Protect Your College or University When Sending Faculty and Staff Abroad
By John Bostwick, Technical Writer, Higher Education and Nonprofits
U.S. colleges and universities have been expanding their global footprints for years now, and that upward trend is only continuing. A 2012 report from the Institute of International Education indicates that “U.S. student participation in study abroad [programs] has more than tripled in the past two decades.” In addition to academic programs, U.S. higher-education institutions engage in research projects, collaborations and other activities all around the world.
In order to support these engagements, U.S. institutions often send their U.S.-based faculty and staff to work abroad on short- and long-term assignments. Home campus administrators, often already overwhelmed by domestic compliance requirements, may be forgiven by their coworkers for making incorrect assumptions about, say, employer tax and reporting obligations in Burkina Faso. But local authorities will not forgive an institution for failing to fulfill these obligations when conducting activities in-country. And failure to comply can result in fines and reputational damage for the institution.
This post lists some precautions you can take to protect your institution when sending faculty and staff abroad.
Don’t Assume Faculty and Staff on a U.S. Payroll Are Exempt from Paying Host-Country Taxes
This is probably the number one misconception related to sending faculty and staff abroad, and it can have negative consequences for both the institution and the individuals involved. An institution’s U.S.-expat and third-country national (TCN) employees may be required to pay income and social security taxes to host-country authorities even if they remain on a U.S. payroll and continue paying U.S. taxes. Typically, if an individual is working in a host country for cumulative stays of just a few months, he or she may be considered a resident for tax purposes in that country and must pay taxes there. Residency laws vary by country, and in some cases workers are required to pay income and social taxes to local authorities after remaining in country for just a single day.
Determine if Your Institution Must Fulfill Employer Obligations in the Host Country
If one of your institution’s employees must pay taxes in a host country as described above, your institution will almost certainly be required to withhold individual income taxes (and possibly social taxes) in the host country and remit them to local authorities. Your institution may also have to register as a legal entity in the host country and fulfill other obligations such as making quarterly and annual regulatory filings.
Ensure That Your Employees Comply with All Immigration Requirements of the Host Country
It is not uncommon for a faculty, staff member or administrator to mistakenly assume that a tourist visa is sufficient for a U.S.-expat or TCN employee working abroad on behalf of a U.S. institution. Often, however, a work visa—not a tourist visa—is required even for short-term assignments. Failure to comply with host-country visa and/or work-permit requirements can put the institution and the individual at risk of fines, deportation and even imprisonment.
Account for the Total Costs of Sending U.S.-Based Employees Abroad and Budget Appropriately
International program administrators that don’t understand host-country employer obligations before commencing overseas activities may soon find themselves with budget shortfalls. After accounting for tax equalization (to reduce employee tax burdens brought on by any double taxation), tax services, benefits, cost-of-living allowances and other factors, sending a U.S. employee abroad typically costs an institution between two to three times the annual salary of that employee.
Develop an Institutional Global Mobility Policy
In order to manage the risks and costs associated with sending faculty and staff abroad, a college or university should develop a global mobility policy. These policies establish and promote consistent practices for engaging individuals legally in a foreign country as employees (or contractors) and supporting these individuals from the home campus. Global mobility policies should also address tax equalization, establishing appropriate compensation, health and safety plans and obtaining medical insurance that is valid in the host country.
For more on protecting your Nonprofit insitution or University abroad, please view the webinar recording A Call to Global Nonprofits! Top 5 Compliance Pitfalls When Operating Abroad