Global mobility: key risks and considerations before sending employees abroad

What risks are most often underestimated by employers?

According to Arda, the risks associated with global mobility are numerous and extend well beyond tax considerations alone. Immigration is often the starting point of any global mobility initiative, and a non‑compliant status can result in denied entry and reputational damage for the employer.

Another commonly overlooked factor is the employee’s family situation. Poor integration of a spouse or children can jeopardize the success of an assignment, even when the role is professionally well-aligned.

These challenges are compounded by legal and social risks, particularly with respect to employment contracts, applicable labour standards and social security coverage, as well as tax risks affecting both the employee and the employer.

What global mobility models are companies using today?

The traditional model of long-term international assignments is becoming less common. Arda observes a shift toward temporary assignments, most often limited to one or two years, followed by the employee’s return to their home country.

She distinguishes between secondments, where the employee remains attached to the home entity while performing duties within a foreign subsidiary, and situations in which the employee becomes fully local under a new employment contract in the host country. Since the pandemic, international remote work has grown substantially and is now recognized as a distinct form of mobility, bringing its own tax, social security and legal implications.

Why do the duration of the assignment and the nature of the employee’s duties affect the tax analysis?

The length of an international assignment plays a crucial role in determining an employee’s tax residency and personal tax obligations. In the case of short-term assignments, employees generally maintain a tax connection with their home country. By contrast, longer assignments may result in a change of tax residency in favour of the host country.

From the employer’s perspective, the nature of the employee’s duties is equally critical. As the employee’s presence abroad becomes longer and their responsibilities more strategic, the risk increases that tax authorities will consider the company to be carrying on taxable activities in the host country.

Why can an employee’s presence abroad create tax obligations for the employer

An employee’s presence in Canada can create tax obligations for the employer because it may result in the company being considered to be carrying business in Canada.  If the employee performs duties in Canada, negotiates or signs contracts, or represents the company locally, the Canadian tax authorities may treat the employer as having a taxable presence.

As a result, even without a local office, an employer may become subject to taxation in the host country and be required to comply with various obligations, including local tax registration, payroll withholdings, filing of tax returns, payment of social security taxes. and payroll compliance.

What are the main tax obligations for employers?

Payroll withholding requirements are often misunderstood, particularly by foreign employers operating in Canada. Arda points out that in Canada, employers are generally required to withhold income tax at source from the first day of employment unlike in many European countries. This withholding obligation is frequently overlooked by foreign employers and therefore represents a key area of focus for tax authority audits.

Certain exemptions may apply, however, provided that a proper analysis has been conducted and the necessary steps have been taken in advance.

Why is international remote work not tax neutral?

International remote work often creates a misleading impression of simplicity. Arda emphasizes that each country has its own tax rules, and a lack of awareness can expose employers to significant non-compliance risks, both from a tax and an immigration perspective.

She notes that these issues are often identified too late. In many cases, HR departments only discover at year‑end that an employee has spent several months working abroad. As a result, employers are required to assess compliance risks retroactively and attempt to regularize a situation that could have been avoided with clear policies and stronger internal controls.

What best practices should employers adopt before sending an employee abroad?

A preliminary analysis is essential before any international assignment. Arda recommends clearly identifying the physical work location, the duration of the assignment, the nature of the employee’s duties, and the applicable tax and social obligations in the host country.

She also stresses the need to evaluate the full financial impact of an international assignment, including potential tax costs, compensation adjustments and the provision of non-taxable benefits. Without proper planning, these issues can catch both employers and employees off guard and lead to avoidable financial and operational consequences.

Why is it essential to consult experts early in the process?

From a best practice perspective, expert advice should be obtained before an employee starts an international assignment. As Arda explains, early involvement allows employers to clearly communicate the applicable tax system to employees, structure compensation efficiently and anticipate the employer’s tax obligations.

She notes, for example, that certain housing-related benefits may be provided on a non-taxable basis under specific conditions. Such planning helps manage costs, secure tax positions and avoid complex and costly late-stage corrections.

What is the key takeaway for employers?

According to Arda, one of the most common mistakes is assuming that there is no tax risk as long as compensation continues to be paid from the home country. She reminds employers that, for income tax purposes, the determining factor is where employees physically perform their duties, regardless of the source of remuneration.

She concludes by noting that “successful international mobility cannot be improvised and requires careful upfront planning.” She reminds employers that, for income tax purposes, the determining factor is where employees physically perform their duties, regardless of the source of remuneration.

For employers, effective mobility programs depend on anticipation: clear governance, close collaboration between HR and finance teams, and early engagement with tax advisors to identify risks, implement appropriate mobility policies and ensure compliance throughout the assignment lifecycle.