Human Resource Services Webcast

Transcription

1 Human Resource Services Webcast International assignment basics: Planning for successful assignments abroad

2 Administrative information 60-minute webcast Audio with slides For a better viewing experience, close all other applications For better sound quality, use headphones To print this entire PowerPoint presentation, click on the green Resource List widget and then Download Slides If you have questions during the live program, type them in the Ask a Question box located on the left side of screen and click Submit This presentation will be archived and available for later viewing as an on-demand presentation 1

3 Administrative information In order to receive CPD credit for this program, you must stay on for the entire live program and participate by responding to all interactive polling questions. CPD credit cannot be awarded for participants who are not logged on to this webcast as themselves, who participate over the phone, or attend the on-demand version. For those qualifying for CPD credit, a certificate will be sent shortly after the webcast to the address used for registration. The certificate will acknowledge one hour of structured learning towards the Institute of Chartered Accountants of Ontario CPD requirement or similar accreditation. For webcast participants in other jurisdictions, you should follow up with your local governing body to confirm if it meets requirements. 2

4 Objectives To provide guidance regarding global trends, mobility policy development, income and social security tax costs, and other challenging areas of international assignments To enable you to understand: The issues related to an international assignment and the attendant costs; and The role of an assignment policy in addressing these issues 3

5 Polling question #1 How many employees does your company currently have on international assignment: 0 to to to 100 More than 100 Uncertain employee 4

6 Agenda Basic objectives of an assignment policy The assignment life cycle Key pre-assignment considerations Issues while on assignment Repatriation Planning considerations Sending your first assignees 5

7 Basic objectives of an assignment policy Why transfer employees Objectives of policy Set up new operations or completion of a specific project To support business strategy Transfer knowledge/develop local staff To facilitate timely and successful transfers Career development of head office employees/development of global talent pool To minimize risk and ensure compliance Employee retention To manage costs 6

8 Understanding the assignment life cycle Assignment identification Postassignment review Assignee selection Repatriation Pre-departure planning Ongoing administration Relocation 7

9 Assignment identification Types of assignments - Temporary Short-term Commuter Business traveller Short term assignment Long-term Expatriate Modified local 8

10 Polling question #2 What is your company s primary goal in sending employees on assignment? Transfer of knowledge to the host entity Development of the employee going abroad Employee satisfaction & retention Other employee 9

11 Assignee selection Technical and business skills Flexibility Interpersonal Skills Cultural sensitivity 10

12 Pre-departure planning - trends More short term assignments Typical assignee Reasons for transfers Policies Increasing regulation Flexible benefits Lump-sum allowances No provisions for home housing 11

13 Key pre-assignment considerations Resource allocation Repatriation Tax compliance Immigration Cost projection Legal / regulatory Payroll options Pre-move preparation Compensation delivery 12

14 Foreign employment authorization Immigration, employment law, work permits Consequences of employees working in the host location without proper authorization Failure to obtain proper employment authorization does not alleviate employer and employee tax compliance requirements 13

15 The assignment costs us how much?? Pre-assignment preparation Relocation costs Ongoing assignment costs Additional benefits for accompanying family Tax gross-ups Tax compliance services Trailing tax costs Early preparation of cost projections and monitoring of actual versus budgeted costs is key for minimizing surprises! 14

16 Pre-assignment preparation Business trips prior to the official start of the assignment Legal fees, immigration services House hunting trips Other destination services 15

17 Relocation & ongoing assignment costs Transportation of the individual, family and belongings Home leave Host location housing Local transportation 16

18 Income tax Equalization, protection, or actual taxes Different year ends or filing deadlines Different tax treatment for compensation items Worldwide taxation based on citizenship vs taxation based on residence Trailing income 17

19 Polling question #3 What type of assignment tax payment policy does your company have? Tax equalization Tax protection Hybrid None Uncertain employee 18

20 Tax gross-ups Gross-ups: tax on a benefit received when an employer pays taxes on behalf of an employee, often due to: Existence of a tax equalization agreement; or Provision of an allowance or benefit from an employer to employee without the employee being held responsible for the taxes on that benefit Gross-ups can significantly increase the cost of providing a benefit to an employee, especially in high-tax jurisdictions 19

