Tag: global tax tips

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Corporate Relocation

Pre-Decision Tax Planning: 5 Steps You Should Take Now

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Global Mobility Solutions knows the importance of pre-decision tax planning. As the pioneer of the benefits of pre-decision services, GMS understands how to identify the markers of success in relocations. Clients know that partnering with us early in the process helps increase relocation success. It also helps increase their transferee’s productivity on their new job. Our wide range of services help clients identify those employees who are the best fit and best suited for the assignment.

GMS spoke with Erika Beddow, Business Development Manager at Global Mobility Tax, LLP.  Erika has over 20 years’ experience in public accounting with the last 12 years specializing in the Global Mobility industry. Erika agreed to share her expert guidance on the issue of pre-decision tax planning.

What is Pre-Decision Tax Planning?

Whenever she is asked this question, Erika states that pre-decision tax planning is an extremely important consideration for relocation programs. Employers should be well-prepared for a successful global relocation. Relocating an employee globally can be beneficial to both the employer and employee. However, global relation can cause many issues if tax planning is insufficient.

Before sending an employee on a global assignment, employers should know the basics. This includes knowing how the host location will tax employees. It also includes understanding the taxes the company will need to pay. Whether the relocation is permanent or short-term, employers should understand the tax costs upfront. This will help them prepare accurate global relocation budgets. It will also help them avoid any possible tax compliance penalties.

COVID-19 Pandemic Puts the Brakes on Global Relocation

Many employers have found global relocations interrupted or halted during the COVID-19 pandemic. Erika believes that as countries start to recover and lift visa restrictions, employers will start considering international moves for employees. As companies look beyond the COVID-19 pandemic, pre-decision tax planning will be an essential part of relocating their employees.

Tax regulations are increasingly complicated and can increase the tax burden for both the company and employee. Pre-decision tax planning should be reviewed by assignment type to understand what the tax implications are in each location. This could vary depending on location, assignment type, and allowances paid. Some of the more common allowances offered may generate tax obligations.

Common Allowances for Global Assignments

  • Moving allowance for both the employee and family (includes airfare and shipping)
  • Housing allowances (either temporary or for the duration of the assignment)
  • Cost of Living Adjustment (COLA)
  • Home finding assistance
  • Home sale / lease break costs
  • Spousal support
  • Child tuition in the host location
  • Tax gross ups – increased tax costs typically know, as “tax on tax.” These are calculated to ensure the employee is not out of pocket for taxes on assignment-related expenses.

5 Steps to Take for Pre-Decision Tax Planning

Erika notes that employers should always be looking to reduce the tax impact that employee global assignments have on their company. Below are 5 steps employers should take now to ensure a simple, smooth, and successful global relocation.

1: Start global tax planning prior to the assignment—“pre-decision tax planning.” This will ensure you have the best type of assignment policy in place for this relocation for both the company and employee, while also minimizing global tax costs.

2: Review the global income and social tax treaties to minimize excess tax costs associated with each assignment.

3: Contact payroll to ensure set up and reporting is complete in both locations.

4: Educate employees on taxes in both locations to ensure the employee understands the implications in both countries via home and host tax consultations.

5: Provide tax assistance in both home and host locations for your employees. This will ensure proper compliance in both jurisdictions.

Proper Planning Saves Time, Money, and Provides Peace of Mind

Planning properly can save your company time and money. As a result, you can have peace of mind that tax issues will not arise from a global relocation. However, improper planning could cause damage to your company’s reputation, in addition to tax costs and compliance penalties.

Experts at Global Mobility Tax, LLP Understand the Importance of Pre-Decision Tax Planning

Global Mobility Tax, LLP has helped companies understand the overall cost of an assignment and its tax implications. We can help your company plan the assignment structure to have the best outcome for both the company and employee. Global Mobility Tax, LLP provides expert tax support, education, and awareness to clients and their employees in order to ensure corporate compliance and employee satisfaction.

Erika is always ready to meet to help employers learn more about being compliant and building internal processes to support their mobile workforce.

Conclusion

GMS’ team of global relocation experts has helped thousands of our clients learn the importance of pre-decision tax planning for their global relocations. Our mobility consulting team can help your company understand how to leverage pre-decision tax planning to reduce global tax compliance issues with the assistance of the experts at Global Mobility Tax, LLP.

GMS was the first relocation company to register as a “.com.” The company also created the first online interactive tools and calculators, and revolutionized the entire relocation industry. GMS continues to set the industry pace as the pioneer in innovation and technology solutions with its proprietary MyRelocation® technology platform.

New SafeRelo™ COVID-19 Knowledge Portal

GMS recently launched its new SafeRelo™ COVID-19 Knowledge Portal featuring a number of helpful resources including:

  • Curated selection of news and articles specific to managing relocation programs and issues relating to COVID-19
  • Comprehensive guide to national, international, and local online sources for current data
  • Program/Policy Evaluation (PPE) Tool for instant relocation policy reviews

Learn more about the importance of pre-decision tax planning. Contact our experts online or give us a call at 800.617.1904 or 480.922.0700 today.

