Dbriefs 080719 GMTR Final

Global employment tax: Switching from reactive
to proactive risk management

The Dbriefs Global Mobility, Talent & Rewards series
Blaise Kah, partner, Deloitte Tax LLP
Jason Russell, managing director, Deloitte Tax LLP
Amelia Corfield, senior manager, Deloitte Tax LLP
August 7, 2019
Agenda
• Global employment tax:

Trends and hot topics
• Benefits and expenses
− Tax complexities and challenges
− 4 Examples
• Leading practices for managing
compliance
• Q&A
Copyright © 2019 Deloitte Development LLC. All rights reserved. Global employment tax: Switching from reactive to proactive risk management 2
Global employment tax
trends and hot topics
Today’s compliance environment
A constantly moving target
Global trends
Tax reform Digital Enforcement

Policy driven programs to Revolutionizing the payroll Specific programs to prevent
generate specific outcomes reporting environment perceived avoidance
How does this impact organizations?
Common challenges
Monitoring
Anticipating and operationalizing employment tax changes
regulatory
changes
on an increasingly real time basis
Anticipating
Managing employment tax impact of business changes (e.g.
business
new employee benefits, M&A activity)
changes
Transparency
Higher standard of compliance as we enter a more
with
authorities
transparent and digital era of global tax administration
Governance Defining roles and responsibilities, assigning ownership of

controls tasks and agreeing escalation protocols
The gig Worker tax classification challenges as the gig economy

economy continues to grow
Tax authority trends
Areas of focus
UK
Worker classification and
Ireland use of intermediaries
Fringe benefits and
Germany
worker classification
Compliance processes
and controls
USA
Fringe benefits
and business
travellers
Belgium
Equity Hong Kong
compensation Business Travellers
Netherlands
Brazil Employee benefits and
South Africa
Equity expenses
Worker classification and
compensation
equity compensation
Polling question #1
When did your organization most recently have an employment tax audit, either
in US or elsewhere?
• Within the last 12 months
• Between the last 1-5 years
• More than 5 years ago
• We’ve never had an employment tax audit
• Don’t know/Not applicable
Benefits and expenses
tax challenges
Employee benefits and expenses
Tax compliance: A simple overview
HR decides Payroll reports

Tax dept. Employee
to benefit and
confirms receives
introduce withholds
treatment benefit
new benefit taxes
Employee benefits and expenses
Changes with the lowest visibility often can attract the highest
tax compliance risk
Visibility
New employee benefit introduced
Change in legislation re: benefit tax treatment
Change to existing benefit provision
Change to global corporate recharge process
Changes to HR systems, processes or data
Benefit provided outside of policy
Change in tax authority behavior
Compliance risk
Polling question #2
How does your organization ensure the correct tax positions are applied to
employee benefits and expenses?
• Stakeholder collaboration. Our teams (e.g. HR, Rewards, Tax, Payroll) maintain
regular contact to ensure the correct tax positions are applied throughout the
benefit lifecycle.
• We confirm the tax treatment when a new benefit is introduced (but
never/rarely revisit the tax treatment afterwards).
• Unsure. We do not have good visibility of how this process is currently handled.
Rewards and recognition
Points Think about…

awards
programs
• What is the timing of taxation (e.g. is
benefit taxable at award, when it can be
redeemed, when it is redeemed?)
Gift cards
• Valuation rules may vary in different
countries (e.g. Fair Market Value, cost to
employer, including vs. excluding VAT/sales
tax)
Time off work
• Differences in timing of taxation may create
challenges for internationally mobile
employees
Cash award
Rewards and recognition example
Points recognition programs
United States Canada

• Taxation triggered when redeemable. • Taxable when the employee redeems
their points in exchange for an award.
• Taxable when points are awarded to
the employee, provided the employee
has received enough points to reach
the minimum available award
redemption value.
Family care benefits
Fertility Think about…

treatments
• Not all countries have yet developed
rules/guidance
Adoption • Is benefit provided to the employee or

services spouse?
• Could benefit be considered a medical

Gender re- service?
assignment
Surrogacy
Family care example
Fertility treatments
United States Singapore