21 Tax gross-up an example Moderate Tax Jurisdiction High Tax Jurisdiction Moving allowance $20,000 $20,000 Individual marginal tax rate 25% 46.41% Net overall cost to employer $26,667 $37,320 The actual cost to an employer of providing a benefit could be double the cost of the benefit! 20

22 Trailing liabilities Unplanned tax liabilities after the assignment ends could surprise both employers and employees Final year gross-ups Taxation of deferred compensation Awards granted before or during the assignment which vest or are exercised after the assignment may have tax implications in the host location at the time of vest/exercise Timing differences awards may be taxable at different times in each location (e.g. at grant in host location, at vest in home) 21

23 Deferred compensation example Facts: Laura is an employee of ABC Company in Canada, and is starting a 2-year assignment in the United States on March 1, 2014 She currently has 100 restricted stock units which will vest on April 30, 2015 She expects to receive another grant of 150 units on April 30, 2015, which will vest on April 30, 2017 Considerations: 100 units vesting while on assignment in April units vesting after the assignment in April

24 Tax compliance services Pre-assignment home and host location tax briefings Individual tax return preparation in the home/host locations Tax or social security registration/de-registration Tax assessment reviews and objections Payroll calculations and advice for home country hypothetical tax and host country actual tax Departure procedures and return filing 23

25 Payroll options Home-based Cost of living adjustments, home benefits Split payroll Host-based Local hire Modified-local International structure Global Employment Company (GEC) Theoretical home salary and incentive/pensions 24

26 Dealing with social security & pensions Employer and/or employee obligations to pay social security could exist in the home and/or host location Social security totalization agreement avoids contributions in both locations if criteria specified in the agreement are met When deciding on the optimal payroll setup for the assignment, need to consider the implications on pension contributions 25

27 Polling question #4 When do you start planning for an employee s repatriation? Pre-assignment planning stage During the assignment Immediately before the assignment end What repatriation planning? employee 26

28 Repatriation planning Starting the process early Maintaining connectivity with the assignee Reducing reverse culture shock 27

29 Other challenges Corporate tax considerations: Inadvertent creation of a permanent establishment ( PE ) in the host location Deductibility of compensation on corporate tax returns Managing cross charges Value added tax (VAT/GST) 28

30 Planning considerations Consider the entire assignment life cycle when planning for a new assignment the repatriation is important as is the initial transfer Prepare a multi-year projection prior to the start of the assignment, including all expected costs Involve staff from payroll, human resources, and corporate tax during the assignment planning stage to flush out potential issues Develop a standard assignment policy, considering all potential assignment locations and related issues, and develop procedures that allow for enforcement of the policy with limited exceptions Estimate the growth of the company s international assignment population and determine when additional resources will be required to support the planned growth 29

31 Ready, set, go! Case Study: Your company has no foreign operations. Now, you ve just won a bid for a major international project that you have to start next month. What are the key issues that you need to consider immediately while you put a formal assignment policy in place? How long is the project expected to last? How many employees will we need to send abroad? Will any of them need to travel before the official project start? Immigration issues Employee selection Compensation determination Payroll requirements Employee / employer income tax issues 30

32 Q & A Chantal Farrell-Carter chantal.farrell-carter@ca.pwc.com Jennifer Powell jennifer.j.powell@ca.pwc.com David de Souza david.desouza@ca.pwc.com

33 Next webcast / podcasts Next HRS webcast Wednesday, February 26, 2014 on Foreign reporting requirements Our recent What If podcast series may be of interest to you Please visit and click on the Tax Tracks Podcast section to access these recent podcasts, as well as a library of additional podcasts Look for our new podcast series Top mobility issues for Tax Directors to think about, with episodes posted monthly starting late January 2014 Also available at the Tax Tracks site 32

34 Thank you! This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopers LLP, its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it PricewaterhouseCoopers LLP. All rights reserved. In this document, refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership, which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity. 33