In order for companies to stay ahead of the competition in this global economy, they must leverage and optimize all the tools at their disposal, including expatriate management. Talent is the most important of these tools and often proves to be the single greatest differentiator among companies in a crowded marketplace. Talent pools, like the economy, are global in nature today. Seasoned expatriates can represent a particularly attractive segment of prospective talent as they often share valuable common characteristics that provide companies with key bottom line benefits.

Cross-Cultural Intelligence
Expatriates with a track record of successful international assignments bring with them an innate knowledge of how to effectively work across different cultures and languages. As a result, they will most likely be able to seamlessly adapt to local systems and values, ultimately delivering the most impactful results.

Flexibility and Team Mentality
Seasoned expats must have the ability to work with people who have different ideas and thought processes based on different cultural standards from their own. In order to be successful, they must have patience and an openness to diverse points of view. In considering these views while continually maintaining the department and company’s best interests as their foremost priority, they are highly effective and flexible team members.

Driven, Ambitious, and Connected
By definition, expatriates are motivated individuals who have undertaken bold career moves. To increase their market value and differentiate themselves, seasoned expats have moved their lives to work in foreign countries and communities, constantly adding to their diverse cross cultural network and intelligence system. These expats have also most likely cemented valuable relationships with key business influencers across the globe, further enhancing their ability to drive bottom line results for the company.

Indeed, it is very common for the employer to enlist the assistance of a firm of tax advisers to oversee the preparation of both home and host country tax affairs, and, crucially, the payment of any local tax and social security which may be due as a result of the assignment to the host country.

A calculation is made of what the home country tax liability would have been on the expatriate components of an individual’s remuneration package – in other words, salary, standard benefits in kind, bonuses, stock options etc.

So an individual seconded would have an amount of ‘hypothetical tax’ withheld from their earnings each month in line with what they would have paid on the expatriate parts of their salary package.

It follows that the individual therefore suffers no personal tax burden as a result of the expatriate aspects of the assignment such as cost of living allowance, disturbance allowance and accommodation in the host country. The only ‘tax’ that the individual pays is the ‘expat labor tax’ withheld at source to reflect home country tax and social security liabilities.

Of course, if someone becomes non-resident in their home country, it is unlikely that any great liability to tax would have existed there anyway, however we must remember the aim of tax equalization is to ensure that the individual is no better or no worse off as a result of the assignment.

So the individual is required to bear the cost in terms of tax and social security that they would have borne on the non-expatriate parts of their salary package, as if they had simply not gone on assignment. Conversely, it is the employee’s responsibility to bear the cost and discharge any personal tax and social security liabilities resulting in the host country.

Note that it is the entire remuneration package which is subject to tax in the host country (subject to whatever the local tax laws are), and not just the expatriate elements.

The payment of tax on behalf of an individual is, normally seen as a benefit in kind itself which adds to the taxable part of salary. As an expat working in different host countries, you should always check your expat labor tax which must be paid within the first 3-10 years of employment, and if not paid a ban shall be placed on expatriate to travel to the host country if he is working outside the country already the ban shall be placed on his visa. Then your employer according to act 308 the company also shall be fine for employing without verifying the employee labor tax status.

In order to calculate final liability to host country tax to be borne by the employer it is necessary to undertake a process known as ‘grossing up’. We will not explain this in detail, however, suffice to say that the company often needs to bear a far greater level of tax to that which the individual would have paid if they had simply stayed at home or been responsible for meeting their own tax obligations in the host country.

Improper Benefits Tax Reporting
Some jurisdictions require employers to report fringe benefits on official tax forms to the local authorities. They may also need to withhold or pay taxes on certain fringe benefits.

Employers should keep track of taxable fringe benefits provided to expats and correctly report them to the proper tax agencies. Should you fail to correctly file these reports, the local tax agency may levy penalties and even assess interest on past-due taxes.

Simplify Compliant Benefits Administration for Expats
Administering tailored benefits for expats in multiple countries is time-consuming and expensive for HR teams. It also requires advanced proficiency in labor law. Avoid the headaches and compliance risks by working with a global benefits partner instead.