The third and final session of AIRINC and GTN’s Summer Mobility Tax Series explored the more challenging topics in global mobility taxation relating to deferred compensation, social security, and mobility tax planning.
Presented by Pat Jurgens (AIRINC) and Jack DeMarco (GTN), and moderated by Jeremy Piccoli (AIRINC), the webinar unpacked how to manage these tax complexities.
Understanding Deferred Compensation for Mobile Employees
Deferred compensation includes bonuses, equity awards, and pensions. These rewards can be valuable tools for attracting and retaining talent, but they bring added complexity when employees move between locations.
Bonuses: Source Income Accurately
Bonuses are often tied to a specific earnings period, which determines where the income will be taxable.
Mobility teams need to:
- Identify where and when the income was earned
- Account for trailing liabilities after employees have moved
- Apply blended withholding tax rates across multiple jurisdictions
- Ensure correct state-to-state sourcing in the U.S.
Equity Compensation: The Most Complex Reward
Equity awards such as stock options, restricted stock units (RSUs), and employee stock purchase plans (ESPPs) require careful handling when employees change locations between grant and vesting. These are awards that are earned over multi-year periods.
Challenges include:
- Allocating income between countries based on time worked in each location
- Understanding that “qualified” plans with tax advantages in one country rarely qualify for tax advantages in another country
- Coordinating with brokers that will handle the stock trades to apply correct blended withholding rates
A case study showed how a single mid-vesting move can trigger reporting in multiple countries, making cross-team coordination essential.
Pension Plans: Treaty Treatment Matters
Private pension schemes can also provide tax advantages including deductible contributions and tax deferral of the earnings until retirement. These are generally known as qualified pension plans. Typically pension contributions are tax-exempt or deductible for the employee, pension earnings are tax deferred, and pension distributions are taxable. Other pension schemes may have different tax results. Pensions that are qualified in one country may not be qualified in another country. Pension taxation for cross border employees often depends on tax treaties between home and host countries to mitigate double taxation.
Teams should:
- Confirm whether employer and employee contributions are taxable in the host country
- Review the relevant treaty’s pension article for “corresponding approval” rules
- Understand the tax treatment of earnings within the pension plan
Managing Social Security for Mobile Employees
Social security contributions are typically due where work is performed.
Two main exceptions apply:
- Certain schemes are only for local nationals and therefore exclude foreigners. These include many social security programs in the Middle East, and the Singapore Central Provident Fund.
- Totalization agreements allow employees to stay in their home system with a certificate of coverage (COC)
Key actions:
- Obtain certificates of coverage, even for short business trips, to avoid unexpected liabilities
- Evaluate whether paying host contributions might be more cost-effective and skip the COC
- Track expiration dates for coverage and apply for extensions when needed
Tax Planning Strategies to Reduce Mobility Costs
Proactive structuring of assignments and allowances can reduce tax costs for both the company and the employee.
Optimize Housing Benefits
In China, direct payment or reimbursement with receipts can be tax-free. Cash allowances, however, are taxable.
Take Advantage of Moving Expense Rules
Some countries exclude qualified moving expenses from tax. Understanding these rules can help avoid over-reporting income.
Structure Short-Term Assignments
In the U.S. for example, qualifying per diems up to certain thresholds for assignments under one year can be tax-free if the assignment is intended to be short-term from the outset.
Use Expatriate Tax Concessions
Countries such as the Netherlands, Ireland, and Italy offer reduced tax rates or partial exemptions for qualifying inbound assignees. If planning to take advantage of any expatriate tax concession, confirm that all criteria needed to qualify are met. This may include a certain level of income, a period of nonresidence prior to arrival in the host country, or a requirement to be tax resident in the host country for a certain number of years.
Ensuring Payroll Compliance
Even the best planning will fail without correct payroll execution. Consider where net pay will be delivered to the employee. Pay delivery isn’t the same as payroll compliance. Especially in the context of international assignments, payroll compliance is often necessary in both the host and home countries. Shadow payroll arrangement are often required to meet local withholding tax and payroll reporting rules.
Best practices:
- Coordinate closely with local and global payroll teams
- Communicate jurisdiction-specific withholding amounts early
- Confirm payroll software can handle special tax treatments
Key Takeaways
The advanced taxation of mobile compensation requires:
- Accurate tracking of employee movements and earnings periods
- Early coordination between mobility, payroll, equity, and tax teams
- Understanding of local laws, treaties, and exemptions
- Clear communication with employees to avoid confusion
The Summer Tax Series:
This webinar was part of a three-part series with AIRINC and GTN. If you are an HR, Global Mobility, or Global Tax Professional, then these sessions are for you!
All can be watched again:
Mobility Tax 101 - Foundations of Global Mobility Taxation WATCH AGAIN
Mobility Tax 201 - Managing Risk and Cost in Global Mobility WATCH AGAIN
Mobility Tax 301 - Advanced Taxation of Mobile Compensation WATCH AGAIN
Accreditation:
The recording sessions qualify for 1 CRP/GMS credit. Anyone who attended the live sessions can claim 1 CPE credit if they took part in the interactive polls.
Hosts and Presenters:
The sessions were presented by our experts from AIRINC and GTN, who brought a wealth of hands-on experience in managing global mobility tax strategy and compliance.
- Pat Jurgens - AIRINC’s Director of Global Tax Research and Consulting, known for his 35 years of experience making international tax policy clear and practical for mobility professionals.
- Jeremy Piccoli - AIRINC’s Director of Global Tax Solutions, known for his deep technical expertise and leadership of AIRINC’s tax tools, with a background in international assignment tax consulting.
- Christopher Ward - GTN’s Director of Business Development, known for his strategic insight and friendly approach to building strong mobility industry partnerships.
- Tracy Novotny - GTN Managing Director with 18+ years of experience, known for delivering clear, actionable tax guidance and building trusted client relationships.
- Raj Azad - GTN Managing Director with a global perspective, drawing on 25+ years of tax expertise and personal expatriate experience to guide clients with care.
- Jack DeMarco - GTN Supervising Senior and equity compensation specialist, known for his proactive mindset and commitment to enhancing the client experience.
