker assignments is the work permit.
Work permits give an expat assignee express permission to engage in substantive work in country on behalf of their employer. Often, this may involve management positions, systems implementation or other work that generates revenue, but may not always be of long duration. Even a short stay may require a work permit, depending on the type of employee activity.
The defining element for choosing to apply for a business visa or work permit is the type of business activity, and if it is significant then the worker must have a work permit. Because a work permit allows a longer stay with more involved business activity, some countries may scrutinize applications closely, which could add to the time for approval.
Examples of business activity that might require a work permit includes:
- Work site supervision and surveys
- Performing equipment or systems installation, troubleshooting or consultancy
- Temporary assignment to a vacant or absent position
The work permit should match the type of employee activity, and failure to do so raises compliance risks even if the work permit is legally obtained.
Work Permit Requirements
The work permit is generally more costly than a business visa, and in some countries requires that the company have a local legal entity as a sponsor. This can be problematic where a company is increasing their presence in a country and need staff, but have yet to receive all the approvals for a local entity. Use of a GEO solution for sponsorship could solve this problem, but there may still be a lengthy approval process in some cases.
Most expats on a work permit will be engaged in business activity that will also require compliance with local income tax and social security withholding requirements, which also increases the effort and cost to the employer. Historically this was another reason that companies were willing to circumvent a cumbersome work permit process by using a business visa, but the risks to this strategy continue to increase. For example in China there are reports of immigration authorities requiring copies of tax returns from foreign citizens to be sure they aren’t avoiding Chinese income taxes.
Many smaller multinationals are tempted to circumvent the immigration policies of a new target market through the use of business visas for medium to long-term stays. If the staff on assignment are simply engaged in marketing activity or exploring the cost of doing business, then this should be within local rules. However, as soon as more involved activity takes place such as running an office, managing staff or other revenue related work, then a work permit is probably required to be compliant.
Each country has their own specific regulations for when a work permit is needed, and every situation is open to interpretation by immigration authorities. It should be noted that immigration departments are becoming more strict in the enforcement of business travel rules, and what has worked in the past for some expat workers may no longer be acceptable practice.
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The information in this article is subject to changes in local legislation.