PKF International

Internationally Mobile Employees

PKF International
Why do you need us?

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Why Do You Need Us?

Overseas investments or undertaking projects abroad typically requires the assignment of people, either to manage the investment or project, or to provide skills not yet available in the local market. These movements of people create a number of issues, such as visa and work permits, payroll, and foreign tax compliance, which the Human Resources function at Head Office may not be able to deal with effectively. In addition the economic and business environment of the destination country may be such that comprehensive changes need to be made to the employees’ compensation and benefits packages.

At PKF we believe that businesses must take a proactive approach to Internationally Mobile Employees, based on the following 5 principles:

One size doesn’t fit all
Individual residence and income tax rules can vary enormously from country to country. Benefits that are taxable in the home country may be tax-free in the destination location. Some countries tax on a worldwide basis, others only on income sourced in-country. Your compensation and benefits policies for your Internationally Mobile Employees will need to be tailored to suit individual overseas locations to avoid significant tax inefficiencies.

Equalize for mobility
To enhance your ability to move employees across borders, you may wish to take tax out of the equation by implementing a tax equalization program. These programs can be complex to administer, but do ensure that taxes are not a factor in your employees’ decisions as to whether to accept an overseas posting.

Be careful of visa and work permit issues
Many countries adopt more protectionist employment policies than you may be used to. Avoid potentially embarrassing and inconvenient incidents by making sure that your Internationally Mobile Employees are issued with visas and work permits consistent with the work they will be performing, and the locations in which they will be present.

Don’t forget your corporate tax
The treatment of items of income for individual income tax purposes is often reflected in corporate tax regulations. Benefits may be tax-free for the individual, but non-deductible for corporate income tax purposes. If corporate tax rates are different from individual tax rates, arbitrage opportunities may exist.

Use the right employment vehicle
Having employees present in another country can create a taxable presence in that country for the employing entity, defined as a Permanent Establishment. Subject to the provisions of an applicable Double Tax Treaty, you should be able to avoid this by careful selection of an employing entity, or the use of secondment contracts.

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