The Deloitte Tax Short-term Global Assignment Survey

Transcription

1 The Deloitte Tax Short-term Global Assignment Survey February 2006

2 Deloitte Tax LLP is proud to present the 2005 results of the Short-term Global Assignment Survey. The survey covers almost 200 companies, and was completed by a mix of Tax Directors and HR personnel, across a variety of industry groups. The results confirm that companies are increasingly relying on short-term assignments as opposed to traditional long-term expatriate types of engagements. An overwhelming 70 percent of respondents anticipate an increase in short-term global assignments within their companies over the foreseeable future. This growing number of short-term assignments brings increasing complexity in managing the assignees a situation that is creating major tax and compliance challenges for companies around the world. The survey revealed that companies now have a much greater awareness of the corporate and employee risks associated with short-term assignments than they have in the past. 75 percent of participants ranked the risk associated with their short-term business traveler population as High/Moderate, and an increasing number of companies, 29%, are realizing the benefits of involving their corporate tax groups in discussions regarding short-term assignment policy. The results also indicate that companies continue to struggle with policy issues related to short-term business travelers. Although a growing proportion of companies (75% of participants) are tracking their short-term assignments, a surprisingly large number 25 percent still do not have any documented short-term assignment policy. Furthermore, of those that do have policies, 76 percent have a single, global policy that applies to their entire populations versus having separate regional policies that accommodate cultural, geographic and regulatory nuances. Additional survey highlights, including significant challenges and emerging trends in policy-setting and risk management, can be found below. We hope you find the results of the survey to be useful. If you have any questions regarding the survey or your short-term assignment program, please do not hesitate to contact me directly via the phone number or address found below. Sincerest thanks to the participants and everyone at Deloitte Tax LLP who made this survey possible. All the very best, Maria Martorello Senior Manager International Assignment Services Deloitte Tax LLP Tel: mmartorello@deloitte.com

3 Highlights of the survey results include: The survey results show a much greater number of companies, 75 percent of participants, actually tracking their short-term assignments than in the past. Tracking is mostly done through HR or Management. The trend is to move toward short-term assignment policies that start under three months; whereas, many companies have historically had short-term policies that commenced at three months. There is a much greater awareness of the corporate and personal risks associated with short-term assignees. Historically, many companies perceived the corporate and personal risks surrounding short-term business travelers to be low. w, over 75% of respondents perceive these risks to be High/Moderate. Companies are still showing a preference for short-term assignments versus long-term ones to meet their business needs. A large majority, 76 percent, of companies are continuing to use a single, global short-term assignment policy that applies to their entire populations versus having separate regional policies. Many companies that acknowledge short-term international assignments maintain a separate and distinct policy from their long-term assignments as well as from their domestics ones (58 percent). Unfortunately, there are still a large number of companies, 26 percent, without any documented short-term assignment policy! Many companies still do not have guidelines built into their policy with regard to qualified break-in service. Companies are starting to pull back on the number of trips allowed for their employees to fly home during an assignment. In fact, more and more are not allowing any trips for assignments that are less than six months. Although there is a likely negative tax impact, many companies are still allowing their employees to take in lieu of trips to places other than their home locations. They are also allowing employees to swap their trips in exchange for family members or friends joining them at the work locations. Of the companies represented in the survey, the majority have between 1-25 known short-term assignees/business travelers. Companies are realizing the benefit of pulling their corporate tax groups into discussions and sharing information with regard to the corporate risks associated with short-term assignments. *For purposes of this survey discussion, the terms Frequent Business Travelers and Short-term Assignees are interchangeable. As used in this document, the term Deloitte includes Deloitte & Touche LLP and Deloitte Tax LLP.

4 Highlights of the survey results include: The survey results show a much greater number of companies, 75 percent of participants, actually tracking their short-term assignments than in the past. Tracking is mostly done through HR or Management. The trend is to move toward short-term assignment policies that start under three months; whereas, many companies have historically had short-term policies that commenced at three months. There is a much greater awareness of the corporate and personal risks associated with short-term assignees. Historically, many companies perceived the corporate and personal risks surrounding short-term business travelers to be low. w, over 75% of respondents perceive these risks to be High/Moderate. Companies are still showing a preference for short-term assignments versus long-term ones to meet their business needs. A large majority, 76 percent, of companies are continuing to use a single, global short-term assignment policy that applies to their entire populations versus having separate regional policies. Many companies that acknowledge short-term international assignments maintain a separate and distinct policy from their long-term assignments as well as from their domestics ones (58 percent). Unfortunately, there are still a large number of companies, 26 percent, without any documented short-term assignment policy! Many companies still do not have guidelines built into their policy with regard to qualified break-in service. Companies are starting to pull back on the number of trips allowed for their employees to fly home during an assignment. In fact, more and more are not allowing any trips for assignments that are less than six months. Although there is a likely negative tax impact, many companies are still allowing their employees to take in lieu of trips to places other than their home locations. They are also allowing employees to swap their trips in exchange for family members or friends joining them at the work locations. Of the companies represented in the survey, the majority have between 1-25 known short-term assignees/business travelers. Companies are realizing the benefit of pulling their corporate tax groups into discussions and sharing information with regard to the corporate risks associated with short-term assignments. *For purposes of this survey discussion, the terms Frequent Business Travelers and Short-term Assignees are interchangeable. As used in this document, the term Deloitte includes Deloitte & Touche LLP and Deloitte Tax LLP.

5 STA Survey Results Role of person completing this survey. 1% 9% 15% 1% 74% HR or International HR Payroll Corporate Tax Immigration Other (please specify) Number of short-term assignees. 100% 80% 60% 40% 20% 0% or more Response Total Domestic Cross-border Assuming your company has a long-term assignment policy does your company have a separate short-term international assignment policy? 26% 58% 16% Separate Policies Short-term Policy Combined Policy

6 Does your company have a short-term "domestic" assignment policy? 34% 66% Does your company have intra-regional short-term assignment policies? 24% 76% At what point does your short-term international policy START? 6% 20% 32% 6% 5% 11% 20% < 3 months 3 month 3-6 months 6 months > 6 months Other (please specify) consistent policy, depends upon circumstance

7 STA Survey Results At what point does your short-term assignment policy END and your long-term policy BEGIN? After: 7% 15% 17% 7% 5% 49% 6 months 12 months 18 months 24 months consistent policy Other (please specify) Does your policy give assignees guidelines with respect to a qualified break in service between assignments (e.g. guidelines with respect to the amount of time the assignee must work back in the home office before undertaking another short-term assignment)? Do not know 10% 10% 80% Does your company tax equalize short-term assignments? 44% 56%

8 Do you provide tax preparation assistance to people who have been on short-term assignments? 24% 76% Do you deduct a hypothetical tax from the employees who are on a short-term assignment? 32% 68% If yes, at what point do you deduct a hypothetical tax? After: 2% 8% 34% 42% 14% 3 months 6 months When a work site country tax is imposed t sure Other (please specify)

9 STA Survey Results What is the nature of the short-term assignments? (Check all that apply) 12% 1% 29% 28% 16% 14% Projects Developmental Training Business need Technology initiative Other (please specify) If you have a short-term assignment policy, does your short-term policy put each assignee on unaccompanied status without a spouse/partner or family? 46% 54% If you have a short-term assignment policy, do you provide the following for short-term assignments? 70% 60% 50% 40% 30% 20% 10% 0% Destination Services Language Training Cultural Training Shipment of Personal Belongings

10 Does your short-term policy require that all employees continue to maintain a home country residence? 48% 52% With regards to housing which form is most often used (provide % of population at each)? 7% 33% 47% 13% Furnished Apartments Hotels Corporate Owned Housing Other For the below assignment lengths, how often do you allow your employees to fly home? Enter # of trips. 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Zero Trips One - Three Four - Six More Than Six 3-6 months 6-9 months 9-12 months

11 STA Survey Results Do you pay daily or monthly meals and incidentals per diem? 31% 69% What drives the daily or monthly amount of the meals and incidentals per diem? 13% 20% 30% 37% Management Cost of living tables Tax free allowance amounts as dictated by the local tax authorities (e.g. IRS per diem tables) Other (please specify) Does your company allow its employees to travel to another location in-lieu of the person s home or normal work site locations? 51% 49%