• Fertility enhancement to overcome • Not taxable (under administrative
inability to have children (either concession for medical treatment) if
performed on employee, their provided to employee or spouse.
spouse, or dependent) is non-
• Taxable if provided to non-spouse
taxable.
partner.
Polling question #3
Are your employee benefits programs administered “globally” (i.e. through a

single, centralized team/process), or “locally” (i.e. local countries/entities take
ownership)?
• All benefits are coordinated globally, through a single centralized team/process.
• It depends. Some benefit programs are administered centrally, and some are
administered locally.
• All benefits are administered at the local country/entity level.
• Don’t know/Not applicable.
Meals, drinks and entertainment
Team
Think about…
building
events
• What percentage of time at events is
business vs. entertainment, and what is the
overall purpose?
Office mini-
bar • Do we need to calculate a cost per person,
and if so, how?
Free meals/ • Could any costs be considered de minimus /

meal non-taxable?
vouchers
• Could alcohol costs attract a different tax
treatment?
Happy hour
Meals, drinks and entertainment example
Staff events
United States United Kingdom

• For staff events within the US, if the • The overall rationale for the event
trip is considered primarily for needs to first be considered (e.g. is
business purposes, any personal the event intended to reward high
related costs paid for by the employer performing individuals while helping
should be included in the employee's them develop and further their career,
income. or is it designed purely as a reward
for good work).
• The tax treatment of events outside
of the US is typically more complex. • Each activity on the agenda should be
reviewed to identify potential staff
entertainment elements.
Transportation
Think about…
Corporate jet
• Valuation rules likely to vary globally,
for use of car and corporate jet
Company car • Is transportation needed for security?
• Taxation of driver benefit may depend on whether

driver is hired employee vs. third party service
Driver/
chauffeur • Don’t assume all travel reimbursements are non-
taxable (e.g. some countries consider commuting
a “business” journey)
Fuel • Some countries impose limits on tax-free fuel

expenses reimbursements
Transportation example
Company cars
United States Romania

• Personal use of car is taxable. • Business use of car is not taxable.
• Method for calculating taxable benefit • Commuting is considered business
can vary: related and non-taxable.
– Automobile lease valuation • Personal use is potentially taxable,
depending on how the employer costs
– Vehicle cents-per-mile valuation
are treated for Corporate Tax
– Commuting valuation deductibility purposes.
Polling question #4
Does your organization oversee employer compliance globally?

• No, each country manages its compliance locally, and this seems to work for us.
• No, each country manages its compliance locally, however I have concerns that
we may have compliance issues in some locations.
• Yes, we have processes in place to ensure there is centralized global oversight
and coordination of our employment tax compliance.
• Don’t know/Not applicable.
Leading practices for
managing compliance
Leading practices for global employment tax compliance on
employee benefits & expenses
Cross-functional Tracking regulatory Automated processes

partnering and
changes and market with minimized
alignment with
trends manual steps
broader tax strategy
Proactive monitoring Defined roles and

Regular training for
of risks responsibilities, and
staff involved in
and regular quality documentation of
compliance
assurance checks processes
Underpinning themes
Proactive Breaking Global oversight

not reactive down silos and coordination
Question and Answer
Join us September 4th at 2 p.m.
ET as our Global Mobility Talent
and Rewards series presents:
Global mobility: Meeting growing

expectations for employee experience
Eligible viewers may now download
CPE certificates.
Click the CPE icon in the dock at the

bottom of your screen.
CPE
Contact information
Blaise Kah Amelia Corfield
Partner Senior Manager

Deloitte Tax LLP Deloitte Tax LLP
bkah@deloitte.com amcorfield@deloitte.com
Connect on LinkedIn Connect on LinkedIn
Jason Russell
Managing Director
Deloitte Tax LLP
jasrussell@deloitte.com
Connect on LinkedIn
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Global employment tax: Switching from reactive

to proactive risk management

• Global employment tax:

Tax reform Digital Enforcement

Governance Defining roles and responsibilities, assigning ownership of

The gig Worker tax classification challenges as the gig economy

HR decides Payroll reports

New employee benefit introduced

Change in legislation re: benefit tax treatment

Change to existing benefit provision

Change to global corporate recharge process

Changes to HR systems, processes or data

Benefit provided outside of policy

Change in tax authority behavior

Points Think about…

United States Canada

Fertility Think about…

Adoption • Is benefit provided to the employee or

• Could benefit be considered a medical

United States Singapore

Are your employee benefits programs administered “globally” (i.e. through a

Free meals/ • Could any costs be considered de minimus /

United States United Kingdom

Company car • Is transportation needed for security?

• Taxation of driver benefit may depend on whether

Fuel • Some countries impose limits on tax-free fuel

United States Romania

Does your organization oversee employer compliance globally?

Cross-functional Tracking regulatory Automated processes

Proactive monitoring Defined roles and

Proactive Breaking Global oversight

Global mobility: Meeting growing

Click the CPE icon in the dock at the

Blaise Kah Amelia Corfield

Partner Senior Manager

Connect on LinkedIn Connect on LinkedIn

Copyright © 2019 Deloitte Development LLC. All rights reserved.

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