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International Mobility: Tax Challenges and Winning Strategies

The increasing complexity of transnational tax regimes and the strengthening of international control mechanisms expose companies to heightened risks regarding the tax compliance of their expatriate employees. This in-depth analysis aims to identify critical risk areas and propose tailored mitigation strategies.

Regulatory Context and Implications

The current regulatory environment is marked by the intensification of automatic exchange of information between tax authorities (CRS, FATCA) and stricter controls on international mobility situations. Companies face growing complexity in reporting obligations, both in tax and social security matters.

Key Risk Factors

Hidden Permanent Establishment

  • Risk of requalification of the employee’s presence as a permanent establishment
  • Implications for corporate income tax (CIT) and VAT in the host country
  • Necessity of a prior analysis of presence thresholds and activities performed

Double Taxation Issues

  • Incorrect application of bilateral tax treaties
  • Risks related to tax credit mechanisms and exemptions
  • Management of tax residence certificates and supporting documentation

Social Security Challenges

  • Coordination of social security systems (European regulations, bilateral agreements)
  • Risks of double contributions or coverage gaps
  • Specific issues related to secondments and expatriations

Analysis and Compliance Methodology

Preliminary Audit

  • Mapping of mobility flows and identification of high-risk jurisdictions
  • Analysis of compensation structures (split payroll, shadow payroll)
  • Assessment of tax and social security impacts based on assignment types

Operational Compliance Implementation

Legal Structuring

  • Optimisation of contractual structures (secondment contracts, suspension agreements)
  • Implementation of documentation compliant with local requirements
  • Securing intra-group financial flows

Tax Compliance

  • Implementation of compliant shadow payroll processes
  • Management of reporting obligations (home and host countries)
  • Traceability of tax positions taken

Social Security Compliance

  • Obtaining and monitoring secondment certificates
  • Management of voluntary affiliations
  • Coordination with social security institutions

Optimisation and Control Strategies

Mobility Governance

  • Implementation of a robust international mobility policy
  • Clear definition of responsibilities (HR, tax, legal)
  • Deployment of monitoring and control indicators

Technology and Tools

  • Deployment of tax tracking solutions
  • Automation of reporting processes
  • Implementation of compliance management tools

Training and Communication

  • Awareness sessions on tax risks
  • Continuous training for HR and mobility teams
  • Regular updates on regulatory changes

Practical Recommendations

Short Term

  • Immediate audit of high-risk situations
  • Regularisation of non-compliant cases
  • Implementation of emergency procedures

Medium Term

  • Development of a country-specific risk matrix
  • Implementation of monitoring and control tools
  • Training of operational teams

Long Term

  • Periodic review of compliance processes
  • Continuous adaptation to regulatory changes
  • Benchmarking of market best practices

Effective management of tax risks in international mobility requires a holistic approach combining technical expertise, robust processes, and appropriate tools. Companies must adopt a proactive stance to secure their international operations and protect their reputation.

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