12 Does your company reimburse the cost of the employee s spouse/partner or family to fly to the work site country inlieu of the assignee flying to his/her home location? 38% 62% Besides housing meals per diem transportation costs what other allowances does your company provide for STA? (i.e. Hardship Allowance foreign service premium etc.) List all. RESPONSES Excess Baggage Disturbance Payment Substandard Housing Premium COLA Completion Bonus Transfer Allowance (combination hardship and incentive) Foreign Service Premium Short-Term Allowance Hazard Twenty Percent Salary Uplift Emergency Leave Short-term Assignment Premium Completion Bonus Danger Premium Car Eligibility Settling-in Allowance Pre-Assignment Allowance Children s Schooling (limited) Hardship Allowance Good & Services Allowance Health Insurance Coverage Start of Assignment Lump Sum Miscellaneous Relocation Lump Sum Allowance Spousal Allowance (if assignment > 12 months) With regards to short-term assignments, how would you describe your corporate tax group s involvement? 10% 4% 15% 10% 32% 29% Very involved Sometime involved Rarely involved involvement Outsourced Do not know

13 STA Survey Results Does your company review the corporate tax implications (i.e. permanent establishment issues) surrounding shortterm assignments? Do not know 13% 38% 21% Sometimes 28% If yes, how does your company determine whether a permanent establishment exists? 11% 10% 47% 32% Based on the length of the project Based upon the activities of the project Do not know Other Are you provided with the economic arrangement (i.e. transfer pricing arrangement cost sharing etc.) of an assignment so that you can make the appropriate determination with respect to taxability of your short-term employees? Sometimes 29% 34% 37%

14 Does your company track the employees on short-term assignments? 25% 75% If yes, how do you track the days an employee has worked outside the home location? 22% 12% Other Responses: Employee keeps travel log Expat Service Tracks Individual Travel Calendar-External Tax Advisor Tracked by Relocation Provider 1% 9% 8% 48% Company s Timesheet System Your visa and Immigration Group Your Company s Travel Group HR or Management Tracks Office Visitor Log Books Other Does your company track assignment extensions? Do not know 7% 16% 77%

15 STA Survey Results If yes, do you change the individual s compensation if the assignment extends beyond one year? 34% 66% Why would you think a company would not track the days for employees working outside their home location? 16% Other response: HR may be unaware of business travelers Exceed treaty provisions 16% 41% 27% Too labor intensive Assume the employees are exempt from tax in the host country Risk is minimal Other List the largest impediments in tracking days. RESPONSES Investment of time Employees that do not cooperate Transferees not completing their organizers HR is not always involved in temporary system in place to track travel Lack of education within the organization assignments Administration Size of the employee population Knowing which employees need to track Business travelers outside of policy provisions Break in Assignment Communication Barriers

16 What are the three biggest issues that you face when administering a short-term assignment program? RESPONSES Length of assignment Global equity Administering policy uniformly Ensuring Tax compliance Variability of tax regulations in countries Being aware of employees who need to be placed on IA status Knowing what employees are on a shortterm assignment Extensions beyond 6 months due to US tax issues Determining who extends People assume rules of business trip apply Education on policy Family visits but we only provide 1 bedroom apt. Avoiding local tax responsibilities Uncertainty of assignment lengths - ST more likely to change Is it a true ST assignment? Managing Visa Requirements Tracking the days spent on a STA Time/language Barriers Bureaucracy of Immigration and Tax Laws Employee Requests Determining Pay and Allowances COLA Effectiveness of talent utilization Business Uneducated About Risks Employee Commitment to Time Tracking Calculating Gross-ups Trips can be multiple of short duration Awareness of all short term assignees Getting managers to think about what is a short-term assignment and what is a business trip Benefits Do you have separate payroll administration for shortterm assignment? 13% 87%

