Expatriate tax-planning and compliance

The secondment of an employee from one jurisdiction to another can be expensive for both the employee and employer if not properly planned in advance. The employee may leave or terminate the secondment early if unhappy, or it may cost the employee far more than initially anticipated.

Of course there are direct costs involved, such as transportation for the seconded and his family, cost of living allowances/housing, flights home, education etc. These costs can all be negotiated and fixed upfront, but what is often overlooked are the taxation consequences. Examples of where we can assist in helping companies and their employees include:

• Assistance in ensuring as far as possible there are no unwelcome additional taxes, continuing home country liabilities and social security etc. For example, with take stock options, different countries have varied criteria such that employees can end up paying taxes twice, or not at all, depending on the trigger point for the tax. If the issues are identified upfront appropriate action can be taken. 
• Assisting in designing appropriate tax equalisation policies. There are many forms that tax equalisation programmes can take, but the intention is that the employee will suffer the same tax liability during the secondment as they would have borne if remaining in their home country.
• Completing and filing appropriate tax returns and notifications to the relevant tax authorities.

For further information please contact Gary James or Winnie Tsui in our Hong Kong office.