Relocating a team: what an employer has to solve

Moving one person is an immigration exercise. Moving a team is five exercises at once, and the one that costs most is the one nobody assigns to anybody.

The five questions

• Immigration. Which route for each person, whether the company can sponsor, and what visa quota a licence carries.
• Payroll. Where salaries are paid from, and whether local payroll registration is required. In most countries it is, from the first employee.
• Social security. Where contributions are due, and whether a bilateral agreement or an EU certificate keeps people in their home system for a period.
• Personal tax. Each employee's residence changes, with a split year and possibly two filings.
• Permanent establishment. Whether the team's presence creates a taxable presence of the company in the new country — bringing corporate tax, filings and transfer pricing with it.

The permanent establishment problem

This is the expensive one. A group of employees working in a country, particularly if any of them can conclude contracts, can create a permanent establishment. The company then has a corporate tax obligation in a country it did not intend to operate in, backdated to when the presence began.

It is not solved by the employees being on foreign contracts, and it is frequently discovered by auditors two years later.

The structures used

• A local entity, which is the clean answer and carries formation, accounting and filing obligations.
• An employer of record, which employs the staff locally on your behalf — fast, compliant on payroll, and not a defence against permanent establishment if the activity itself creates one.
• Secondment from the home entity, with a certificate keeping social security at home for a defined period.
• Contractors, which is the option most often chosen and most often wrong: misclassification carries penalties in most jurisdictions and does not solve the establishment question either.

The sequence

Decide the entity question before the immigration question. The route each employee uses depends on what the company is in that country, and reversing the order produces visas that have to be redone.