A mobile employee moving from their Home country to an overseas location usually discovers fairly quickly that their tax situation has become far more complex as a result of the move. If the employee is moving from a low-tax location to a country with a high income tax, that employee may be facing a major increase in tax liability as a result of the move. Additionally, the mobile employee may encounter tax issues related to the sale or rental of their home, moving expenses for state reporting purposes, state residency issues, and a number of other issues they may not be prepared to handle on their own.
A mobility tax services firm’s job is to apply international tax laws and treaties in a manner that allows the company and its mobile employees to meet their global tax reporting and payment obligations while proactively managing tax risks and costs. The firm will help individuals and their companies navigate the tax complexities that result from working outside of the Home location.
Mobility tax services firms assist their clients by helping them to structure their overseas employment scenarios in a tax-efficient manner by tax planning and policy implementation. They also assist with tax and payroll compliance matters in the Home and Host locations. A mobility tax services firm provides guidance for employers on the development and implementation of policies and procedures that are appropriate for the company and its employees, and providing education and support that helps prevent unexpected tax assessments, penalties, and interest.
The services provided by a mobility tax services firm may include creative assignment planning and compensation structuring, mobility tax and assignment cost projections, global equity consulting, and business traveler compliance. Firms also offer support for individuals such as Home and Host country tax counseling, tax return preparation, and preparation of calculations to assist in applying the company’s tax reimbursement policy (e.g., a “tax equalization” calculation if the policy is to keep the employee in a tax neutral position while on the foreign assignment).
Mobility Tax Specialists Stay on Top of the Changing Tax Landscape.
Even companies employing large tax departments often find that they are unable to stay on top of the constantly changing tax laws and regulations affecting mobile employees in both their Home and Host locations. These companies turn to mobility tax services firms for additional guidance. That is why firms specializing in mobility taxes have overseas offices or affiliates in nearly all of the countries and territories with businesses that are actively involved in the global economy.
Assessing the mobility tax issues that can arise when a company decides to move employees overseas requires a firm with a perspective of the international tax landscape. The firm must also be capable of layering the ability to address the tax situations of employees in their Home countries with additional capabilities in the Host countries.
A firm specializing in mobility tax can guide companies and their mobile employees through the process of becoming tax compliant in Host locations while ensuring mobile employees continue to fulfill their tax and reporting responsibilities in their Home countries. The mobility tax firm does this by staying up to date on the various compliance issues employers face when utilizing mobile employees and by maintaining established partnerships with tax firms operating in the Host location.
Mobility Tax Professionals Know What Questions to Ask.
The mobility tax firm’s overseas offices and affiliates will eventually prepare the mobile employee’s returns to be filed in the Host country, so it is important that they are involved in the planning process. They have worked with other mobile employees in the past, so they are familiar with the nuances of the Host country’s tax code as it applies to mobile employees and know how to ask the right questions so that the mobile employee’s tax situation can be settled in the most efficient manner possible.
The overseas offices and affiliates will also ensure that a company is not adopting a “one-size-fits-all” approach to its mobile employees in a Host country when a more nuanced approach is necessary. For example, two mobile employees may be doing the same job in a Host country, but they may be facing very different tax situations if they are citizens or residents of different Home countries. A mobility tax specialist will work closely with its overseas branches and affiliates to provide their employer with tax guidance specific to each employee’s situation, both in the Host country and in their Home country.
The information provided in this article is for general guidance only and should not be utilized in lieu of obtaining professional tax and/or legal advice.