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.
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 are often tied to a specific earnings period, which determines where the income will be taxable.
Mobility teams need to:
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:
A case study showed how a single mid-vesting move can trigger reporting in multiple countries, making cross-team coordination essential.
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:
Social security contributions are typically due where work is performed.
Two main exceptions apply:
Proactive structuring of assignments and allowances can reduce tax costs for both the company and the employee.
In China, direct payment or reimbursement with receipts can be tax-free. Cash allowances, however, are taxable.
Some countries exclude qualified moving expenses from tax. Understanding these rules can help avoid over-reporting income.
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.
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.
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.
The advanced taxation of mobile compensation requires:
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:
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.
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.