Tips for a successful expat assignment: What you need to know...in a nutshell
International assignments can be fairly complicated. There are many tax and reporting burdens on both the company and the expatriate. However, being aware of these requirements allows for successful pre-planning meetings to facilitate the assignment, which leads to reduced stress for both the expat and the company and allows the expat to focus on the assignment rather than feeling overwhelmed or financially burdened.
There is a lot of things to consider when sending an employee overseas. One thing is tax equalization for the individual, and the other is from a corporate standpoint. Having that expat overseas could expose the U.S. company to taxation in that host country. Being aware of your permanent establishment risk and exposure beforehand is imperative.
Knowing how you're paying your expatriate employee is crucial. You've got items like deferred compensation, pension plans, stock options—and it's imperative that you understand whether they are handled the same way in the U.S. and in the host country. The other item to consider is mergers and acquisitions. [In a merger,] Suddenly you may end up with an expat and you need to work out what you're doing with that expat.
You want to look closely at how the assignment is structured. A secondment versus a local hire will have an impact as well as the length of the assignment. Holding departure meetings will minimize future surprises on the assignment. You can utilize income tax treaties, foreign tax credits, and other host country benefits.
It's also a good idea to tie the compensation package to the assignment, which gives the expat an incentive to keep costs down.
When they repatriate, that’s usually the part people forget about or don’t do very well. It’s important at that point to
Then from a tax perspective, there could be trailing foreign tax credits. They need to be tracked and utilized and that can help as a future reduction of costs to the company.