Risk Assessment Reports

International projects often operate to rapid deployment timescales, tight budgets and urgent in-country requirements. The pressing nature of deployments can sometimes lead to corners cut and snap decisions made. From this, risky situations can arise. Although operating internationally will undeniably broaden your organisation’s horizons, ignoring potential risks will impact compliance and can lead to headaches, penalties and damage control. In response to the risk monitoring needs of our clients, Mauve Group has developed comprehensive risk assessment reports drawing attention to problem areas.

Our clients in the NGO and education sectors often commission risk assessment reports due to their strict governance requirements. However, public and private organisations alike can benefit from risk assessment monitoring – penalties in areas such as taxation or employment law issues will apply to both sectors. In some cases, non-compliance can lead to blacklisting from the country. The reports assess the individual, current circumstances of the company’s operations in their chosen country, and shed light on operational red flags and recommendations. No two scenarios are ever the same, and the reports are therefore bespoke to your needs.

In this article, we discuss the importance of risk awareness into the planning and implementation of your overseas projects. We look at five frequently flagged topics in our risk assessment reports to help you prioritise your planning.

1. Determining Potential Risk of Permanent Establishment

Permanent Establishment is a fixed place of business liable for income or corporate taxation purposes. It ascertains whether a business has sufficient permanent operations in another location to create a taxable presence. This can include individual workers or employees operating on behalf of the organisation in another location. If those workers have been given the authority to enact contracts on the organisation’s behalf, there is risk of permanent establishment.

Penalties or payment of backdated taxes at home and abroad may be payable by organisations deemed to be permanently established in an overseas location. Risk assessment reports will explore your operations in-country, existing taxation arrangements, double-taxation treaties and how these could contribute to a risk of permanent establishment.

2. Is Your Entity Correctly Registered?

Entities should be registered in accordance with local laws, and charities and NGOs are subject to particular registration requirements. In Tanzania, NGOs must register in line with the Non-Government Organisation Act 2002, as amended by Act 11/2005. This act includes local definitions of international and domestic NGOs, and provides the specific registration processes and ongoing compliance requirements. A risk assessment report will look at your existing registrations and advise the correct procedure in line with local law. Mauve can also carry out the registration and ongoing administration if required.

3. Tax and Accounting Compliance

Overseas tax laws can differ from country-to-country and this can lead to increased potential for risk. Penalties for tax non-compliance can greatly impact the success of your project and damage your local reputation, so awareness of risk is vital. Risk assessment reports will look at VAT registration, employer payroll registrations, statutory contributions for tax and social security, and any other necessary fiscal considerations.

4. Alerting to Contracts and Labour Law Issues

Use of existing contract templates is not always permissible under local law. Some countries have statutory employment contract templates with certain mandatory provisions, determined by role or sector. Risks also may arise in the incorrect application of local labour law, for example following incorrect termination procedures. Risk assessment reports can explore individual scenarios or the company’s internal procedures and contract management as a whole, mapping them against local employment law to flag any risks.

5. Disguised Employment Risks

International projects often require rapid deployment of staff in-country. The worker may enter as a short-term volunteer, temp or contractor, and then the project term is extended. Incorrect categorisation of workers may result; this is something many countries are clamping down upon. In the UK, IR35 governs deemed employees that are incorrectly classified as contractors; public bodies must determine if their contractors fall inside or outside of IR35 rules. Contractors found to be inside IR35 may be deemed “disguised employees” and both the worker and contracting organisation will be liable for income taxation and penalties.

Risks can also arise if the worker has entered the country on one type of visa but the conditions of their employment change. For example, if they enter on a volunteer visa and then receive a full-time position with a charity, they should apply for a work permit. Volunteers receiving a monthly stipend for their services could be at risk of incorrect employment classification, as this may be seen as a salary in certain locations.

Risk assessment reports can assess the circumstances of one employee or whole teams and determine any liabilities for the organisation. Any resulting registration, enrollment or visa applications can be carried out by Mauve.

Risk assessment reports can be a vital resource for your organisation’s international projects and countries of work. The reports are bespoke and can focus on certain individual risks or a broad assessment as required. For more information or a free 15-minute discussion about your specific needs, please get in touch via the Contact Form.

Related Articles:

A Guide to IR35

The Global HR Agony Aunt

Case Study: Healthcare NGO