17 STA Survey Results How would you rate the risk for any company not complying with local tax and payroll laws in a country for STA? 1% 7% 3% 13% 36% 40% High Risk Moderate Risk Low Risk Risk Depends on the Country N/A What does your company do with respect to short-term assignments to ensure compliance from an immigration perspective? RESPONSES Local HR ensures that all proper immigration/work permit papers have been filled out We use Deloitte for tax issues and Cendant Mobility for immigration/visa issues. Compliance check by the host country before assignment Obtain work permits and visas as required We rely upon our immigration consultant firm. All transfers processed by my team; employee and business have no choice but to contact myself or colleagues in order to arrange corp. housing, per diems, etc. So, my team knows of 99% of transfers into US and we ensure visa compliance. HR advisors in the business also know immigration rules and will pass along any unusual cases to my team just in case we are left out of the process. All STA s must go through the Expat Services Immigration organization. Continue to monitor travel days and work with business units to educate on tax compliance. We have in-country HR leaders who help track employees in country. IHR monitors and administers all assignees Obtain as much information as possible from the management team up front in order to obtain correct immigration papers Check local formalities Limit the length of the assignments to remain in compliance with local immigration laws Work with Host Country HR Educate and outline a policy and required guidelines / approvals If we know it will be a 3 plus month assignment we work locally for visa s

18 How would you rate the following countries in terms of risk for non-compliance with local tax and payroll compliance? 60% 50% 40% 30% 20% 10% 0% United States United Kingdom Australia Canada Japan Low Risk Moderate Risk High Risk Don't Know What do you think the trend for short-term assignments will be at your company in the next 2-3 years? 3% 22% 5% 70% Increase Remain Relatively The Same Decrease Do not Know Assuming the trend is on the rise what do you think the reason is for the rise in short-term assignments? 5% 27% 46% 22% Less costly than long-term assignments Easier to find people to go Business need Other (please specify)

19 STA Survey Results Which department is handling or should be handling these short-term assignments? (If one group is but you believe another should please indicate) 60% 50% 40% 30% 20% 10% 0% HR Tax Finance Business units Currently Handling Should be Handling Shared services Travel department For More Information For more information on the Short-term Global Assignment Survey, please contact: Maria Martorello Senior Manager, International Assignment Services Deloitte Tax LLP Tel:

20 STA Survey Results About Deloitte Deloitte refers to one or more of Deloitte Touche Tohmatsu, a Swiss Verein, its member firms, and their respective subsidiaries and affiliates. Deloitte Touche Tohmatsu is an organization of member firms around the world devoted to excellence in providing professional services and advice, focused on client service through a global strategy executed locally in nearly 150 countries. With access to the deep intellectual capital of 120,000 people worldwide, Deloitte delivers services in four professional areas audit, tax, consulting and financial advisory services and serves more than one-half of the world s largest companies, as well as large national enterprises, public institutions, locally important clients, and successful, fast-growing global growth companies. Services are not provided by the Deloitte Touche Tohmatsu Verein, and, for regulatory and other reasons, certain member firms do not provide services in all four professional areas. As a Swiss Verein (association), neither Deloitte Touche Tohmatsu nor any of its member firms has any liability for each other s acts or omissions. Each of the member firms is a separate and independent legal entity operating under the names Deloitte, Deloitte & Touche, Deloitte Touche Tohmatsu, or other related names. In the U.S., Deloitte & Touche USA LLP is the U.S. member firm of Deloitte Touche Tohmatsu and services are provided by the subsidiaries of Deloitte & Touche USA LLP (Deloitte & Touche LLP, Deloitte Consulting LLP, Deloitte Financial Advisory Services LLP, Deloitte Tax LLP and their subsidiaries), and not by Deloitte & Touche USA LLP. The subsidiaries of the U.S. member firm are among the nation s leading professional services firms, providing audit, tax, consulting and financial advisory services through nearly 30,000 people in more than 80 cities. Known as employers of choice for innovative human resources programs, they are dedicated to helping their clients and their people excel. For more information, please visit the U.S. member firm s Web site at Copyright 2005 Deloitte Development LLC. All rights reserved. Member of Deloitte Touche Tohmatsu