Category Archives: Expatriate Taxation

Postings and discussions about expatriate tax topics

Two Tax Planning Strategies to Reduce Expatriate Costs

Author:
Eric Loff – Global Tax Network

The tax cost of an international assignment can be significant and companies struggle to find ways to manage these costs.  This article outlines two straightforward strategies for reducing the tax costs of your expatriate program.

Where do those excess taxes come from anyway?
Excess tax costs associated with an international assignment include the actual taxes paid by the employer on behalf of the employee which exceed the employee’s tax burden as calculated under the company’s tax equalization policy. But don’t worry. There are a variety of tax planning techniques that can reduce these excess tax costs. Two common ones are:

  • Paying benefits-in-kind in lieu of cash payments
  • Proper timing of the assignment

Read on to learn how these tax savings strategies work. Continue reading

Expatriate Orientation – Why, What, When?

Author:
Jennifer Stein – Global Tax Network

When individuals relocate, they are bombarded with many changes at once. You may hear the phrase: So much to do, so little time. They may be tempted to skip part or all of the relocation process. Here we’ll discuss three questions related to orientation meetings.

  • Why do we need to provide international assignees with orientation meetings?
  • What should be covered during the orientation meetings with an international assignee?
  • When should this information be provided to the international assignee?

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Expatriate Assignment Checklist Part 2 – Assignment Planning

Author:
Warren Heaps – Birches Group LLC

This is the second part of a five-part series, where we present checklists to help international HR professionals plan and manage long-term international assignments. There are five stages we identified for long-term assignment management:

International Assignment Stages

Click to Enlarge

In part one of this series, we looked at candidate assessment, selection and approval. In this installment, we will examine Assignment Planning.

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Expat Lump Sums – Trap or Panacea?

Author:
Mary Lou Stockton – Global Tax Network

A US company sends an employee on assignment to the UK.  The company informs the employee that they will pay X amount for his UK housing.  The employee wants to spend more, because he wants a larger, nicer flat.  He feels the allowance is not enough for the type of flat he wants considering his family needs, including the fact that his wife wanted to live near other Americans.  

The HR Director works with the business manager to determine whether the company would pay more in this case.  The employee is told that he will have to reimburse the company for excess housing cost through payroll.  The employee contends that he should get a tax deduction on his hypo tax for the excess housing that he funded.  The issue went to the tax accountant and finally to the company VP for resolution.  The VP asks why he is being asked to resolve assignment allowance issues and tells HR that they should “handle it”.  The HR Director considers transferring to something less complicated, like nuclear engineering or cell biology.

It does seem expats take a disproportionate percentage of HR’s available time, and require much more administration than one would expect.  The trend in HR today is towards “self-service”.  Why do we need such detailed and centralized control of assignment expenses and allowances?  

Why can’t I just give assignees some extra money to handle the costs of an international assignment?

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10 Killer Reasons to Attend the North East Totally Expat Show

The International HR Forum is proud to be a Partner Organization for the upcoming North East Totally Expat Show on 3 April in New York.  The event is just three weeks away! It will be the largest global mobility event ever held in New York.  So, if you are in the New York Metro area, or if you are able to travel, register now!

Here are 10 killer reasons why you should register today: Continue reading

NY Totally Expat Show

Author:
Warren Heaps – Birches Group LLC

Have you heard about the Totally Expat Show sponsored by the Forum for Expatriate Management? This group has hosted several very successful exhibitions designed for global mobility professionals.

This year, the International HR Forum will be represented at the New York Show on April 3rd.  Birches Group LLC will have a booth in the Exhibition Hall — stop by and introduce yourself as one of our loyal readers.

Check out the details on our NY Totally Expat Show page.

When you register, please be sure to mention you saw the event on the International HR Forum!  And if you want to, leave a comment if you will be there, so we can look for you.

New York Totally Expat Show – April 3, 2012

Join us at the New York Totally Expat Show on 3 April

The Forum for Expatriate Management’s Totally Expat Show will be returning to New York on 3 April 2012. We will also be visiting Chicago for our Mid West Show on 1 June 2012.

  •  North East USA at the Metropolitan Pavilion in New York on 3rd April 2012 – Register to Attend
  • Mid West USA at the Sheraton Hotel & Towers in Chicago on 1st June 2012 – Register to Attend

The International HR Forum is a proud partner organization of The Forum for Expatriate Management, and Birches Group LLC will be attending the New York Totally Expat Show on 3 April 2012. Do come along and visit us. With over 500  attendees, this is likely to be the biggest Global Mobility event  ever held in New York.

