Permanent Establishment Risks Firmly In Focus
Many global mobility leaders are waking up with cold sweats in the middle of the night.
First, a quick recap.
If you’re not aware of what it is, permanent establishment is when you create a taxable presence in a country. By triggering permanent establishment, you then risk that country being able to tax a portion of your corporation tax profits, amongst other things.
There are many different ways to trigger permanent establishment, and it can vary significantly from country to country. Likewise, the enforcement of permanent establishment can also vary from country to country.
But if you are sending senior directors abroad or are sending people in sales-generating roles, to name but two examples, then you need to be extremely careful about the potential for accidentally triggering permanent establishment risks.
This is why permanent establishment is fast becoming the biggest risk on the radar of global mobility leaders.
That was one of the key takeaways from John’s visit to the Global Mobility Executive Leaders Exchange in London.
The Work From Anywhere Tsunami
The original agenda for the event didn’t even mention work from anywhere, yet it took up over 80%+ of the discussion.
This is because work from anywhere is almost becoming a standard request from new hires.
Potential new hires are requesting some element of work from anywhere before they’ll even consider taking a role, meaning global mobility teams are getting inbound compliance requests before someone is even hired.
Global mobility leaders appear to be getting an enormous amount of inquiries coming in which is not easy when you’re a small team looking after hundreds (if not thousands) of remote workers.
Remember that global mobility functions were primarily set up to deal with a targeted group of employees, expats, who were a tiny fraction of the overall workforce. Whereas remote workers are now a considerable portion of the workforce in many companies.
Work From Anywhere Is The New Ping Pong Table
Forget the bean bags or ping pong tables. Work from anywhere is the new game in town.
This has been reinforced by a recent Qualtrics survey which indicated that “80% of employees looking for a new job said it was important to them that their next job offer them the opportunity to live anywhere”.
We have already witnessed The Great Migration earlier this year. When travel opens up early next year, and you see one of your friends post one of these images, will that create another risk of employees leaving their company if not offered some flexibility around work from anywhere?
New Work From Anywhere Solutions Critical
This is also linked to another challenge for global mobility leaders; many lack the technology tools to be able to quickly assess the full range of work from anywhere risks.
With such an enormous increase in inbound work from anywhere requests, tech solutions will be required to help reduce the manual workload for global mobility teams.
Tracker Software Technologies and Equus Software were both mentioned, amongst others.
A Tricky Balancing Act For Global Mobility
With so many requests coming in for work from anywhere, how can global mobility understand the ROI (Return On Investment) of work from anywhere?
How can you weigh up the potential risks with the employee benefits? This was a key discussion point during the event.
This is easier said than done, but it is nonetheless crucial for the global mobility team to balance the risks with the potential employee benefit.
Google invested in bean bags, ping pong tables and nice lunches for their employees in the early 2000’s yet did that mean every company suddenly invested in the same facilities for their employees?
And it’s the same approach with work from anywhere.
You need to decide for your own company what works for your company, the company culture and whether your industry is even the right fit for work from anywhere.
Many won’t, such as manufacturers and highly regulated financial institutions.
However, those that are, such as tech companies, will soon be feeling the pinch, if they’re not already.
Another critical element is determining which roles, such as tech engineers, are especially susceptible to attrition if you do not offer some degree of work from anywhere, and to bring this into the ROI framework.
A strong cross-functional framework involving multiple departments is non-negotiable in this respect.
Turning Global Mobility Into Marketers
With so many more people now exposed to work from anywhere compliance risks, another major challenge raised during the event was around awareness.
Because work from anywhere impacts a lot more employees compared to traditional expats, it is critical to make everyone in the company, especially managers, aware of work from anywhere risks.
This means global mobility teams need to raise their game when it comes to building their marketing muscles and simplifying their messaging to avoid getting bogged down in complicated compliance terminology. This also means working patiently with other teams across different functions, divisions and countries to make everyone at all levels aware of the risks to work from anywhere.
Permanent Establishment Tax Advisors Under The Microscope
A surprising message that came out of the event was that people are not exactly thrilled, to say the least, with their existing tax providers.
Establishment tax advisors tend to be pretty solid in their core home markets (e.g. US, UK) but as soon as you go abroad to other jurisdictions, which is the case with work from anywhere, the service levels were seen as being inconsistent.
The one consistent feature was the high pricing.
Work from anywhere demands a completely different service approach to traditional expats and traditional providers need to step up a gear.
A Word Of Thanks
Thanks again to Alex Felstead, Shaun Griggs, Charlie Dabney and all the Global Mobility Executive Team for putting together a great event, and to Siobhan Cummins and Rachel Parsons for moderating the event.
Thank you for everyone’s contribution and sharing of experiences so far.
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John is Co-founder of the Work From Anywhere team, a platform to help companies execute a hire or work from anywhere strategy. John is a Chartered Accountant who speaks 6 languages and was previously the senior finance leader of a €4 billion division of FTSE-listed CRH Plc. John and his family are passionate about travelling and his eldest daughter, Rosa, while only 5 years old has already travelled to 25 different countries.