Tax Support for Permanent Transfers

GTN Newsletter - January 2017

Tax Support for Permanent Transfers

Brett Sipes, Branch Director

GTN Pacific
Phone: +1.619.758.4083 | Email: bsipes@gtn.com

Relocating can be one of the most stressful events in a person’s life; and providing support, service, and guidance to those that are relocating is a major undertaking by global mobility program leaders.

One major challenge faced by international permanent transfers is the tax rules and regulations in their new country.

Consider what the individual is facing when they transfer to a new country:

  • Breaking home country tax residence.
  • Ending home country social security contributions.
  • Suspension of home country pension plans.
  • Possible taxation of previously tax exempt income.
  • Possibly facing a tax filing requirement for the first time (many countries do not require an annual tax return).
  • Entering a new social security system.
  • Uncertainties around net pay levels.
  • Establishing a new pension plan.
  • First time exposure to stringent foreign asset declaration rules.

The U.S. tax system can be particularly complex for permanent transfers. For example:

  • Anyone with more than $10,000 in foreign bank accounts needs to declare all their foreign accounts. Failure to do so can lead to penalties of 50% of the balance of the accounts or even jail time.
  • The US does not recognize tax exempt income from overseas, income from investments previously considered tax free may become taxable following a move to the US
  • Many countries allow for a tax free sale of real estate; this is often NOT the case once an individual is in the US
  • The US has complex residency rules, especially in the first year of a transfer, which can have a large impact on the transferee’s US income tax liability.
  • State income tax must be considered in addition to the federal income tax.

What services should be offered to help alleviate the stress of a permanent transfer?

Many companies will often offer tax support for permanent transfers including some or all of the following services:

  • Tax counseling session or “entrance meeting” to advise the transferee on their new tax responsibilities such as filing requirements, residency rules, state tax issues, and personal income reporting.
  • Tax counseling session or “exit meeting” for their home country to advise the transferee on potential tax planning before they transfer to their new country.
  • Preparation of a net pay estimate for the new country, including both income and social taxes.
  • Tax return preparation for the first, and sometimes the second, tax year in both the home and host countries.

While the stress of an international transfer cannot be fully eliminated, program leaders can help to lessen the burden on the transferee by showing support and providing services throughout the process. Providing tax assistance for the transferee can maximize employee satisfaction and will help to ease the stress the transferee and their family may be feeling.

Please see Our Services page for further information on services we offer and tax support we can provide to you and your permanent transfers.

For further information on this newsletter, please contact Brett Sipes at +1.619.758.4083 or via email at bsipes@gtn.com.

The information provided in this newsletter is for general guidance only and should not be utilized in lieu of obtaining professional tax and/or legal advice.

Author: Brett Sipes

Brett Sipes

Brett is Managing Director in GTN’s Pacific region and has over 20 years of experience in mobility tax services. He joined GTN in 2006 and is responsible for managing all aspects of the Pacific region along with providing tax compliance and consulting to Pacific region clients.

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