These truly unique global mobility events will include a major exhibition with a large number of leading service providers and a rolling program of seminars (which will be certified by HRCI for GPHR credits).

Entry is entirely FREE for corporate HR professionals.  Just  Register to Attend!

Service Providers can attend for just $290 for FEM Members ($350 for non-Members). Just Register to Attend!

Topics to be covered are listed below.  For full descriptions of the topics, see the seminar program.   Additional speakers and topics will be announced shortly.

  • Meet the Experts – Global Immigration Compliance Trends
    Experts from Fragomen and other leading specialists
  • Latest Trends in Global Mobility Policy and Practices
    Debra Frost, Vice President, Client Services, Cartus
    William Sheridan, Vice President, National Foreign Trade Council
  • Business Process Automation in Global Mobility
    Mark Rabe, VP Business Development, Equus Software
  • US Reporting Requirements for Foreign Assets – What Global Mobility Managers need to know
    Beth Penfold and Katrina Haynes, Grant Thornton
  • An Overview for Companies new to Expatriation
    Pat Jurgens, Director of Tax for AIRINC
  • Emerging Trends in Global Mobility Transformation
    Glen Collins, Senior Manager, International Executive Services, KPMG
  •  Technology and Global Mobility – The Next Generation
    Frank Patitucci, CEO NuCompass Mobility
  • Strategic Intercultural Support: Insuring the ROI on the International Assignment
    Dean Foster, President and founder, DFA Intercultural Global Solutions
  • Is Cross Cultural Training really worth it?
    Diane McGreal, Director Berlitz Global Leadership Training, Americas Region
  •  Spousal assistance : overview of best practices based on a global sampling of 200 multinational corporations
    Alain Verstandig, President and Denise Michelle Starrett, Senior Consultant NET EXPAT Inc
  • Managing the Global Mobility Function
    Brian Friedman, Founder and CEO, Forum for Expatriate Management

Register to Attend!

 Just these Corporate Attendees

AIG * Amphenol TCS * Associated Press * AXA Equitable * Axiom Law * BNP Paribas * Boehringer Ingelheim * Bunge Limited * Citibank * Citicorp * Coach * Columbia University * Corning Incorporated * Covance Inc. * Criteo * D&B * Deloitte * Discovery Communications * Dragados USA * DSM Services USA * Fidessa corporation * Foot Locker Inc. * Harris * HSBC * IBM * ING Financial Services * Ingersoll Rand Company * JPMorgan Chase * KPMG LLP * Marsh & McLennan Companies * MetLife * Milbank, Tweed, Hadley & McCloy LLP * Morgan Stanley * Nielsen * Novartis Pharmaceuticals Corporation * NYSE Euronext * NYU * PTC * Ralph Lauren * Resources Global Professionals * Sikorsky Aircraft Corporate * Sony Music Entertainment * Teach For All * Terex Corporation * The Hershey Company * The NPD Group Inc. * The Royal Bank of Scotland * Tiffany * Towers Watson * Toys’R’Us * UNDP * Unilever * United Technologies Corporation * White & Case LLP * William J. Clinton Foundation *

Equalization or Protection – A Taxing Question

Guest Author:
Jennifer Stein – Global Tax Network

[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.]

Taxes are one of the most complicated and expensive aspects of an international assignment.  To control these costs, most companies utilize a tax policy as part of their international assignment process.  The two most common approaches are tax equalization and tax protection.  How do you decide if one of them is right for your company? Let’s start with some definitions.

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Permanent Establishment and the International Assignee

Chris HallGuest Author:
Chris Hall – Global Tax Network, LLC

We are delighted to welcome Chris Hall as a Guest Author.  Chris is the Managing Director for Global Tax Network in New York.  GTN is an award-winning firm that assists clients with expatriate tax matters headquartered in Minneapolis, Minnesota.  He is a Chartered Tax Advisor with over twelve years of experience.  Chris has worked in the UK, Canada and the US.  Before joining GTN, he held positions with Arthur Andersen and Deloitte.

The concept of Permanent Establishment (PE) is one of the fundamental principles used by taxing authorities to claim jurisdiction over a corporate entity deemed to be doing business in their location. When sending people to work in overseas locations it is important to consider the impact the PE concept might have on the company as a whole.

