The Critical Role of Shadow Payroll
Amidst this climate of increasing government regulations and audits, using a shadow payroll is an essential tool for maintaining global payroll compliance. The need for shadow payroll generally arises when an employee works abroad for more than the length of a typical business trip. Employees working in a foreign country for an extended period of time, even if they are not receiving any wages in that country, will eventually trigger certain tax liabilities in that foreign country. The main challenge is the fact that employees often remain on their home country payroll and therefore must continue to pay their home country taxes despite the fact that they are overseas and triggering foreign tax obligations.
Bloomberg Law has documented numerous cases where governments are using increasingly sophisticated and unprecedented methods to track and monitor tax compliance with foreign companies and employees. This white paper examines key challenges that shadow payroll can create and best practices for managing shadow payroll once it is set up.