We're Here to Help! Request a Courtesy Consultation

Are you ready to talk to a Mobility Pro? Learn how GMS can optimize your mobility program, enhance your policies to meet today’s unique challenges, receive an in-depth industry benchmark, or simply ask us a question. Your Mobility Pro will be in touch within 1 business day for a no-pressure, courtesy consultation.

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Global Mobility Global Relocation Global Relocation Challenges Global Relocation Tips Global Relocation Trends

Totalization Agreements Help Employers Avoid Paying Duplicate Social Security Taxes

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A confident business woman in the City of London holding a cup of coffee and a tablet device

Totalization Agreements between the United States and other countries help employers avoid paying duplicate social security taxes. But how can such a situation arise? First, ask these questions:

  • Are you a U.S. employer with operations in other foreign countries?
  • Are you sending your employees to work temporarily across borders?

If the answer is yes to these questions, your company and its employees may benefit from bilateral social security agreements. These are agreements that the U.S. has concluded with certain other countries to address social security taxes. As a result, these agreements are usually called Totalization Agreements, and they eliminate dual country social security taxation.

GMS spoke with Erika Beddow, Business Development Manager at Global Mobility Tax, LLP (GMT).  Erika has over 20 years of experience in public accounting and in the global mobility industry. Erika agreed to share her expert guidance on this issue.

What are Bilateral Social Security Totalization Agreements – and Who is Covered?

Sending employees to work on a temporary assignment outside of the U.S. can trigger social security taxation in the other country in addition to income taxation. The employer and employee will likely have social security tax liabilities in both the home and host country on the same earnings causing double taxation. The U.S. has entered into Totalization Agreements with several countries designed to eliminate the double taxation that can occur with respect to social security taxes.

How Does an Employer Apply for Relief Under U.S. Totalization Agreements?

While both employer and employee are responsible for reporting income and remitting social security taxes in both home and host countries, there is relief for double taxation for social security taxes. If the U.S. has a Totalization Agreement with the country your employee is working in, the company can apply for a “Certificate of Coverage” from the United States Social Security Administration.

The Certificate of Coverage serves as evidence that the employee temporarily working in another country meets the requirements of a Totalization Agreement shared by both countries. As a result, it allows both the company and the individual to be exempt from paying social security taxes in the country where they are working.

How long is a Certificate of Coverage Good For?

Once a Certificate of Coverage has been issued, it is good for the length of the assignment. It will typically max out at 5 years.

Are There Risks for Non-Compliance?

Yes, there are risks for non-compliance. Similar to the risks associated with not paying income tax, a company and/or individual may face corporate or individual fees, interest and other charges for not being compliant in paying social security taxes.

How Should an Employer Identify Their Specific Risks and Plan Strategically?

Employers should begin to identify their specific risks by planning early in the process. They should also engage with experts that understand Totalization Agreements. GMT can assess whether a Certificate of Coverage is beneficial. This will help employers to plan strategically, and ensure compliance while providing tax savings opportunities.

A thorough review of the assignment details and documents will help unlock opportunities. Applying for a Certificate of Coverage eliminates double taxation of social security taxes. This allows both the employer and employee to remain on the home country social security tax program. As a result, this also minimizes worldwide social security taxes.

What Does an Action Plan for Dealing With Totalization Agreements Consist of?

Employers should identify the employees that are eligible to apply for the Certificate of Coverage. Then, the next step is to submit the application for the Certificate of Coverage with the Social Security Administration. Employers should plan for how they will track the duration of the Certificate of Coverage. A company may need to send an employee to a location where there is no Totalization Agreement in place. In these situations, GMT can provide social security tax cost estimates and other advice. This will help employers to strategize and remain compliant.

GMT can assist employers with tracking employee information, including:

  • Assignment location
  • Duration
  • Certificate of Coverage availability

Employers would have ready access to this information through GMT. It is also used to ensure timely filing and renewal of the Certificate of Coverage, as needed.

GMT has a quick guide in PDF form for employers to help them understand some of the tax issues surrounding Certificates of Coverage and Totalization Agreements. GMT is always ready to help employers learn more about tax compliance and building internal processes to support their mobile workforce, and Erika states that she is available for preliminary consultations.

Conclusion

GMS’ team of domestic relocation experts has helped thousands of our clients learn about important issues such as tax compliance for their organization. Our mobility consulting team can help your company understand if it can eliminate double taxation for social security taxes through the benefit of Totalization Agreements with the assistance of the experts at Global Mobility Tax, LLP.

GMS was the first relocation company to register as a .com. The company also created the first online interactive tools and calculators, and revolutionized the entire relocation industry. GMS continues to set the industry pace as the pioneer in innovation and technology solutions with its proprietary MyRelocation® technology platform.

Contact our experts online to learn more about Totalization Agreements and Certificates of Coverage, or give us a call at 800.617.1904 or 480.922.0700 today.

We're Here to Help! Request a Courtesy Consultation

Are you ready to talk to a Mobility Pro? Learn how GMS can optimize your mobility program, enhance your policies to meet today’s unique challenges, receive an in-depth industry benchmark, or simply ask us a question. Your Mobility Pro will be in touch within 1 business day for a no-pressure, courtesy consultation.