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How to Develop Effective International Assignment Policies

Author:
Alan Freeman – LOF International HR Solutions

During a recent conversation a colleague shared some frustration she was feeling. “I’ve read lots of articles and attended conferences where we’re told what we “should” be doing with our International Assignments (“IA”) policies on the basis of what everybody else is doing with theirs. What I’m not hearing is how to go about structuring our program in a way that really makes sense for our company. Where do we start? Who should be involved? What steps are necessary?”

“True”, I said. “We hear a lot about best practices such as keeping the spouse happy, increasing flexibility, controlling costs, keeping exceptions to a minimum and conducting benchmarking studies to find out what everyone else is doing. That’s all well and good but if your company sells luxury consumer goods in the best department stores in the largest cities of the world, do you think that practices that work well for mining companies in rural West Africa or at 14,000 feet in the Andes Mountains will be relevant and useful?”

“Exactly – they wouldn’t!” she said, “so what should we do?”

Let’s start with The Prime Directive. Simply put, your IA policies and program exist to help your company achieve its business objectives by having the right talent, in the right places, at the right times, doing the right things. Clearly, your company’s business objectives define what the various “right items” will be. Is this another way of saying you must start by truly understanding your business? Yes, of course!

“OK, that makes sense” she said, “then what?”

Well, now it’s time to go about structuring your program. A process that has proven to work well follows these steps:

Assemble a Policy Development Team

To often, policy development is left up to a Global Mobility department or single HR staffer working in a vacuum.  This generally is not effective. Utilizing teams of key stakeholders provides greater breadth of ideas, broader input from key functions and business operating units, and greater understanding of and buy-in to the end product. The team must be led by someone with significant depth of IA program expertise and include Global Mobility, Tax, Accounting, Payroll, HR Business partners from units that utilize international assignments, etc. Bringing in expert consultants and specialty service providers, e.g. immigration, international tax, global security firms, etc. can pay large dividends as well.

Conduct Benchmarking

There are two types of benchmarking to consider. First, conduct internal surveys of line managers who make use of IAs, and current and former assignees themselves. These groups can provide a wealth of information as to what has been working and what has not. They further can often make great suggestions for new approaches worth considering.

Second, do take a look at market practices through both generally available surveys and, potentially, custom surveys more precisely focused upon your company’s industry and competitors. This can help generate ideas and help gauge competitive positioning. Be careful, however, to not only look at what companies are doing but also to ask how well those practices are working. It’s amazing how many times I’ve heard a colleague say “we do ____” and in the next breath, say “and I’d change that practice in a heartbeat if my management would allow me to!” Another caution about benchmarking is that it’s imperative to consider the policy package as a whole and how the many provisions work together in total. There is a definite tendency toward getting caught up on individual line items and, hence, “lose sight of the forest for staring at the trees”.

Draft a Policy Structure

Put together the first array of policy provisions that make sense given the demographic, geographic and time variables dictated by The Prime Directive. Make sure they integrate and work together in a consistent and holistic manner.

Model the Costs

The first question executive management is likely to ask when the new program is presented for approval is not, “how does it meet our business needs?” It’s assumed that it will. The first question is, “what’s it going to cost?” If you are reengineering an existing IA program you’ll need to show the difference in costs between the proposed and existing programs.

Fortunately, there are many applications and providers that make cost modeling relatively straightforward.

Test Your Ideas as You Go

One of the worst ways to achieve buy-in on your ideas is to keep them to yourself and spring them on someone only at the end. If you communicate as you go through the process, sharing what you’re thinking about and soliciting inputs, that engagement frequently gives the other a sense of having had input and influence on the final product. Those who feel they had input are much more likely to respond positively. Their inputs may well have a lot of value as well.

In a larger corporate environment this could be done via periodic progress update meetings.

Finalize and Implement

In pursuing the steps above, you’ll ultimately obtain approval to proceed. Prepare the necessary communications and implementation materials. If you are reengineering an existing program, you’ll have already determined whether current assignees will be “grandfathered” under their old terms, converted to the new terms, or converted with some sort of buy-out provision.

When you have it all in place, move ahead.

Continually Evaluate and Improve

Finally, when you implement your new program, be sure you’ve also built in metrics and processes for determining how well it’s working on an ongoing basis. You can’t have anticipated everything that will ultimately be encountered and change happens! Be ready to be flexible and make program adjustments “on the fly”.

More About Alan:

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