The Deloitte Tax Short-term Global Assignment Survey February 2006

Deloitte Tax LLP is proud to present the 2005 results of the Short-term Global Assignment Survey. The survey covers almost 200 companies, and was completed by a mix of Tax Directors and HR personnel, across a variety of industry groups.

The results confirm that companies are increasingly relying on short-term assignments as opposed to traditional long-term expatriate types of engagements. An overwhelming 70 percent of respondents anticipate an increase in short-term global assignments within their companies over the foreseeable future. This growing number of short-term assignments brings increasing complexity in managing the assignees—a situation that is creating major tax and compliance challenges for companies around the world.

The survey revealed that companies now have a much greater awareness of the corporate and employee risks associated with short-term assignments than they have in the past. 75 percent of participants ranked the risk associated with their short-term business traveler population as “High/Moderate,” and an increasing number of companies, 29%, are realizing the benefits of involving their corporate tax groups in discussions regarding short-term assignment policy.

The results also indicate that companies continue to struggle with policy issues related to short-term business travelers. Although a growing proportion of companies (75% of participants) are tracking their short-term assignments, a surprisingly large number—25 percent—still do not have any documented short-term assignment policy. Furthermore, of those that do have policies, 76 percent have a single, global policy that applies to their entire populations versus having separate regional policies that accommodate cultural, geographic and regulatory nuances.

Additional survey highlights, including significant challenges and emerging trends in policy-setting and risk management, can be found below.

We hope you find the results of the survey to be useful. If you have any questions regarding the survey or your short-term assignment program, please do not hesitate to contact me directly via the phone number or e-mail address found below.

Sincerest thanks to the participants and everyone at Deloitte Tax LLP who made this survey possible.

All the very best,

Maria Martorello Senior Manager International Assignment Services Deloitte Tax LLP Tel: +1 203 708 4654 Email: mmartorello@deloitte.com

Highlights of the survey results include:

• The survey results show a much greater number of companies, 75 percent of participants, actually tracking their short-term assignments than in the past. Tracking is mostly done through HR or Management.

• The trend is to move toward short-term assignment policies that start under three months; whereas, many companies have historically had short-term policies that commenced at three months.

• There is a much greater awareness of the corporate and personal risks associated with short-term assignees. Historically, many companies perceived the corporate and personal risks surrounding short-term business travelers to be low. Now, over 75% of respondents perceive these risks to be “High/Moderate.”

• Companies are still showing a preference for short-term assignments versus long-term ones to meet their business needs.

• A large majority, 76 percent, of companies are continuing to use a single, global short-term assignment policy that applies to their entire populations versus having separate regional policies.

• Many companies that acknowledge short-term international assignments maintain a separate and distinct policy from their long-term assignments as well as from their domestics ones (58 percent). Unfortunately, there are still a large number of companies, 26 percent, without any documented short-term assignment policy!

• Many companies still do not have guidelines built into their policy with regard to qualified “break-in service.”

• Companies are starting to pull back on the number of trips allowed for their employees to fly home during an assignment. In fact, more and more are not allowing any trips for assignments that are less than six months.

• Although there is a likely negative tax impact, many companies are still allowing their employees to take “in lieu of” trips to places other than their home locations. They are also allowing employees to swap their trips in exchange for family members or friends joining them at the work locations.

• Of the companies represented in the survey, the majority have between 1-25 known short-term assignees/business travelers.

• Companies are realizing the benefit of pulling their corporate tax groups into discussions and sharing information with regard to the corporate risks associated with short-term assignments.

*For purposes of this survey discussion, the terms “Frequent Business Travelers” and “Short-term Assignees” are interchangeable.

As used in this document, the term “Deloitte” includes Deloitte & Touche LLP and Deloitte Tax LLP.

STA Survey Results

Role of person completing this survey.

74%

1%

15%

1%9%

HR or International HR Payroll Corporate Tax

Immigration Other (please specify)

0%

20%

40%

60%

80%

100%

0 1-25 26-50 51-100 101-150 151-200 201 ormore

ResponseTotal

Domestic Cross-border

Number of short-term assignees.

Assuming your company has a long-term assignment policy does your company have a separate short-term international assignment policy?

58%

16%

26%

Separate Policies Combined Policy

No Short-term Policy

Does your company have a short-term "domestic" assignment policy?

Yes34%

No66%

Does your company have intra-regional short-term assignment policies?

Yes24%

No76%

At what point does your short-term international policy START?

