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New tax rules and its effect on corporations with globally mobile employees

Arthur Gude Arthur Gude

In June, the Netherlands and 75 other member countries of the OECD signed a convention to adopt the so called BEPS-proposals (Base Erosion and Profit Shifting). The aim of these proposals is to ensure that profits of a company are taxed in the country where the value added activities are conducted and thus bring taxation  more in line with economic reality.

Future changes

One of the future changes will have a significant impact on . Activities abroad by employees may much sooner result in a so called ‘permanent establishment’ of the company in the host country. This may result in a corporate income tax liability for the company as well as an individual income tax liability for the employee in the locations where the employee performs his activities rather than where the employee is legally employed or on the payroll.

Our advice

In the future, to avoid increased compliance risks, a company with globally mobile employees should more strictly monitor where their employees are working, for how long and what tasks they are performing. The challenge is to manage these risks. Systems and processes should be put in place, to track employees, such as (extended) business travelers and to monitor their tasks in detail.

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