Identifying tax and payroll issues that arise when people employed in one country go and live and work in another
Many international assignees will remain on the payroll in their home country, typically to enable them to remain in benefit plans and pension schemes. However, they may also have some amounts paid in the host location under a ‘split payroll’ arrangement, and may have locally-provided benefits, often including expensive and taxable items such as housing or schooling for more senior long-term assignees. And, if that wasn’t complex enough, if they participate in the parent company’s employee share scheme, that may be operated from the country of headquarters, which may be yet another location.
Every country has its own payroll withholding obligations, and although similar, they are often different. Plus, if the individual chooses to remain in their home country social security system by obtaining a certificate of coverage, the reporting for tax may be in a different country to the reporting for social security.
One consequence of the last wave of globalisation is that assignees now come from all over the globe, rather than being sent out from head office or a few major locations. That gives an exponential increase in potential country combinations, so it becomes increasingly important to be able to track what is paid, when, and by which entity, and to ensure that this data flows back to the right payrolls.
Getting this right entails managing many data flows, and sets of regulations.
Base and variable pay
Country of payment information needs to flow to the country of reporting, whether from home to host in the case of tax, or potentially host to home for social security.
Some assignment-related benefits such as housing may be paid tax-efficiently in some countries, but this often requires careful structuring. Employers also need to track payments made, whether made directly or paid indirectly through expense claims, to ensure they are correctly reported.
Certificates of coverage need to be in place, and all income needs to be correctly tracked and reported to assess contributions.
Different countries require reporting of equity at the time of grant, vest, and exercise. These need to be tracked, to enable correct reporting to take place in the home and host country – and any other place where the assignee may have worked between grant and exercise.
Tax-effective planning in one country can sometimes be made effective in the other, for example by obtaining recognition for a foreign scheme in the UK. Employee and employer contributions need to be tracked and reported both for tax and social security.
How we can help
Blick Rothenberg’s Global Mobility team combines deep expertise in multi-country tax knowledge with the local knowledge of employment tax rules and social security.
Our Compensation Accumulation specialists can help you identify the reporting requirements, manage your data flows, and support you with making the required payroll filings, both in home and host country. And, when it comes to aggregating that information into your annual tax filings, our award-winning global mobility specialists can ensure that your tax return includes everything that it should.
- Support Payroll teams with training
- Review payroll calculations to ensure that items are correctly treated
- Advice in addressing various issues as unusual payroll and benefit items are encountered