32%

20%11%

5%

6%

20%

6%

< 3 months 3 month 3-6 months

6 months > 6 months

No consistent policy, depends upon circumstance

Other (please specify)

STA Survey Results

At what point does your short-term assignment policy END and your long-term policy BEGIN? After:

15%

49%

5%

7%

17%

7%

6 months 12 months 18 months

24 months No consistent policy

Other (please specify)

Does your policy give assignees guidelines with respect to a qualifi ed “break in service” between assignments (e.g. guidelines with respect to the amount of time the assignee must work back in the home offi ce before undertaking another short-term assignment)?

Yes10%

No80%

Do not know10%

Does your company tax equalize short-term assignments?

Yes56%

No44%

Do you provide tax preparation assistance to people who have been on short-term assignments?

Yes76%

No24%

Do you deduct a hypothetical tax from the employees who are on a short-term assignment?

Yes32%

No68%

If yes, at what point do you deduct a hypothetical tax? After:

2%8%

42%

14%

34%

3 months 6 months

When a work site country tax is imposed

Not sure Other (please specify)

STA Survey Results

What is the nature of the short-term assignments? (Check all that apply)

If you have a short-term assignment policy, does your short-term policy put each assignee on “unaccompanied” status without a spouse/partner or family?

29%

16%

14%

28%

12%1%

Projects Developmental Training

Business need Technology initiative

Other (please specify)

If you have a short-term assignment policy, do you provide the following for short-term assignments?

Yes54%

No46%

0%

10%

20%

30%

40%

50%

60%

70%

DestinationServices

LanguageTraining

CulturalTraining

Shipment ofPersonal Belongings

Yes No

Does your short-term policy require that all employees continue to maintain a home country residence?

Yes52%

No48%

With regards to housing which form is most often used (provide % of population at each)?

47%

13%

33%

7%

Furnished Apartments Corporate Owned Housing

Hotels Other

For the below assignment lengths, how often do you allow your employees to fl y home? Enter # of trips.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Zero Trips One - Three Four - Six More Than Six

3-6 months 6-9 months 9-12 months

STA Survey Results

Do you pay daily or monthly meals and incidentals per diem?

Yes69%

No31%

What drives the daily or monthly amount of the meals and incidentals per diem? 20%

37%

30%

13%

ManagementCost of living tablesTax free allowance amounts as dictated by the local tax authorities (e.g. IRS per diem tables)Other (please specify)

Does your company allow its employees to travel to another location “in-lieu” of the person’s home or normal work site locations?

Yes49%

No51%

Does your company reimburse the cost of the employee’s spouse/partner or family to fl y to the work site country in-lieu of the assignee fl ying to his/her home location?

Yes62%

No38%

Besides housing meals per diem transportation costs what other allowances does your company provide for STA? (i.e. Hardship Allowance foreign service premium etc.) List all.

RESPONSES

Excess Baggage Disturbance Payment Substandard Housing Premium

COLA Completion Bonus Transfer Allowance (combination hardship and incentive)

Foreign Service Premium Short-Term Allowance Hazard

Twenty Percent Salary Uplift Emergency Leave Short-term Assignment Premium

Completion Bonus Danger Premium Car Eligibility

Settling-in Allowance Pre-Assignment Allowance Children’s Schooling (limited)

Hardship Allowance Good & Services Allowance Health Insurance Coverage

Start of Assignment Lump Sum Miscellaneous Relocation Lump Sum Allowance

Spousal Allowance (if assignment > 12 months)

With regards to short-term assignments, how would you describe your corporate tax group’s involvement? 15%

32%

29%

10%

10%

4%

Very involved Sometime involved Rarely involved

No involvement Outsourced Do not know

STA Survey Results

Does your company review the corporate tax implications (i.e. permanent establishment issues) surrounding short-term assignments?

Yes38%

Sometimes28%

No21%

Do not know13%

If yes, how does your company determine whether a permanent establishment exists?

47%

32%

10%

11%

Based on the length of the project Based upon the activities of the projectDo not knowOther

Are you provided with the economic arrangement (i.e. transfer pricing arrangement cost sharing etc.) of an assignment so that you can make the appropriate determination with respect to taxability of your short-term employees?

Yes34%

No37%

Sometimes29%

Does your company track the employees on short-term assignments?

Yes75%

No25%

If yes, how do you track the days an employee has worked outside the home location?

