[Editor's Note: We are happy to welcome Jen Stein as a Guest Author. Jen is the Managing Director of the Global Tax Network Chicago office. She has more than 15 years of experience in expat and foreign national tax preparation and consulting, starting her career with Arthur Andersen, and then Ernst & Young, where she served for over 14 years.]
International assignment administration is complex. Sometimes it’s useful to take a step back and review basic components. The list below, while not exhaustive, is a good starting point to help review your international assignment process and procedures. Adopting one or all of these components may make your life easier when administering international assignments.
- Have a written tax equalization policy for international assignments. Why? Because by having one it will:
- Enhance assignee mobility and satisfaction;
- Protect assignee cash flow;
- Minimize special negotiations;
- Help make international assignments tax neutral;
- Control assignment costs; and
- Limit the risk of tax non-compliance.
- Help ensure the assignee’s purchasing power in the host location;
- Provide tax-effective delivery of base compensation and assignment allowances;
- Control assignment costs;
- Ensure consistency; and
- Improve assignee perception as to the fairness of the program.
- Lowers assignment costs;
- Eliminates special deals;
- Increases assignee satisfaction; and
- Conforms to corporate strategy.
- Seamless payroll delivery – especially assignment allowances;
- Reporting of tax costs on all assignee remuneration is accurately and timely – both in home and host country;
- Elimination of costly correction efforts;
- Proper maintenance of records and transactions for accounting and payroll; and
- Full compliance with host country payroll reporting requirements.
- Provide a centralized reporting point for international assignee compensation;
- Supply direction as to what hypothetical tax needs to be withheld during the year;
- Increase internal control of tax payments made to or on behalf of the assignees; and
- Increase assignee confidence in the tax equalization system.
- Eliminate the surprise element when the assignment should be approved;
- Identify tax saving benefits in advance;
- Mitigate tax exposure in home and host country;
- Provide an opportunity to accrue “trailing” assignment costs (tax equalization clear-out, final host country taxes, etc.); and
- Help to control assignment costs and conform to corporate strategy.
- Coordinating expatriate planning with corporate tax planning, including inter-company charges, book/tax differences, and legal structure; and
- Ensuring tax risks are managed appropriately.
- Identify not only the skill-set, but also the traits and personal characteristics required for the position and environment;
- Determine the family’s enthusiasm for the assignment;
- Discuss the impact of the assignment on the employee’s career goals; and
- Have all the corporate parties in the transfer identify and agree upon expectations, goals and perceived benefits of the position.
- During the assignment, is there a mentoring program to help the assignee keep abreast of company and local news?
- Is a meaningful position (if not promotion) provided to the returning employee?
- Does the corporation acknowledge and utilize the repatriating employee’s international skills?
- Is reverse culture shock acknowledged and help provided?
- Does your company have a global business perspective that understands the great investment made in international assignees?
- Frequent and timely;
- Clearly understandable;
- Concise and to the point; and
- Professional in tone.
The above list illustrates various groups that often interact as part of a successful international assignment program. As we all know, a breakdown in one area can reverberate throughout the program, impacting both Company administrators and the assignees. Utilization of even one of the above components can have a positive impact on your international assignment program.
What tips can you offer that are effective in your organization? Please leave a comment with your thoughts.
More About Jen
About Global Tax Network
Global Tax Network provides international assignment tax compliance and consulting services for corporate global mobility programs, including program development, ongoing tax management, and special projects. The firm is recognized as a leader in consulting for emerging to mid-sized global mobility programs. GTN has six U.S. offices, with allied partners and resources in more than 100 countries to support assignee home and host tax requirements. For more information please contact us.