Unfortunately, there’s no one-size fits all solution to managing tax risks when looking to employ someone in another country. Each individuals’ personal facts and circumstances differ and could have a bearing on the tax outcomes for their employer. Similarly, each country has differing tax rules and exemptions that may or may not apply and each may operate their tax regimes differently in light of COVID-19. There are also non-tax issues to consider, such as immigration, employment law, access to technology and systems, and the protection of intellectual property, just to name a few.

Managing and keeping track of these issues is no small task and can cause a bit of headache. The good news is that Deloitte does have a technology tool that can be used to provide a high-level assessment and flag key areas of risk across these issues, given a set of inputs and country combinations. If you would like to know more about this and how it could be used within your organisation, please get in touch.

In the past you might have travelled to another country to run your business there. If you had a company in that country, you could hold board and management meetings, and make strategic decisions in-country. Now that you can’t travel, you’re probably doing all of that from New Zealand. Similarly, you might have directors in another country who, in pre-COVID times, travelled to New Zealand for board meetings, who now cannot get into New Zealand.

Running a company from another country can create tax problems for that company, as it might become tax resident in more than one country. Some tax authorities (including Inland Revenue) are being understanding about the position that puts the companies in. If the reason a company is being run in New Zealand is because of COVID-related travel problems, they may be willing to overlook that – for now. Many other countries are offering the same concessions. However, that position isn’t universal, and even if a revenue authority is being tolerant of unusual situations, that won’t last forever. If COVID has caused the way you manage companies across borders to change, we recommend you check the rules applying in both the country where the company is incorporated, and the country where the people run it from.

Being tax resident in more than one country isn’t necessarily a big problem – unless you ignore it for long enough that it becomes one. Many companies file income tax returns in more than one country. That might mean that no, or only a small amount of income is taxed in one country, and most or all of it is taxed in another. Double tax agreements can help reduce the tax cost.

The biggest expense from having tax obligations in another country, or from changing the way you manage your business cross-border, usually arises from failing to understand what your tax obligations are, particularly when several years have passed before this is picked up.

Picking up the phone to check with your accountant or tax advisor will give you the information you need to make a decision about the best way to manage your risk. Deloitte can draw on its international network of member firms to find an advisor in almost any country in the world. Give your usual Deloitte advisor a call if you’d like to discuss how you are managing your business.