Market trend |
It is clear that employees expect more flexibility. Whilst some companies have drawn the line at offering this flexibility across borders due to the numerous ramifications, many groups are reviewing strategies to make it work on a global scale (without borders) in order to attract and retain top talent and benefit from more flexibility in their operating model. Changes to the organisational structure need to be understood from a broad variety of perspectives, including corporate tax and transfer pricing. |
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Why it matters |
When a Permanent Establishment (“PE”) claim is successfully made, this could trigger a separate taxable presence and potentially double taxation. Such double taxation may not always be easy to remediate when it concerns a PE qualification as such. |
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| Apart from the corporate tax consequences, there may also be collateral risks and consequences from a VAT and social security perspective, from a personal income tax perspective for the employees concerned and equally from a director liability perspective. | |
| Non-compliance with specific tax formalities for PE's could result in penalties or in some cases even criminal sanctions. There is also an increased risk of tax audits and overall scrutiny from tax authorities, resulting in increased management time and costs. | |
| Impact on the overall transfer pricing model/effective tax rate of the group. |
Where we can assist |
Overall PE risk assessments to detect potential PE risk areas (can be tailored to certain job titles, business units, etc). |
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| (Co-) creation of a working-from-anywhere policy tailored to the specific needs of a group. | |
| (Co-) creation of business (transformation) models to accommodate a working-from-anywhere policy within the group (from design to implementation, across various tax/legal workstreams). | |
| (Co-) creation of a tax control framework in the context of PE’s in a working-from-anywhere environment (i.e. post implementation of a working-from-anywhere policy). |
