H-1B Workers Stranded in India Create Tax Dilemma for Employers

"US businesses risk hefty tax bills as thousands of their H-1B workers remain stranded in India because of months-long visa interview delays, complicating remote work options. The State Department rescheduled the workers' visa interview appointments after abruptly imposing extensive new social media screening policies, delaying the US return of people who traveled to India to visit relatives. Companies will have to mull big tax implications when deciding on options like long-term remote work accommodations for affected workers."

"Allowing them to work remotely for an extended period could result in a so-called "permanent taxable entity," said Parizad Sirwalla, partner and national head of tax at Global Mobility Services at KPMG India. If stranded workers trigger the creation of a permanent establishment in India, that new entity would have to pay taxes in India and comply with a myriad of reporting requirements."

"Consular offices adopted the screening policies suddenly in mid-December, pushing back pending interview appointments for months-in some cases, as late as 2027. The timing of the policy change was disruptive because it came during the holiday travel season that many H-1B workers use to renew visas. But it's been especially messy for employees from India, the biggest source of H-1B workers."

Months-long visa interview delays caused by newly imposed social media screening policies have left thousands of H-1B workers stranded in India after consular offices rescheduled appointments, in some cases into 2027. The delays have separated visa holders from family in the United States and disrupted schooling for dependents. Employers face potential tax exposure if they permit prolonged remote work from India, because employees' activities could create a permanent establishment there, triggering Indian corporate taxes and extensive reporting requirements. Companies must carefully analyze allowable remote activities and payroll options; finding new US employers could require paying roughly $100,000 for replacement H-1B hires.

Read at Bloombergtax