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Global Relocation Global Relocation Challenges Global Relocation Tips Global Relocation Trends Visas and International Travel

China Residency Rules May Increase Taxes on Foreign National Employees

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China residency rules are changing with the implementation of a new law. The People’s Republic of China Individual Income Tax law has abolished the 5-year tax exemption period during which a foreign national employee does not have to pay income tax on their worldwide earnings. As a result, foreign national employees working in China may face higher taxes on their earnings.

What are the Current China Residency Rules?

Currently, foreign national employees have an exemption for five years before they must pay income tax on their worldwide earnings. Until the five year requirement is met, they only owe income tax on their earnings in China. Also, the current China residency rules require five full years before tax on worldwide earnings takes effect. Foreign national employees with absences are able to avoid the tax requirement if they break residency with one of the following scenarios:

  1. Have an absence of 30 or more days continuously on a single trip during the year.
  2. Have an absence of 90 or more days over multiple trips during the year.

What are the New China Residency Rules?

The new China residency rules eliminate the full year requirement for residency starting January 1, 2019. Instead, foreign national employees who are a resident in a People’s Republic of China-treaty country, and who work in China more than 183 days in a given year, will owe taxes on worldwide earnings. Foreign national employees receive an exemption for China income tax if they do not exceed 183 days residing in China.

Foreign national employees from a non-treaty country have a much shorter China tax exemption of only 90 days. After 90 days, these employees would owe tax to China on their worldwide earnings.

What Should Employers Expect?

Employers in China should expect that the new China residency rules may require employees to pay taxes on their worldwide earnings to China if they exceed 183 days residing in China during a year. Also, there is no mention of any five year period to determine residency, so employees may face immediate tax obligations.

What Should Employers do?

Employers should review their current employment situations in China to determine how the new China residency rules will impact their company and their employees residing in China. They should also provide information to their employees residing in China so the employees can prepare for possible tax obligations accordingly.

Conclusion

Global Mobility Solutions’ team of global relocation experts has helped thousands of our clients with their country-specific employment, visa, and residency requirements. We can help your company understand how to respond effectively to new China residency rules.

Learn how your company can mitigate the impact of China residency rules and resulting tax impacts on employees from Global Mobility Solutions, the relocation industry and technology experts who are dedicated to keeping you informed and connected. Contact our experts online to discuss your company’s relocation program needs, or give us a call at 800.617.1904 or 480.922.0700 today.

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Corporate Relocation Global Mobility Global Relocation Global Relocation Tips Relocation Best Practices

Strategic Tax Reimbursement and Best Practices for Global Mobility

There are five steps you should employ when developing a global program for strategic tax reimbursement that balances the needs of both the company and employees with regard to managing tax costs:

  1. Strategically Align Company Objectives and Employee Values
  1. Consider Tax Impacts of Likely Host Locations
  1. Choose a Tax Reimbursement Method that Best Fits, for example:
  1. Tax Reimbursement Policy Design
  1. Tax Reimbursement Policy Launch & Implementation

By following the five-step process outlined, you can develop a global mobility program that keeps your company compliant, reduces tax burdens, and, by saving them money, demonstrates to your relocating employees how much you appreciate them. At Global Mobility Solution (GMS), we like to think that there is a sixth step – contacting an expert for help. Outsourcing your workforce mobility program provides an expert partner in relocation.

Workforce mobility consulting at Global Mobility Solutions means our consultants focus on reducing organizational costs and minimizing relocation timelines in order to increase assignment success. Our in depth consultation includes competitor benchmarking, policy analysis, and relocation evaluations.

Global Mobility Solutions will perform a full review of your existing policies, to ensure the goals of your organization are properly aligned with the policy. If necessary, we will write new or change existing relocation policies and coordinate the implementation of the changes. If no policy currently exists, GMS will work with you to determine what your relocation needs are and develop new policies that best fit them. Your dedicated account manager will advise and counsel you throughout the relationship to ensure your relocation policy is the most cost effective.

In order to reach an experienced relocation policy expert who can help your company plan for strategic tax reimbursement and best practices, please contact us now.

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Corporate Relocation Corporate relocation tips Global Mobility Global Relocation Global Relocation Challenges Global Relocation Tips

Making Global Tax Less Scary for International Relocation

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Making Global Tax Less Scary for International Relocation: 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, making global tax their specialty.

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.

Physical presence

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.

Japan

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.

China

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).

 

Learn more about global relocation programs and services

 

DISCLAIMER

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 making global tax their specialty.

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.

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About

Contact Us

About Us

GMS Client Login

Privacy Policy

Other Services

Our Technology

Global Relocation

Group Moves

U.S. & Canadian Relocation

Address

Global Mobility Solutions
15333 N. Pima Road
Scottsdale AZ, 85260

1.800.617.1904
Available 24/7/365

About

Contact Us

About Us

GMS Client Login

Privacy Policy

Address

Global Mobility Solutions
15333 N. Pima Road
Scottsdale AZ, 85260

1.800.617.1904
Available 24/7/365

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