Which emoji sums up your feelings related to expat tax articles? Someone said expat tax is like cilantro, you either love it or hate it. I am not sure about that, but this article, 6 Questions to Consider If Your Mobile Employees Have Equity Income is one that you should read if you are in global mobility and one that you might actually like, even if you are not a huge expat tax lover.
Sure, expat tax is a compliancy requirement to address when sending employees to work across borders, so if you are managing or working within a global mobility program, you have to have a solid understanding of some of the issues, understand how timing and compensation create issues and know who to go to when an issue arises or better yet, to prevent an issue from coming up.
But this article speaks to the potential complexities that being awarded stock options, and/or other equity compensation can have for employees not in their home location. Per this GTN article by Lynn Carbo, "In general, the U.S. subjects such equity awards to ordinary income tax at the time the awards vest, as well as capital gains tax at the time they are sold." For a U.S. expat abroad, each state's tax treatment will vary on the employee's residency and workdays as will the host country's rules. If you don't venture further into the article, at least take away this golden nugget:
"It is important to understand how such income will be treated by the Host jurisdiction before sending an employee to another location to make sure the employer and employee understand the implications and work to avoid future complications."
But you should also know which six questions the article will dive into, so here they are:
- Where will the equity award be subject to tax?
- Does the timing of the equity award matter?
- Does the award create any social security obligations?
- Do your employees work in multiple states?
- Is your company's payroll system up to the challenge?
- What is the rend in global compliance for equity compensation?
Ok, now I bet your hungry for more so click in and have a read. For those of you that like cilantro, also try these posts:
Employees who work across global as well as domestic borders and have been awarded stock options and other equity compensation or will be receiving such an award while working in locations other than their Home location, can expect to experience complex tax implications. That is because not all jurisdictions treat equity income in the same manner for tax purposes.