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Short Term Business Assignments: Tracking

This is the second article of a three part series on Short Term Business Assignments. It will illustrate tracking measures that can be implemented to ensure compliance when sending an employee overseas. The first article explored compliance concerns and provided an overview on the potential risks and consequences of short term business assignments. 

As discussed in the previous article, many companies use short term business assignments for specific types of planned activity in a foreign country.  This can be a cost efficient and simple method of initiating customer relations or sales efforts, but there is the risk of running afoul of immigration and employment laws if the length of stay or frequency exceeds the limitation for standard business visas.  For this reason, it is recommended that business travel be monitored by the employer, to avoid violating local regulations – possibly inhibiting future travel or business activity.

It is important to note that tracking and compliance has become a priority for many companies engaged in foreign commerce, as governments and immigration authorities are clamping down on the overuse of business visas.  Violations can result in penalties, future travel restrictions and loss of business opportunities.

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Factors to Consider When Creating a Tracking System

To avoid non-compliance problems, it is essential for human resource departments to implement some type of tracking system that provides a means to oversee business travel assignments.  The tracking method must include ‘triggers’ that will alert the traveler and HR that they may be close to violating host country immigration and employment rules.

The key factors to track will include:

  •  The type of business activity:

Business visas in most countries will have specific limitations on the type of permitted business activity.  Typical allowed activity, that falls within the scope of a business visa, include sales, marketing and attending meetings.  However, concluding contracts and other revenue creating activity would not be permitted. This could also trigger permanent establishment tax liability in addition to violating immigration laws.

  • The duration of the stay or cumulative days in country:

A business visa will have a fixed duration, ranging from a few days up to six months, and upon expiration will require an extension or departure from the host country.  Tracking the number of days remaining on current visa is important, but cumulative days should also be monitored if the employee is exiting and re-entering on a new visa.  Some countries use the number of cumulative days in a 12 month period as a measure of permanent establishment, as well as criteria for personal income tax residency for the employee.

  • The frequency of visits to a single country:

If an employee is making frequent trips to one country it is important to track the frequency since there may be limitations on how often a business visa can be used for multiple visits.  Also, frequent trips could alert immigration to a company’s use of business visas to circumvent the more onerous work permit process, and may invite increased scrutiny of all business travel to the country.

Approaches to Tracking Business Travel

Human resource departments can use host country research, checklists, mobile technology and other software applications to evaluate and monitor the activity of business travelers.  Simple calendars may not be sufficient to track the more subtle aspects of business activity, or to measure progress toward compliance alerts.

Pre-departure Steps

  1. Research on Host Country Regulations: This is an essential first step to fully understand the specific country rules regarding business visas, employment laws and permanent establishment triggers.  Then, these regulatory limits can be used for alerts and triggers in the tracking method for each country visited.
  1. Develop a Pre-departure Compliance Checklist: Using the host country’s rules as a guideline, a pre-departure checklist should be developed, including items such as:
  • Allowable length of stay for a business visa
  • Planned length of employee stay and potential extensions
  • Type of planned business activity and objectives
  • Frequency of previous visits and/or cumulative days in country
  • Number of previous business visa applications
  • Any previous issues or inquiries by immigration authorities
  • Existing tax treaties that could affect permanent establishment rules or personal tax residency

A pre-departure checklist similar to this should help avoid any issues on arrival, and will provide the basis for monitoring and tracking the traveler.  The checklist can be integrated into any tracking system used for a specific country.

Post-departure Tracking

After departure, tracking and reporting of employee activity should be matched up against ‘non-compliance triggers’ and alerts.  These triggers could be based on number of days in the host country, visa extensions and types of business activity to allow HR to monitor the potential for non-compliance. By using mobile technology applications, both HR and the employee can stay aware of any issues ahead of time.

There are two examples of tracking applications that could be useful for short term assignments:

  1. Trac-King Mobile App

One such application is Trac-King, a day counting app for iPhones. Trac-King automatically logs the number of days in a country, using a geo-location technology.  It can be configured by the time frame (number of days in a month or year) or by specific trips.

  1. Tracer

Another mobile technology requires users to manual enter location data, but organizes the data via an online calendar. “Ernst & Young’s Tracer is a smartphone application that allows travelers or assignees to voluntarily and easily track their movements for tax and immigration reporting and compliance purposes.” 

Ongoing Communication

Regular communication with employees on foreign assignment is a crucial step which goes beyond simple location and activity data collection.  Employees may fail to appreciate that any significant business developments or changes in activity could result in either immigration violations or even tax liability.

For example, an employee who is involved in a sales or negotiation process may suddenly be faced with a potential client who wants to finalize a deal.  While this may be the desired business result, concluding a contract in some countries will immediately trigger permanent establishment tax liability.  Therefore, regular communication via email, phone calls or texts is one way to monitor the substantive daily activity for compliance purposes.  Also, the employee is likely to have the best sense of progress and an idea of the required length of stay, giving HR time to develop a contingency plan for visa extensions or exit and re-entry into the country.

Summary

Tracking employees on international assignments is extremely important to ensure compliance with both local immigration and employment laws.  While the use of short term business visas has advantages, there are limits on both the length of stay and scope of business activity.  Failure to adhere to host country laws can carry consequences for both the employee on assignment and the employer.  Tracking systems that have integrated alerts for HR can minimize the potential for non-compliance, and allow for seamless communication and travel planning.

As an alternative, many companies entering a new market will rely on a solution such as Shield GEO, which provides a local employer of record and payroll service for clients.  For longer stays, Shield GEO can handle all aspects of required work permits and statutory withholding rules, eliminating a company’s reliance on short term business visas and multiple re-entries to the country.

Get in touch to find out more about how an Employer of Record solution can help your company

The information in this article is subject to changes in local legislation.

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