If you’re an individual who travels frequently to the same countries, the two words you never want to hear are “tax resident”. If you’re a
company that sends people to specific countries, for weeks or months at a time, the two dreaded words are “permanent establishment”.
What is a tax resident?
Every country, most US states, and some cities have rules about how many days you can spend in their jurisdiction before being considered
a “tax resident”. If you breach a country’s tax threshold, you could be liable for tax on your worldwide income, no matter where it was
earned. In addition to being liable for income tax in your official country of residence.
Clearly, this is not desirable.
Let’s say you live in Sweden, but you’ve landed a contract in Denmark that requires you to visit every month, for a couple of weeks at a
time. If you check the Country tax lookup in the footer of this site, you’ll see that in Denmark, “Individuals are generally considered
to be resident if they permanently reside or are present in Denmark for more than six months.”
As the first year of your contract draws to an end, if you haven’t been paying attention to your days in Denmark, you could inadvertently have become tax resident.
What is a permanent establishment?
Let’s say your company is an international consulting firm, and you’ve closed a big contract with a business in another country. Sometimes just your team
lead needs to visit the client’s site, sometimes just your technical team, sometimes all of you.
If you add up the number of days in the year your company has boots on the ground, and it exceeds the number allowed by the foreign country, your firm
could be taxed for having the appearance of a permanent establishment.
This is not a mistake only made by small firms; recently, a multinational consultancy got hit with a tax bill in the millions.
Mia Bazo is a travel tracking company. We don’t give tax advice. So whenever you, or your team, must travel to another country
for extended periods, you should first consult an international tax accountant or attorney.
What we can do is track all your days in all the countries you visit, automatically. We let you set intelligent thresholds, and
warn you when you’re approaching them. We let you see how many days you’ve spent in each country, and how many days left
before you reach your threshold.
You work hard for your revenue. Let’s make sure you don’t waste some of it on unnecessary tax.
J Laurence Sarno is co-founder and CMO of Mia Bazo, with more than 30 years in technology marketing. He led his first socially responsible company in the late 1970s and is passionate about ESG (Environmental, Social, Governance).