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Borderless commuting – a new work trend with increasing fiscal challenges

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In the Norwegian Financial paper, DN, on the 3rd October 2015 we could read about "Extreme - commuters" - employees who commute to work outside Europe, outside of the area where there is a relative easy flow of labor. This, along with commuting within Europe, is becoming more and more common. International mobility has become an integral part of Norwegian and foreign companies everyday life. The question is, can you send the staff off with the plane to Singapore and think that it is the same as commuting between London and Manchester?

Unfortunately the extreme commute is a bit more complicated than a “regular” work commute - and unfortunately, we often see that companies do not see the financial and immigration complications before it is too late. International mobility is a challenge for many companies, and the new group of employees who commute across national borders are no exception.

Business Travelers, (alternatively "Extreme Commuters"), are a group of international workers we are going to hear more about in the future. The reason for this is because of the issues mentioned above, which are becoming more and more common, but also because this group of employees are going to be in the spotlight of the various countries' tax and immigration authorities.

What makes it more and more common to have commuters who cross borders?

  • A general increase in mobility over the last years and in the years to come.
    Surveys show that we can expect a 50% increase by 2020! This means that more companies are going to have employees working across borders in the years to come and there will be more people working internationally.
  • The traditional International worker, "expat" as they often are referred to, who moved overseas for a 3-5 year period, will become less common.
    Where it used to be easy and common to move the employee together with the family to another country for an extended period of time, we now see shorter work contracts and that the families are staying in the home country.
  • Increased globalization and digitization.
    It has become easier to perform the job "anywhere" in the world - we are always available and online. This makes it all a bit more flexible and you do not have to move the whole family to another country as before.
  • Family constellations.
    There is an increasing number of "international families" with spouses / partners from two different countries. This may make people want to live in one country but still work in another. Choice of place to live, schooling and perhaps most importantly – the accompanying spouse / partners career are considerations which today plays a more important role than it did previously. We see from many cases that this results in the family living at home and that the employee commutes cross borders.
  • Increased cost focus.
    In economic challenging situations, as we are experiencing now, many companies consider it cost saving to have people who travel/work internationally compared to the traditional expatriates.

We will frequently hear more about these commuters, both from a company and employee angel/point of view, as this is the way we want to work and will work in the future

What challenges exist?

In an increasingly international, mobile and digitalized world, we see more and more countries tightening the regulations and start to have an increased focus on securing their tax revenues. The fact is, that many people who works across borders only report, pay taxes and duties to their country of domicile. There is a high number of unrecorded cases, and there is little doubt that several of these employees work enough days in a foreign country to make them obliged to report (both for the company and the employee) and to pay tax / fees also in the country of work.

Having employees who work across borders is not a straightforward issue and coming back to the question raised at the beginning of the blog, being an "extreme commuter" is definitely not the same as travelling between London and Manchester. Moving employees across borders is complex and there are many pitfalls. Although I have mentioned tax and surcharges for the employees above, there are also other factors that are necessary to deal with. Worth mentioning are issues like corporate tax, immigration, social security and labor law.

Stricter regulations, more control and the need and wish to secure tax revenues will hence be the reasons why the authorities will focus on this group of international workers.

My advice!

The way forward? This is all about addressing the challenges sooner than later. Do not push this complicated problems ahead of you. "Borderless commuting" is here to stay, and the fact that that the various countries' regulations constantly are evolving, there is not much to do about. Many companies have good procedures and policies to safeguard and capture all groups they have of international workers already. Nevertheless, we also find that many companies have little or no control, especially with the group of commuters we are talking about. It means running a risk, both for the company and its employees, in relation to the obligations they have as an employer and employee both in the home country and not least in the country (countries) where they work / operate.

My recommendation is that you take an evaluation / risk analysis at what the situation is for your company and for your employees. Do you have full control of all obligations you may have in all the countries where you operate, or do you see a red warning lights some places?

This blog post is written by Erland Nørstebø

Ståle Wangen

Ståle Wangen

Jeg heter Ståle Wangen og jobber som advokat i Advokatfirmaet PwC. Jeg leder PwC Norges avdeling for internasjonal skatt og jobber til daglig med å bistå norske og utenlandske virksomheter med skatteplanlegging, strukturering av kjøp og salg av virksomheter, internprising og andre spørsmål knyttet til bedriftsbeskatning i Norge og utlandet. Jeg har mer enn 20 års erfaring med skatterådgivning.

Skatteverdenen blir stadig mer internasjonal og kompleks. Ved kjøp og salg av varer og tjenester utenfor Norges grenser må norske virksomheter håndtere skatteregler både i utlandet og i Norge. PwC har kontorer i de fleste land og vi har et unikt nettverk av skatterådgivere som kan bistå med spesialkompetanse på de fleste områder. Jeg håper mine innspill kan gi deg en alternativ innfallsvinkel til ulike temaer enn hva tradisjonelle nyhetsbrev gir.

Ta gjerne kontakt dersom du har spørsmål, kommentarer eller innspill.

My name is Ståle Wangen and I work as a partner and lawyer in PwC Tax and Legal Services in Oslo. I am head of PwC Norway’s international taxation services, and I have more than 20 years of experience assisting Norwegian and foreign businesses with tax planning, cross border restructuring, mergers and acquisitions (M&A), transfer pricing and other issues related to corporate taxation

Tax world is becoming more international and complex. Norwegian companies must increasingly handle tax rules abroad. PwC has offices almost all over the world and we have a unique network of tax advisors who can assist with expertise in most areas.

Please feel free to contact me if you have any questions, comments or input.

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