Academic journal article Journal of Accountancy

Tax Planning for Expatriates

Academic journal article Journal of Accountancy

Tax Planning for Expatriates

Article excerpt

Minimizing taxes on employees working internationally.

The need for corporate tax planning, particularly for companies with international operations, is fairly obvious, and information on the various strategies is readily available. CPAs will find, however, that providing these corporate clients with individual tax planning and services for their U.S. employees assigned to foreign countries is less widely discussed.


Companies that send employees overseas typically assist them with the added costs they may incur (for example, housing, cost-of-living differentials and English language school tuition). Such benefit payments generally are taxable income to the employee and may increase his or her individual tax burden.

Transferred employees may incur additional tax burdens if the work assignment is to a country with substantially higher tax rates than in the United States (many European countries fit this description).

The question arises as to who will be responsible for these additional tax burdens: the employee or the employer.

A tax equalization program is a voluntary system by which both the employer and the employee pay their respective shares of the latter's global tax burden. The program, in essence, provides that the employee will pay neither more nor less tax while on assignment than if he or she had remained at home.


A tax equalization program provides a company with several advantages.

* Simplicity. The employee generally will not suffer a tax "penalty" as a result of the international assignment. …

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