Global mobility year end cut-offs are approaching, so it's not a bad time to revisit global expatriate tax basics and ensure there won't be any tax-related "shock and awe" moments for your expatriates, payroll teams and all stakeholders of your global mobility program. Expat tax filing is part of that monstrous, pesky goal of keeping your global mobility program clean and compliant. Mobility programs that do this effectively usually have a well-oiled, collaborative process with their expatriate tax partners, their relocation management company (RMC), and their own internal stakeholders like payroll, AP and internal tax. Your global compensation accumulation process can make for a cleaner and more streamlined ability to prepare those filings, and there might be room for cost savings in your current process as well. For more related to this process, take a minute and watch: "Global Compensation Accumulation - What is it?"
The article below from GTN's Emre Kicik defines what a foreign tax credit is and how it gets used in the filing process. He also explains what exclusions from income are, and advises on how to structure expatriate compensation in a tax-efficient manner! Without a doubt, U.S. citizens and residents face a number of challenges when they live and work in another country, and one of the most significant is how to properly address U.S. and foreign tax law.
Want to review and prep for the upcoming comp collection process? Tap into one (or all) of these previous posts:
- Raise your G-A-M-E (global assignment management expertise) Part one
- Raise your G-A-M-E (global assignment management expertise) part two: Let's look at tax compliance
- Companies need to address compensation in a hybrid working world
- If things are different (#newnormal), is your global mobility program ready?
And lastly, to avoid global mobility tax program landmines, here's more from GTN on how to manage global assignment risk for expatriates.
When working outside the United States, most US citizens and permanent residents (i.e., green card holders) will be required to file income tax returns in both their Host country and in the United States. Filing two sets of returns can be a headache for the taxpayer, but it does not necessarily mean that they will be taxed twice on the income earned while working abroad. The US government understands that when citizens and permanent residents are working outside the country, they will be subject to taxation in their Host country. Because of this reality, the government has provided those taxpayers with several options to avoid double taxation of their foreign income. It does this by providing a foreign tax credit and exclusions from income that can be claimed by taxpayers working abroad to reduce or eliminate their US tax obligations.