Summary of webinar on tax equalization
In early June we held a webinar on tax equalization. The difference in tax burdens is one of the main discussion points when looking at compensation for international assignments. Although there is no legal obligation for employers to equalize the difference in the income taxes, most employers do.
The webinar gave an overview of the different possibilities for equalizing tax and looked in detail at the connection between the definition of the compensation approach (net-compensation vs. gross-compensation) and the strategic and administrative steps in terms of implementation. This included also ways of calculating hypothetical income tax and how it can be defined in the assignment contract.
Our next webinar on June 21st will focus on working permits in Switzerland for assignees in Switzerland. Please check our website for further details
Thank you for your comment, Vesco! This is in my view one of the main challenges to bring across to the employee.? It shows that in expat compensation the different financial aspects need to be looked at in combination, as topics like? taxes, cost of living, different levels of salaries , social security, benefits etc. are interdependant and can not be looked at individually. The company should provide a comprehensive view of how each of the issues is treated. Ideally, the principles of expat compensation is defined in an expat policy to ensure everyone is aware of how compensation and tax equalization is dealt with.? So in your case, where taxes in the host location are lower but cost of living is higher, the company adjusts the cost of living independently from the taxburden, as maybe only the difference in taxes does not equalize the much higher costs of living. In my experience, when explained to the expat upfront and details are shared transparently, it was accepted.
Tax lawyer with 30 years international experience
6 年Why would anyone want to pay higher home country taxes when moving to lower tax jurisdiction, especially if it is higher cost of living?