Basics
Basics
General Principles of Income Taxation
Basics
As a Global Mobility professional, it is not your task to map out the tax consequences, but it is your responsibility to draw stakeholders' attention to unforeseen tax liabilties triggered by cross-border employment. After all, an employee's presence abroad can have both corporate and personal income tax implications. The financial impact of (unforeseen) tax liabilities, additional costs and non-compliance damages on the company's profitability can be substantial. Add reputational and financial damage as a result of blacklisting to the equation, and the outcome is even more worrying. In other words, the stakes are high.
In this section of the Navigator, we will walk you through several tax-related issues that your stakeholders be aware of.
How to determine the Employee's Primary Tax Residence?
Checklists:
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Understanding Tax Residence
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Determining the Primary Tax Residence
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Avoiding Double Taxation as a result of Multiple Residences
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The Compliance File
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Flowcharts
An employee's country of Tax Residence is a critical factor for both the employee and the employer. This designation dictates where the employee's worldwide income is subject to income taxation (regardless of where it is earned), and also plays a role to determine the employer's potential tax withholding obligations.
This section provides a roadmap to help you determine an employee's Tax Residence(s) and navigate the complexities that arise from multiple residences.
How to Avoid Double Income Taxation?
Checklists:
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Understanding Double Taxation on Host Country Income
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The Legal vs Economic Employer
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The Permanent Establishment
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Double Tax Relief
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Navigating Practice Challenges
Cross-border employment introduces a critical challenge: managing personal income tax. A significant risk is double taxation, where both home and host countries may claim the right to tax earnings for work performed in the host country and impose compliance requirements on the employer.
This roadmap will guide you through the essential concepts of international personal income taxation, helping you navigate this complex landscape.
How to Avoid Double Income Tax for the Employer?
Checklists:
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Understanding Double Taxation on Corporate Income
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The Concept of Employer
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The Concept of Permanent Establishment
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The Concept of Transfer Pricing
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Avoiding Double Taxation
Cross-border employees can establish a 'taxable presence' (Permanent Establishment) in host countries, leading to significant corporate income tax liabilities for employers.
This roadmap provides guidance for understanding Corporate Income Tax interests and the urgency to effectively mitigate the risks associated with cross-border labor mobility.