Global mobility issues in the energy industry
Worldwide ERC conference and tax issues arising from global mobility
INSIGHT ARTICLE |
From May 18 -20, 2016 hundreds of workforce mobility representatives from multinational companies based in North America congregated in Houston for Worldwide ERC’s inaugural America’s Mobility Conference. RSM is one of the many service providers that support these companies so we attended the conference to stay up to date on the latest news and trends in expatriate management.
Worldwide ERC is one of the largest global organizations focused on bringing together corporate mobility professionals around the world to share knowledge, best practices, and innovation. The event attracted a wide range of businesses each with the goal of learning from each other through peer-to-peer roundtable discussions, industry updates and best practices.
North American cross-border considerations
A panel related to cross-border commuting between Canada and the US and Mexico and the US revealed the challenges individuals face as countries tighten borders and increase information sharing between immigration and tax authorities. For example, the concept of “residency” differs for immigration and tax purposes, which may result in residence for immigration but not tax purposes, or vice versa. From an immigration standpoint your foreign visa could disqualify you from claiming resident status in the host country; however, if you exceed the threshold of time spent in the country you may be considered a tax resident and subject to tax on your worldwide income. Income tax treaties may be utilized to offset the negative financial impact of being considered a tax resident in the host country but should be considered in advance of commencing the assignment as trying to make adjustments and planning retroactively is rarely possible and can be costly.
There has been increased scrutiny related to the appropriate foreign visas/work permits obtained for cross-border employees. In the past, employees crossed the border indicating they were “just visiting” when they were traveling for work-related projects. With the recent surge of terrorist activity and the economic downturn many countries are increasingly regulating border control, immigration, and tax levies to minimize potential threats and economic loss. In certain countries, like Mexico, tax drives immigration so Mexico adjusted its visa and work permit regulations acknowledging that the increased number of workers allowed into Mexico equates to additional tax revenue generated. With the implementation of Foreign Account Tax Compliance Act (FATCA) and increased information sharing between immigration and tax authorities it is easier for countries to track the travel of cross-border employees and to ensure employees and employers are tax compliant. Penalties for noncompliance have also increased. For example, persons caught working in a Mexico or performing business without the appropriate visa now face deportation and potentially a lifetime ban from entering the country. These are a few examples of the considerations corporate global mobility programs are facing today.
Oil and gas economic downturn affects expats
Being in Houston, the center of the US oil and gas industry, there was no way to avoid the discussion related to the recent drop in prices and demand for oil. While most Americans are thrilled that the price of gas has dropped at the pump, the decline in profits at the major oil and gas companies has created massive workforce reductions and has shut down supporting businesses and industries including engineering, exploration, pipe manufacturers, trucking and transportation, and mining. The economic impact of the decline in this industry sector was discussed at length at the conference, particularly the impact on the expatriate community. The downturn has created to a large number of repatriations and a halt on new assignments, according to the US Global Mobility leader at a leading oil company who was a speaker. Many companies are adjusting their global mobility programs and policies to include expanding and enhancing repatriations and severance models. Companies are particularly concerned about the need to drastically cut costs but want to retain top talent for the future.
The new ‘gig employee model’ has also impacted the oil and gas industry with a move away from hiring full-time employees and a preference for hiring contract workers on a project basis. Employers no longer seek highly-skilled specialists or subject matter experts as full-time employees but look for generalists so that in the event of another economic downturn, employees can be retained and “repurposed” for another project or area. Companies also find this attractive because it is less costly to hire generalists compared to specialists. A very hot topic of discussion centered on the impact of this shift on college students pursuing specialized degrees in science, technology, engineering, and mathematics (STEM) programs.
As always, the landscape of global mobility is in flux due to internal and external factors. Internal policies need to be reviewed frequently and practices need to be adjusted to stay current with local and global legislation and regulations. RSM’s participation in the global mobility industry and with networking groups such as Worldwide ERC help ensure we are up to date on the issues and providing holistic solutions for our clients.
RSM’s global employer services team shares key topics on global mobility from the Forum for Expatriate Management Americas Summit
Determining U.S. reporting and tax obligations resulting from an individual’s foreign pension plans differs by plan and may be challenging.