Press release

18 Jan 2022 Tokyo, JP

EY survey reveals the impacts of COVID-19 on overseas assignments and the costs associated with overseas assignees

We are pleased to announce the release of EY Mobility Survey No. 1, a joint project of Ernst & Young Tax Co. and EY Immigration Corporation which explores international mobility practices. The survey reveals the limited impact of COVID-19 on companies’ plans for overseas assignments, the low adoption rates of methods that enable international job functions to be performed remotely, and the prevalence of tax examination findings concerning the allocation of costs associated with overseas assignees and business travelers to Japanese companies.

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  • 74% of respondents indicated that they will either maintain or increase the number of overseas assignees in consideration of the pandemic, a finding which indicates that companies do not treat the pandemic as cause for reducing overseas assignees.
  • 76% of respondents indicated that either the implementation of virtual assignments is not currently under consideration at their company, or that their company has shown interest but has not taken action towards implementation. “Virtual assignments” are practices wherein employees remotely engage in work for an overseas entity or other location. These results indicate that while companies are exploring ways of facilitating new work styles, only a minority of them are putting those considerations into action.
  • As many as 40% of respondents indicated receiving findings from authorities during tax examinations concerning the overseas assignee and business traveler costs allocated to Japanese companies.


We are pleased to announce the release of EY Mobility Survey No. 1, a joint project of Ernst & Young Tax Co. and EY Immigration Corporation which explores international mobility practices. The survey reveals the limited impact of COVID-19 on companies’ plans for overseas assignments, the low adoption rates of methods that enable international job functions to be performed remotely, and the prevalence of tax examination findings concerning the allocation of costs associated with overseas assignees and business travelers to Japanese companies.

The EY Mobility Survey commenced in 2021 with the purpose of gaining insight into corporate management of overseas assignees. EY surveyed and analyzed responses provided by 295 respondents (representing 266 companies) concerning policies and tax practices pertaining to overseas assignees, with such responses primarily sourced from administrative departments including HR, accounting, executive functions and corporate planning. Topics covered in this inaugural survey include corporate policies concerning employees temporarily repatriated to Japan due to COVID-19, policies concerning unusable benefits and overseas assignees instructed to remain in their host country, cost allocations, overseas assignment costs, individual income taxes in the host country, and other related topics.

EY Mobility Survey No. 1: Findings

COVID-19 has no significant impact on companies’ long-term plans for overseas assignments:

The global spread of COVID-19 since 2020 acted as a catalyst for strengthened border enforcement measures in many countries, which significantly impacted companies’ plans for overseas assignments. In response to questions about the impact of COVID-19 on their future plans for overseas assignments, 46% of respondents indicated that COVID-19 will have no effect, whereas 28% indicated that the number of their employees on overseas assignment will likely increase. These responses suggest that any decreases in the number of overseas assignees are temporary and that the impact of COVID-19 on long-term plans for overseas assignments is generally insignificant.

Companies hard-pressed to provide support for overseas assignees during crises such as the COVID-19 pandemic:

The rapid global proliferation of COVID-19 caused significant international disruption. The inconsistency of restrictions across countries and regions poses difficulties for companies with overseas assignees as they attempt to provide support for those assignees and their overseas livelihoods. Half of respondents indicated having no predetermined lengths for the provision of assignee-specific components of salaries and allowances to assignees who have temporarily been repatriated to Japan. 7% of respondents indicated that their policy is to provide such salaries and allowances for either “1 year or more” or “up to 1 year” after temporarily repatriating an assignee to Japan, a clear indication of the difficulties companies face in unprecedented situations like COVID-19, such as determining when to re-assign assignees they have repatriated to Japan or how long to provide those assignees with assignment-specific components of salaries and allowances. The salaries and allowances provided to overseas assignees are generally higher than those provided to domestic workers, and this fact only compounds the challenges for any company seeking to control its costs.

Additionally, the pandemic has made it difficult for overseas assignees to make use of certain benefits (such as temporary return leave), and nearly 40% of respondents indicated that they have no intention to provide special treatment to the affected individuals. One way to address these issues is to ensure that company policies governing assignees codify both salary and allowance payment practices and rules applicable when societal factors affect assignee access to time-limited benefits (whether monthly or annual).

Travel restrictions to due to COVID-19 have affected the nature of overseas assignments:

The majority of respondents (92 out of 95 companies) indicated that they limited family accompaniment in the region of Asia/Oceania due to COVID-19, and many also indicated temporarily limiting family accompaniment to countries where the number of infected persons was increasing, such as China, Indonesia, India, and other countries in Asia/Oceania. These results speak to the extent of the pandemic’s influence beyond individual assignees and the consequent heavy impact on their families.

Rising interest in virtual assignments and other new work styles:

In response to questions about virtual assignments, 16% of respondents indicated that they have already implemented or are currently considering implementing virtual assignments, whereas 42% indicated that they are making no such considerations. Another 34% of respondents indicated their interest in but lack of concrete action taken toward implementing new work styles, which suggests that despite such high levels of interest, few companies move to consider and implement new work styles. However, the responses companies provided to open-ended questions about overseas assignments and accepting overseas personnel reflect a trend in which many companies have an express interest in both the taxes applicable to virtual assignments and in new work styles and forms of employment including international remote work and the leveraging of global talent.

