In the past, we've pointed out that one of the key qualities of a world-class global mobility program is tax compliance. That's still true, but today's global work environment has made staying compliant even more challenging. Most companies charged with tax violations never intended to violate the rules, and frequently the professionals responsible for the administration of global mobility tax compliance were not aware or just did not fully understand or appreciate the laws and regulations.
Equity compensation is one of those challenging areas to keep up with. Per Global Tax Network (GTN), every mobility program must assess their current compliance risk levels. GTN explains:
"Ask yourself the following questions to identify if you have an equity non-compliance issue due to a mobile workforce:
- Do you have any international permanent relocations?
- Do you have state-to-state transfers?
- Do you have any business travelers?
- Do you have any remote workers or employees who are working from anywhere?
If the answer is yes to any of these questions, you may have a tax withholding issue and should work to ensure you are following the rules for equity awards in the jurisdiction(s) where your employees have been working over the life of the awards."
Tax laws have continued to get more complex, and they vary dramatically from country to country. Additionally, countries have gotten more efficient at oversight. Improved technological developments are allowing better tracking of of financial accounts, executives working in multiple locations, and other hybrid work arrangements. Most of this tracking has been driven by a desire for increased tax revenue. Programs that aren't compliant could be setting themselves up for audits and potential financial, reputation, and legal risks for both the company and any mobile employees.
It can be difficult to track and manage where all your employees are located, taxable events, and when you need to report on the equity compensation. The good news is that relocation management companies (RMCs) are increasingly being able to support complicated compliance needs. RMCs have also upgraded tracking capabilities, with the ability to flag all mobile employees so that none slip through the cracks. Consider what support you might need as your mobility program prepares all those GSOE's (Global Statements of Earnings). Having a strong process in place with your tax partner and your RMC helps to ensure that details on payments get captured and reported, with proper withholdings in all locations. Your tax experts will lead you through, but having your RMC in the mix helps to ensure people are tracked and details are captured. As you spend some time wrapping up tax reporting and filings for your global mobility population for 2022, explore what issues have come up and review existing processes to make sure you're not going to run into any compliance snags in 2023.
When it comes to payroll reporting and withholding for equity compensation, companies don't always realize they may be non-compliant if they have a mobile workforce. These companies may be unaware of the rules in the various jurisdictions their employees have worked, and they may not have processes in place to allow for the tracking of employees. For these reasons, the payroll reporting and withholding, related to equity income, may be handled as if the individual had only worked in one location. However, this approach is often not appropriate for mobile employees working in multiple locations since reporting and withholding rules can vary for each jurisdiction.