Tax Planning
Timing of an Assignment
The start date and end date of an assignment may have an impact on the tax and administrative cost of the assignment. The administrative burden of filing an additional tax return and the extra tax costs should be taken into consideration if your company is planning to start an assignment right before year end or ending an assignment shortly after the beginning of a new tax year.
Relatively high marginal tax rates in many countries, increasing corporate governance and closer control by the tax authorities are factors leading to greater demand for tax planning for expatriates. Proper management of tax cost is an important task for a HR/Tax manager dealing with international assignments.
The actual taxes to be paid by the employer on behalf of the employee are depending on the structure and type of compensation package provided to the employee going on international assignment. As a rule, any cash payment made by the company directly to the employee will be considered as taxable income. By adopting the appropriate tax planning techniques, companies can reduce the excess tax costs associated with an international assignment:
Benefits-in-Kind
The direct payment of certain expenses by an employer is considered a benefit-in-kind. In many countries, certain benefits-in-kind will not be fully taxable to the employee. Examples of common benefits-in-kind are housing, cars, and club dues.
Tax treaty between home and host countries
In some countries tax treaties may provide relief and/or exempt from taxation if the assignee is in the country less than 183 days in a tax year. For countries using a calendar year for the tax year, this means an assignment should start after July 1 and end before June 30. In other cases, it may be possible to achieve tax savings if the assignment is less than a specified amount of time under a country’s domestic law.
If the assignee will be working for the company registered in the host country, the assignee will, normally, be taxable thereto as from day 1. In some countries business days prior to assignment start may become taxable.
Under a tax equalisation policy, which should be defined in the IAP, it is normally so that the company agrees a net compensation with the assignee, and the company ensures tax compliance in the host country.
In case your company does not apply tax equalisation, and your assignees’ income and benefits earned during the assignment period is considered taxable in the host country, it will be the assignee’s responsibility for the tax balance upon tax assessment.
Tax Calculation
Provides simple solution to calculate the tax of base country and host country of an employee going abroad or coming from abroad for an assignment. You can select the base country (initial country of assignment) and host country (destination of assignment) to display their tax percentage and tax step. This also provide an ultimate solution to covert gross salary to net salary and viseversa.This calculation is purely based on the common items considered during tax calculation. So the calculations may vary from person to person depending on their circumstances.
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