Just under 40% of respondents indicated instances in which their host entities bear all costs associated with overseas assignees:

When asked about cost management for overseas assignees, 37% of respondents indicated that host entities bear all costs associated with overseas assignees, while 57% respondents indicated that home entities bear a portion of costs related to overseas assignees in some instances. Over 50% of responses (representing 94 out of 154 surveyed companies) base their rationale for home entities bearing costs associated with assignees on the concept of disparity compensation, and the survey data reflects the commonplace practice of having host entities bear payroll costs up to local salary levels and the remainder allocated to the home entity.

In determining the local salary level of a host entity for these purposes, it is essential that companies prepare evidentiary materials, collect the relevant data, and verify the appropriateness of the measure.

Companies’ awareness of overall costs associated with individual overseas assignees:

37% of respondents indicated that they do not track overall costs for assignees on an individual level. The survey data demonstrate that, whereas foreign-affiliated companies typically estimate assignment costs in advance and have the home and host entities conclude an agreement regarding said costs prior to dispatching assignees, Japanese companies generally refrain from accurately estimating these costs before dispatching assignees, a finding consistent with existing accounts testifying to the considerable extent to which Japanese companies can still improve their cost management practices.

Key points of focus for tax examinations regarding costs associated with overseas assignees and business travelers:

In response to a question concerning tax authority actions in relation to tax examinations covering the costs associated with overseas assignees and business travelers assumed by Japanese entities, a combined 40% of respondents indicated that either the authorities issued findings and imposed additional taxes, or that the authorities issued findings without imposing additional taxes. Companies that bear costs associated with overseas assignees should remain vigilant, as these practices may be considered grounds for tax examination findings.

Systems for managing individual income taxes and risk of incorrect filings (15% of respondents report incorrect filings):

As for the systems companies use to manage individual income taxes for assignees, 71% of respondents indicated that host entities (overseas subsidiaries) independently manage income taxes for their assignees. Because any difference in management practices or tax vendor quality among the host entities gives rise to a heightened risk of incorrect tax filings, periodic inspection of tax return accuracy helps counteract such risks.

Commentary from Megumi Fujii, EY Tax Co. Partner and EY Japan People Advisory Service/Global Mobility Leader: 

“Our survey provides insight into the policy challenges impacting overseas assignments throughout the COVID-19 pandemic. While best practices in efficiency and risk management dictate that tasks such as assignee cost tracking and managing host country income taxes be managed centrally by the head office, our survey demonstrates that many companies nevertheless delegate these responsibilities to their overseas entities, and there is still much that head offices can do to improve their assignee management practices. EY plans to conduct additional surveys on these topics and will leverage those insights to help our clients address corporate challenges.”

Overview of survey findings:

Please click on the links below for the key findings from the survey.
 
第1回 EYモビリティサーベイレポート
 PDF(769KB)
EY Mobility Survey Report No.1

 PDF(582KB)

Overview of EY Mobility Survey No. 1

Purpose: To survey and analyze the policies and tax practices pertaining to overseas assignees and business travelers. 
Topics: Treatment of employees temporarily returning to Japan due to COVID-19, unavailable benefits and overseas assignees unable to return home, cost management, overseas assignment costs, individual income taxes of host locations, and other related topics.
Survey period: Friday 22 October 2021 to Friday 26 November 2022
Number of respondents: 295 (valid responses*: 266) 

*The following standards were applied in cases where there were multiple respondents from the same company: 

  1. Responses from the head office over those from an overseas subsidiary were prioritized 
  2. Responses from human resource departments over those from all other departments were prioritized 
  3. Surveys from respondents with the most valid responses were prioritized when there were multiple respondents from the same department or group

An overview of EY Mobility Survey No. 2 is below.

First look at the results of EY Mobility Survey No. 2
Companies scrutinize Japan’s border enforcement measures, significant impacts from New Border Measure 20

EY Mobility Survey No. 2 commenced on 8 December 2021 with a focus on visas, border enforcement, overseas business trips, and inbound foreign national employees. By 14 January 2022, three days before the survey closed, we had already received responses from more than 200 individuals, the majority of whom represent corporate administrative departments.

With COVID-19 entry restrictions persisting globally, companies that utilize overseas assignments and international business travel have turned their collective attention to border enforcement measures. With Japan’s own border enforcement measures also changing frequently, many companies are unable to determine when they may resume overseas assignments and business trips, which exacerbates worries about impacts on policies for overseas business. Moreover, the announcement of New Border Measure 20 and the tightening of entry restrictions to combat the Omicron variant forced many companies to make changes in how they handle immigration-related matters; the dilemmas presented by the need to adapt to these changes are reflected in our survey results, wherein over half of respondents listed obtaining up-to-date information and uncertainty regarding the time required to complete administrative procedures as major challenges.

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