How Global Companies Are Navigating The Post-Pandemic Tax Season

The global pandemic has affected many businesses in terms of their productivity and workforce. However, vaccines are rolling out globally, with many countries managing to vaccinate a significant portion of their populations. Tax professionals have an added concern with deadlines in different legislations. With many clients having businesses in several locales or states, knowing tax deadlines and changes in legislation over this period is crucial to ensuring that they get their taxes filed on time. While some jurisdictions have shifted their tax deadlines down, this isn’t the case for all of them. As accounting professionals, knowing which jurisdictions the deferred deadlines apply to can help clients by avoiding unnecessary penalties for missing deadline dates.

The decisions a tax professional takes during this recovery period could have longstanding consequences for their clients later on. These consequences aren’t just contained locally but may impact international quartz countertop markets as well. Tax compliance matters in all jurisdictions carry with them serious considerations. Clients that operate within these locales ought to be aware of the potential fallout for not obeying those stipulations.

Approaching the Problem Logically

When you’re delving into your tax status, several considerations are immediately evident. If the client’s company has a registered presence in a locale, they may not need to pay certain taxes. However, they may be subject to their own local taxes based in their home country. If the business has an established location in a particular country, it may be liable to pay a portion of its taxes there as part of its operating agreement. Companies with an established base in a foreign locale may need to delve into local tax law to see how they pay their employees and what taxes they’re liable for on their behalf. Some client businesses stipulate in their contracts that employees may be responsible for their own taxes (as in the case of having independent contractors on staff).

However, for each negative that operating in a locale may have, there may be tax write-offs that apply to the business as well. Payroll taxes have to be paid when salaries are disbursed, but some countries allow for up to twenty days after payroll is finalized for taxes to be paid on it. Income taxes are usually paid yearly, but some jurisdictions have their own stipulations for income tax, with a few opting to pay quarterly estimates instead.

When we look at payroll taxation, they start racking up when a client hires their first employee within the locale. Paying payroll taxes could be more critical than income taxes. Many jurisdictions have legislation that allows the government to jail the director of a company for failing to pay their payroll taxes and social contributions to the state. Aside from payroll taxes, businesses will also pay taxes on the goods and services they purchase. Value-Added Tax (VAT) is a prominent addition to many prices in the US and other locales, as is sales tax in some states. In Asia, the equivalent is something known as Goods and Services Tax (GST). In the US, businesses may file for a sales tax exemption for acquiring raw materials, but GST and VAT are mandatory.

Determining where to file client taxes allows professionals to now look at the challenges with compliance within these locales that they may come up against.

Compliance with Local Legislation

Taxation compliance is always a concern for clients of accounting professionals. With the face of business changing, there now needs to be extensive rewrites to a lot of tax legislation. For example, thanks to the pandemic, most people have been working from home. The AICPA mentions that three out of four American workers worked up to sixty days from home over the last year. States have realized that their taxation paradigm may need to shift thanks to this new methodology for workers. Thus, an employee that lives in a particular state may need to get taxed in that jurisdiction. States, in comparison, are likely to press companies to pay for their employees’ taxes since many state governments are strapped for income from employers thanks to shelter-in-place orders.

Unfortunately, this makes life difficult for employers. Since state governments have a registry of employers within the state, an out-of-state business may need to register as an employer with that state to pay employee taxes. If employees don’t report their location change back to their home state, the business doesn’t know that it has to be paying taxes in that state. One way around this requires employees to register any moves they make out of state to notify the employer that they may owe taxes to their home state. Some international jurisdictions can be vicious when it comes to the taxation of employees. US and Canadian employees working out of the country may be subject to local taxes and taxes from their home government. If the employee moves to a jurisdiction where the employer has no local presence, they risk getting cut from the staff or changed into independent contractors. The lack of a local base of operations means that the employer can’t pay taxes within that locale. Based on the number of employees who move there, it may not be feasible to set up a local presence with the sole aim of paying taxes for a few employees.

Preparing Is Crucial To Success

One of the most crucial parts of preparing for this tax season is being aware of the deadline dates for filing in each jurisdiction that the client company operates in. The pandemic has seen a few local governments shift their deadline dates down, allowing businesses to file their taxes a bit later in the year than usual. Payroll tax countries have instituted measures to deal with cash flow problems from employers. As the US Small Business Administration notes, the Payroll Protection Program (PPP) in the US serves this purpose.

Preparing the documentation well in advance of filing gives a business a chance to inspect the finalized documents for discrepancies. Additionally, leveraging professional help to ensure that you’re complying with local legislation is one of the safest ways to avoid penalties. With governments worldwide looking for more revenue from any source, it’s in your company’s best interest to prevent fines levied for non-compliance.