Other Responses:

Employee keeps travel log

Expat Service Tracks

Individual Travel Calendar-External Tax Advisor

Tracked by Relocation Provider

12%

9%

8%

48%

1%

22%

Company’s Timesheet System Your visa and Immigration Group Your Company’s Travel GroupHR or Management TracksOffice Visitor Log Books Other

Does your company track assignment extensions?

Yes77%

No16%

Do not know7%

STA Survey Results

If yes, do you change the individual’s compensation if the assignment extends beyond one year?

Yes66%

No34%

Why would you think a company would not track the days for employees working outside their home location?

Other response:

HR may be unaware of business travelers

Exceed treaty provisions

41%

27%

16%

16%

Too labor intensiveAssume the employees are exempt from taxin the host countryRisk is minimalOther

List the largest impediments in tracking days.

RESPONSES

Investment of time Employees that do not cooperate Transferees not completing their organizers

HR is not always involved in temporary assignments

No system in place to track travel Lack of education within the organization

Administration Size of the employee population Knowing which employees need to track

Business travelers outside of policy provisions

Break in Assignment Communication Barriers

What are the three biggest issues that you face when administering a short-term assignment program?

RESPONSES

Length of assignment Global equity Administering policy uniformly

Ensuring Tax compliance Being aware of employees who need to be placed on IA status

Extensions beyond 6 months due to US tax issues

Variability of tax regulations in countries Knowing what employees are on a short-term assignment

Determining who extends

People assume rules of business trip apply Education on policy Family visits but we only provide 1 bedroom apt.

Avoiding local tax responsibilities Uncertainty of assignment lengths - ST more likely to change

Is it a true ST assignment?

Managing Visa Requirements Tracking the days spent on a STA Time/language Barriers

Bureaucracy of Immigration and Tax Laws Employee Requests Determining Pay and Allowances

COLA Effectiveness of talent utilization Business Uneducated About Risks

Employee Commitment to Time Tracking Calculating Gross-ups Trips can be multiple of short duration

Awareness of all short term assignees Getting managers to think about what is a short-term assignment and what is a business trip

Benefi ts

Do you have separate payroll administration for short-term assignment?

Yes13%

No87%

STA Survey Results

How would you rate the risk for any company not complying with local tax and payroll laws in a country for STA?

36%

40%

13%

1%

7%3%

High Risk Moderate Risk Low Risk

No Risk Depends on the Country N/A

What does your company do with respect to short-term assignments to ensure compliance from an immigration perspective?

RESPONSES

Local HR ensures that all proper immigration/work permit papers have been fi lled out

IHR monitors and administers all assignees

We use Deloitte for tax issues and Cendant Mobility for immigration/visa issues.

Obtain as much information as possible from the management team up front in order to obtain correct immigration papers

Compliance check by the host country before assignment Check local formalities

Obtain work permits and visas as required Limit the length of the assignments to remain in compliance with local immigration laws

We rely upon our immigration consultant fi rm. Work with Host Country HR

All transfers processed by my team; employee and business have no choice but to contact myself or colleagues in order to arrange corp. housing, per diems, etc. So, my team knows of 99% of transfers into US and we ensure visa compliance. HR advisors in the business also know immigration rules and will pass along any unusual cases to my team just in case we are left out of the process.

All STA’s must go through the Expat Services Immigration organization.

Educate and outline a policy and required guidelines / approvals

Continue to monitor travel days and work with business units to educate on tax compliance. We have in-country HR leaders who help track employees in country.

If we know it will be a 3 plus month assignment we work locally for visa’s

How would you rate the following countries in terms of risk for non-compliance with local tax and payrollcompliance?

0%

10%

20%

30%

40%

50%

60%

United States United Kingdom Australia Canada Japan

Low Risk Moderate Risk High Risk Don't Know

What do you think the trend for short-term assignments will be at your company in the next 2-3 years?

70%

5%

22%

3%

Increase Decrease

Remain Relatively The Same Do not Know

Assuming the trend is on the rise what do you think the reason is for the rise in short-term assignments? 27%

22%

46%

5%

Less costly than long-term assignmentsEasier to find people to goBusiness needOther (please specify)

STA Survey Results

Which department is handling or should be handling these short-term assignments? (If one group is but you believe another should please indicate)

0%

10%

20%

30%

40%

50%

60%

HR Tax Finance Businessunits

Sharedservices

Traveldepartment

Currently Handling Should be Handling

For More Information

For more information on the Short-term Global Assignment Survey, please contact:

Maria MartorelloSenior Manager, International Assignment ServicesDeloitte Tax LLPTel: +1 203 708 4654Email: mmartorello@deloitte.com

STA Survey Results

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