a call to global nonprofits: top 5 compliance pitfalls when operating abroad

A CALL TO GLOBAL NONPROFITS! TOP 5 COMPLIANCE PITFALLS WHEN OPERATING ABROAD

Is your nonprofit organization conducting research or other mission-driven activities abroad?

If so, there are numerous compliance issues you need to be aware of and mitigating these risks should be a priority.

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Maintaining compliance with local laws is an essential element of conducting activities abroad.

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It may even be required as part of a sponsored award agreement or terms agreed

to by your organization from its donors.

There are five main areas that cause the most risk for nonprofits operating abroad.

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Assumptions May Lead to Trouble

When it comes to international activities, planning is your friend

and assumptions are not.

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Just because you’re carrying out nonprofit activity, don’t assume

you won’t have compliance obligations.

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Remember, it’s not the type of activity that dictates risk, but the characteristics of the activity.

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Engaging Independent Contractors

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Independent contractors are often hired due to

convenience, but such engagements are often

not compliant with local labor laws.

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In the end, fines for misclassifying an employee as a contractor can far exceed the hiring costs of an actual employee.

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Many countries are now taking aggressive measures to encourage

‘whistleblowers’ to come forward and expose noncompliant companies.

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Partnering Arrangements

There are many obvious benefits to partnering in a foreign country, but the risks can be high as well.

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The more responsibility you hand over to your partner, the less control you have over the foreign activity.

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Getting to know your partner is critical; make sure they are fit to represent your company or

risk reputational damage.

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And remember, partnering is not necessarily a substitute for having your own registration or for having to fulfill your own

reporting requirements.

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Sending employees abroad

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The right type of documentation is crucial in order for employees to enter legally into another country for purposes of work.

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Without the correct visa, an employee is noncompliant from day one.

And Just because an employee is on your US payroll, it does not mean that they don’t potentially

owe taxes in a foreign country.

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Permanent Establishment (PE)

There are various things that can trigger PE in-country.

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Having local employees and income-generating activities are two of the most common triggers.

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Having a permanent establishment in-country does not mean that you owe taxes necessarily. What it does mean is that you are expected to

fulfill certain reporting requirements.

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Again, planning and knowledge of the local environment is key to avoiding trouble

further down the road.

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Staying fully compliant outside of the safe haven of the home office is challenging.

With over 190 countries in the world, you’re unlikely to be 100% compliant in them all.

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But getting these 5 biggest risk areas right will set you on the right track.

Are you a non-profit organization operating abroad?

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