Ablean Saoud examines how the OECD's BEPS project, and specifically Action 7, will affect multinational business travellers.
It is expected that outcomes from the Organisation for Economic Co-operation and Development's (OECD) Base Erosion and Profit Shifting (BEPS) project will affect many multinational business travellers.
Specifically, the BEPS Action 7 Report suggests changing the definition of ‘permanent establishment’ (PE) for international tax law.
Consequently, many countries, including Australia, are entering into a multilateral instrument to change the definition of PE (among others) in tax treaties. This may apply to Australia’s treaties from as early as 1 January 2019.
Even countries that decide not to adopt the report’s recommendations will likely monitor multinationals more closely to identify whether their activities are causing PEs to arise.
If your people are travelling regularly to specific locations, these changes will increase the risk that their travel will give rise to a PE in Australia and/or foreign jurisdictions. This will particularly affect:
As a result, these PEs could affect not only domestic corporate taxes, but also attract further wage and employment tax obligations in foreign jurisdictions.
To minimise the impact of these changes, we recommend that human resources and mobility professionals pay close attention to the movements of its mobile employees to ensure they are not giving rise to PEs while travelling for business.
Likewise, we also recommend implementing or revising travel policies, procedures and rules for mobility staff to manage the risk of a PE arising in a foreign jurisdiction.