Presenter Mindy Mayo mindymayoryancom 1 Introduction of Speaker Mindy MayoDirector Human Capital Tax Practice Ryan LLC Agenda US Payroll Tax Treatment of Expatriates International Assignments ID: 575652
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Expatriates and Tax Equalization
Presenter Mindy Mayo mindy.mayo@ryan.com
1Slide2
Introduction of Speaker
Mindy Mayo-Director
Human Capital Tax PracticeRyan LLCSlide3
Agenda
US Payroll Tax Treatment of Expatriates
International AssignmentsTax EqualizationExpatriate ComplicationsCompensation IssuesAdditional Complexities
Best Practices DiscussionSlide4
U.S. Payroll and the Treatment of Expatriates
Federal employment tax treatment
FICA, FUTAFITState payroll tax treatmentUISITAreas of IRS interest
Tax preparation fees
RelocationSlide5
International Assignments
When an employee is a taxpayer in one country, but works in another, they may be subject to different taxation from if one had worked in one's home country, or even to double taxation, even taking account of tax treaties between countries.
Tax equalization is the offsetting of any such difference so that working abroad is tax neutral for the worker.
It is also known as hypo tax, from "hypothetical" – the worker pays taxes as if they were still resident in their home country. Tax equalization most often arises in international assignments of workers in multinational corporations.Slide6
Tax Equalization
The principles behind a "tax equalization policy" is that the employee will not need to suffer neither a financial hardship nor experiencing a financial windfall, all being the result of the tax consequences of an international assignment.
The employee should pay no more or no less tax than he would have paid had he never left his former home. Hence, the company should be paying all related worldwide effective taxes for the assignee (using assignee withheld tax (hypothetical tax)).Such a policy will put the assignee in a tax neutral position during the assignment. Slide7
Tax Equalization
What will be included in the equalization?Salary aloneSpouses salary
Bonuses and incentive paymentsAll other outside incomeSlide8
Expatriate Complications
If you have an expat, the following questions may arise:
Does your payroll company process in the new jurisdiction?What are the in-country rules?Can you run your own payroll?Do you need a local provider?What are their rules around employee benefits?
What items are included in compensation?
Do you run a shadow payroll?
What do you need to report in the US?
What do you report to the state versus the IRS?
What items are included in compensation?Slide9
Compensation Issues
Central administration of stock plans by parent company
Only domestic payroll feedsCompliance requirementsTax withholding & reportingEmployer social taxes
Legal requirements
Corporate tax deductions
Locally qualifying plans
Mobile employees
Time zone, currency and language issues
Staying up to dateSlide10
Additional Complexities
Difficulties in communication due toTime zone
LanguageWho is going to answer employee questions?Currency issuesAre there cash disbursement restrictions?
How will funds be disbursed to employees?
Local currency: check/wire
Through payroll
Cost to employee
What exchange rate should be used?
Mobile EmployeesSlide11
Discussion
Is there such a thing as a one-stop-shop for international payroll?In house tax equalization versus outsourced tax equalization?How far do you go to accommodate the employees?
What do you do when you enter a new country?How do you get country specific data?11Slide12
Thank you
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