Firstly, we need to review the relevant tax agreements between the respective jurisdictions, and ask: Is a taxable presence of the corporate body created by the presence of the individual, and/or their duties carried out there? Does the presence of the individual create a fixed place of business or do the duties create an agency Permanent Establishment for the employer?
CORPORATE PRESENCE - PERMANENT ESTABLISHMENT
And, if the jurisdiction in which the employer is working is not a treaty country or state then - have we reviewed local tax laws to determine whether the presence of the individual creates a source of taxable income for the corporate body?
NON-TREATY COUNTRIES
ATTRIBUTION OF PROFIT
If a Permanent Establishment is deemed to have been created, or in a non-treaty jurisdiction, presence there results in taxable income - it then becomes a Transfer Pricing exercise, and we need to work out the attributable profit on which corporate tax will be levied.
SPECIAL CASES
Notwithstanding the Permanent Establishment rules there may still be special cases where particular sources of income, say management expenses or technical assistance expenses, could be taxable in the non-resident territory under the terms of a ‘double taxation’ agreement.
CORPORATE TAX FILING OBLIGATIONS
If there is attributable income subject to corporate tax in a jurisdiction… have we understood the corporate tax filing obligations that may follow?
Finally, if a corporate tax liability arises in the jurisdiction in which the employee is working, there may be the availability of a foreign tax credit claim to be taken in the home location of the employer.
TAX CREDITS
