Tracking Cross Border Business Travelers
Penalties levied for non-payment of Canada’s nonresident taxes upon completion of business travel
A U.S. producer of specialty medical devices that had recently entered the Canadian market was asked to provide product support to a Toronto facility that had just purchased its equipment. The equipment wasn’t working as expected, possibly to installation errors, so two technicians were immediately sent to the client facility.
As the issues were more complex than anticipated, and the technicians were also asked to provide training, they made a number of trips to the facility over the next several months. However, because they drove the short distance from their Buffalo, NY office and had not booked travel through the company’s provider, their finance team was never notified of their trips. As a result, the company didn’t withhold and remit Canadian nonresident taxes.
Also, because the Canada Revenue Agency (CRA) had recently increased its audits of cross-border business travelers, it quickly discovered the violation and issued a fine, along with penalties and interest for noncompliance.
To prevent future compliance violations, the company implemented a policy that required employees traveling on business to notify finance in advance. This new procedure allowed the company to conduct business in Canada compliantly and avoid any further penalties; it also enabled the company to continue working in Canada.
They also engaged msi‘s Business Travel Compliance Services to ensure that the number of days spent working in Canada, as well as any other foreign jurisdiction, would be accurately tracked for compliant reporting and withholding.
All of the company’s business travel is now fully accounted for. This new process has enabled finance to accurately withhold and report any income its employees earn while outside the U.S. and avoid the financial and reputational consequences of noncompliance.