Relocating across international borders can be a little scary. However, the experts at Global Mobility Tax were kind enough to provide these treats to take the trickiness out of workforce mobility.
When sending employees on assignments, careful planning can minimize overall tax cost. Each country has its own set of laws that are subject to change. Employees should seek guidance from their tax advisors.
Social security tax
If there is a totalization agreement in force between the home country and the host (assignment) country, a certificate of coverage should be obtained in order for the assignee to be exempt from social security tax contribution in the host country.
If an employee has regional responsibilities and is required to travel to countries like Singapore (60 days), Taiwan (90 days), Malaysia (60 days), China (90 days) and Hong Kong (60 days), he can arrange his visits in order that the physical presence stays below the de minimis day threshold and be exempt from income tax in these jurisdictions. In addition to physical presence, other requirements, such as no cross charge of costs, will also have to be met in order to be exempt from income tax.
Preferential tax treatment on employer provided housing can be achieved if the lease is signed by employer, the employer pays the rent to the landlord directly and the employee pays back “legal rent” to the employer with after-tax money. If all the conditions are met, the valuation of the taxable benefit is reduced.
Individuals who are residents in Japan on Jan 1st are required to pay local inhabitant tax assessed on income paid in the preceding year. If the assignment is expected to end in early January, the employee may consider repatriating before Jan 1st so that local inhabitant tax does not apply in the final year of assignment.
In order for certain non-cash benefits such as housing, relocation, education, home leave, meals and laundry as well as language training to be treated as non-taxable compensation, the amounts have to be reasonable and have be paid by the employer directly or reimbursed by the employer upon presentation of official receipts (fapiao).
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Although the above information is presented in good faith, it is for general guidance on matters of interest only and is not intended as tax advice. The information presented herein may not be applicable to or suitable for the individuals’ specific facts and circumstances.
The information should not be used as a substitute for consultation before any actual transaction with a professional tax adviser who is familiar with all the relevant facts.
Global Mobility Tax, LLP assumes no obligation to inform any person of any changes in tax law or other factors that could affect the information contained above.
About Global Mobility Tax (www.glomotax.com)
Global Mobility Tax, LLC (GMT) is dedicated exclusively to the tax and HR issues impacted by global mobility. Our quality people and high-touch client service approach enable us to offer world-class service to global organizations.
Their core specialty is tax planning for international assignments and relocations. In concert with our global service partners, we can offer your organization global strategy, planning and compliance.
GMT clients include both public and private companies, ranging from Fortune 500 companies to industry start-ups, based in the US and abroad.