Cross-border labor mobility can lead to (unforeseen) corporate tax liabilities, potentially resulting in company profits being taxed more than once. This can happen when an employee (inadvertently) creates a taxable presence in the host country.
To recognize and flag this risk, one must first understand the basic principles of national and international taxation on corporate income.
Typically, a company's country of incorporation or registered seat determines its corporate Tax Residence. This country usually levies corporate income tax on the company’s worldwide income, regardless of where it was earned.
Conversely, the country of activity (the Host Country) seeks to levy corporate income tax on profits earned within its borders, either through local operations or a "taxable presence" established there. This can lead to the company being taxed as a non-resident taxpayer.
Consequently, some or all of a company's profits may be taxed in both countries, a situation known as "double taxation on corporate income."