1. Short-term Assignments:
Tax and HR Policy Considerations September 15, 2016 Presented by Mark Tirpak and Ted Hess

2. Agenda
Defining Short Term Assignments
Host Location
Treaty relief
Social tax considerations
Short Term vs Business Traveler

3. STAs (Travel Away from Home)
Assignment of 1 year or less
Tax home does not shift
Based on intent
Consider documentation
Tax treatment changes when intent changes
Per diem payments
Housing, Meals & Incidentals, Transportation
Payments for family members
Payments in excess of nontaxable Per Diem
Watch for extended assignments

4. Adjustments to Compensation
“Away from Home”
Benefits available
Per diems and temporary lodging
Does employee qualify?
Identify and document “tax home”
Is employee maintaining home in Home location
Intent
One year or less
Extension of assignment
Payment of other items – host tax
Inbound to U.S.

5. Host Location
Per diem treatment
Treaty utilization
Domestic law
Withholding requirements - Canada

6. Treaty Relief U.S. Model Income Tax Convention
Article 15 – Dependent Personal Services, Paragraph 2
…remuneration derived by a resident of a Contracting State in respect of an employment exercised in the other Contracting State shall be taxable only in the first-mentioned State if:
The recipient is present in the other State for a period or periods not exceeding in the aggregate 183 days in any twelve month period commencing or ending in the taxable year concerned;
The remuneration is paid by, or on behalf of, an employer who is not a resident of the other State; and
The remuneration is not borne by a permanent establishment or a fixed base which the employer has in the other State.

7. Treaty Considerations
Understanding the definitions within the treaty is critical!
The U.S. did not add comments to the OECD commentary on Article 15 of the 2010 Model OECD treaty. An “economic employer” interpretation of the term “employer” rather than a U.S. legal definition could apply.
Watch out for actual or deemed corporate permanent establishments!

8. Social Tax Considerations
Certificate of coverage
Duration
Payroll implications if no totalization agreement

9. Short Term vs Business Traveler
Is there a difference?

10. Factors that influence risks
What are the travelers doing?
How long is the travel?
Who is the employer/ beneficiary of work performed?
What is the corporate structure?
What level is the person who is travelling?
Where is the person going?

11. Risks inherent with business travelers
Business traveler risks
Permanent establishment risk
Regulatory Compliance
Business reputation risk
Unhappy employee population
Budgetary risk
Risk of prosecution
Employment law risk
Many different factors to consider
Some are risks to the individuals
Most are risks to the organization

12. Advanced border technology
What has changed and how do authorities go about identifying business travelers?
Advanced border technology
Immigration and tax authorities are sharing information
Countries are sharing information to scrutinize immigration status
Authorities are using more sophisticated tracking and reporting systems to collect the information
By conducting analysis authorities are linking corporate deduction to individual filings
Organizations have access to better information
Data can be shared more readily from travel providers, expense reporting, and inter-organization departments
Costly remediation

13. Why are authorities increasingly focusing on business travelers?
The global economic climate
Increased sensitivity about protecting domestic labor market
Governments want to increase revenue
From employers: unforeseen triggering of a permanent establishment
From individuals: may be obliged to file/ remit taxes in multiple jurisdictions
Business travelers present an untapped source of revenue
Because they can!

14. Deportation of employees Damage to business reputation
Consequences
The consequences of not managing risks created by business travelers are severe:
Fines
Deportation of employees
Damage to business reputation
Lost business opportunities

15. Policy (and other) considerations
May seem simpler than a long-term, traditional expatriate assignment
Employee : “I (we) can go anywhere / handle anything for a year!”
Employer : “We don’t have to do/spend as much!”
Reality may be more complex
Employee: “Is it worth it…?”
Employer: “Where do we draw the line…?

16. Policy (and other) considerations
Employee: “Is it worth it…?”
If taking my family is either not practical or not allowed? Can I/we handle an unaccompanied assignment?
If my family is allowed to acccompany me – what about the disruption to my spouse’s work? My children’s education, activities, etc.?
To leave a “safe” role behind? Will it be waiting for me when the assignment is over?

17. Policy (and other) considerations
Employer: “Where do we draw the line…?”
Do we provide the same benefits we provide to long-term assignees?
What makes a 10-month assignment assignment different (“easier”) than a 14 month assignment?

18. Policy (and other) considerations
No Easy Answers; Questions to Consider:
Why a short-term assignment?
How likely is it to be extended?
What situations call for it?
Has the business done the cost-benefit of frequent travel vs assignment?
Do your policies make STAs seem less costly? Are they really?

19. Contact Details
Mark Tirpak Ted Hess Managing Director Independent Consultant GTN South The Woodlands, TX Phone: Mobile: