Updates from Around the World – February 2019

by | Feb 5, 2019 | News

international relocation

China

The new individual income tax (IIT) law came into effect on January 1, 2019, and affects foreign individuals who live in China for 183 days or more. According to Dezan Shira & Associates, the new regulation is likely to give more room for expatriates to avoid taxation on worldwide income.
Read more about the individual income tax (IIT) law (in Chinese). 

Greece

Effective February 1, 2019, the minimum monthly salary for foreign workers in Greece has increased to EUR 650 for employees of all ages, up 11 percent from last year. As before, benefits and allowances may only be included in the minimum salary calculation if they are specified in the employment contract and are not paid in kind.
Read more about the minimum monthly salary for foreign workers in Greece.

Mexico

Review of immigration applications has been delayed several weeks past normal processing times in Mexico City, Guadalajara, Querétaro and several other large cities due to the transition to a new government. Employers and foreign nationals should expect delayed work start dates.
Read more about the delayed immigration processing.

United Kingdom

The British parliament voted in favor of the government’s proposed immigration bill, aimed to ensure it has an independent immigration policy after Brexit, late on January 28, 2019. EU citizens who plan to stay for longer than three months will need to apply for permission and receive European Temporary Leave to Remain, which is valid for a further three years.
Read more about the British parliament’s vote.

United States

The Internal Revenue Service (IRS) is open following the government shut-down and accepting 2018 federal tax returns as of January 28, 2019. Most refunds are anticipated to be sent in less than 21 days.
Read more about the Internal Revenue Service (IRS) reopening.

 

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Repayments No Longer Deductible due to TCJA

by | Dec 11, 2018 | Uncategorized

Major tax reform rocked the relocation industry on December 22, 2017 when The Tax Cuts and Jobs Act (TCJA) was approved by congress. The most realized effect was the removal of tax exempt status for qualified moving expenses. In November’s edition of Mobility Magazine, Peter Scott, Worldwide ERC®’s tax counsel, details an additional effect of the TCJA.

employee relocation

A Repayment Agreement protects your financial investment in an employee’s relocation. The agreement establishes that an employee must repay reimbursable relocation expenses upon termination of employment. Typically, these are structured on a prorated basis determined by the length of employment, such as 100% repayment within the first year and 50% repayment between 13-24 months.

According to Scott, “repayments in the same [tax] year as the move are not at issue, because such repayments are accounted for by simply adjusting withholding and payroll taxes.” The company would credit the employee the overpayment in withholding and FICA and adjust the wages on Form 941 accordingly.

Previously, repayments in a subsequent year were deductible on the employee’s taxes. With the passing of the TCJA, employers must now:

  • provide a Form W-2c for the FICA and Medicare collected;
  • refund the employee share of FICA and Medicare;
  • obtain a written statement from the employee that they will not seek a refund; and,
  • claim a FICA and Medicare credit on a subsequent Form 941.

The TCJA’s suspension of miscellaneous itemized deductions applies to all repayments beginning with moves in 2018. Scott does additionally mention Section 1341, however given the fact that it is only applicable if “a deduction is allowable for the taxable year,” it cannot be used in this instance.

As we approach 2019, this change may seriously impact the employee from a financial standpoint. However, Scott warns that under no circumstance should the debt be forgiven or written off. The IRS treats forgiveness of the repayment agreement debt as taxable wages to the employee, requiring a Form W-2, income tax withholding, and payment of payroll taxes. This creates additional expenses on part of the company.

Click here to read the full article in Mobility.

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Tax Assistance and Your Global Mobility Tax Program

by | Feb 6, 2018 | News

Find the updated version of this article here!

In December 2017, the U.S. government passed legislation that directly impacts taxpayers. Under the new law, known as the Tax Cuts and Jobs Act, taxpayers will be unable to claim certain deductions, including job-related moving expenses.

relocation expenses taxable to employee, tax gross-up, global mobility tax

Job-related moving expenses now taxable

In accordance with the new legislation, taxpayers must treat any direct payment or reimbursement of moving expenses received from their employer for job-related moving expenses as taxable income. Previously, employees only needed to pass the time and distance test (criteria 50-miles, 39-weeks, and 1 year) to be qualified to deduct moving expenses related to household goods moves, storage, and final moving expenses. Alternatively, an employee paying their own moving expenses could deduct those moving expenses, even if they didn’t itemize.

Under the Tax Cuts and Jobs Act, all moving expenditures will be taxed accordingly, at least until 2025. However, active-duty military members may still deduct moving expenses.

For employers like you, this can have a significant impact because it could be a deterrent to attracting new talent, or current employees may be less inclined to take a promotion that involves moving. One possible solution you can consider is to offer tax assistance.

What is tax assistance?

Tax assistance, often called gross-up assistance, is an approach where an employer “grosses up” an employee’s taxable relocation benefits. This is done to alleviate some tax burden on a portion of the employee’s income. However, there are some benefits and drawbacks with this approach, and it’s important to consider the impact.

Pros and cons of tax assistance

When considering whether to implement tax gross-up, you should carefully examine the advantages and disadvantages.

Pros of offering tax assistance

  • Helps your relocation program remain competitive.
  • Enables you to attract and retain top talent.
  • Alleviates some tax burdens placed on employees.

Drawbacks associated with tax assistance

  • Increasing an employee’s taxable income can change their tax bracket, which may increase the employee’s tax rate and phase out certain tax credits.
  • Increases company relocation expenses.

If your company decides to take the tax assistance approach, it is essential your employees are educated on what gross-up is and how it impacts their taxable income. Relocation management companies can help by explaining how tax assistance works to your staff. RMCs can also manage everything, including ensuring tax assistance is correctly calculated and implemented.

At WHR Global, we are committed to helping our clients hire top talent as well as helping their employees feel comfortable in their new location. We can help your company modify its relocation plans to adjust to the new tax law. We’ll also help you find the best solutions to help alleviate the potential tax burdens associated with moving and relocation for your employees.

For more information on how WHR Global can assist and explain how to incorporate tax assistance, give us a call at +1-800-523-3318 or email [email protected].

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The Importance of International Tax Assistance

by | Jul 13, 2017 | News

Global compensation management and tax compliance can both significantly impact an employee when relocating across country borders. Regardless of whether the relocation is permanent or simply a short-term assign­ment, all relocation-related expenses will likely raise tax issues in both departure and destination countries.

This is why it is critical that the potential tax exposure from relocation reimbursements be monitored so that accurate tax returns can be filed in both the old and new country locations.

U.S. Employees’ Unique Tax Obligation

U.S. citizens are required to file taxes on their global income regardless of where it was earned and in addition to the tax fil­ings required in the country of assignment. When an employee transfers out of the U.S., they must still file a U.S. Federal Income tax return. However, the U.S. does provide a foreign tax credit that can be applied to the employee’s return, which means the amount owed in the U.S. could be nothing or a neg­ligible amount, but they are still required to file.

The Importance of Tax Equalization

It is strongly suggested that you provide tax equalization for employees relocating inter­nationally. This allows your employee to pay taxes as they would in their original country, with you covering the difference. This benefit is becoming more common because it taxes people at the same amount had they never taken an assignment. You would then cover the cost of the host location tax and any ad­ditional U.S. obligation that may be incurred.

For example, let’s say you are moving an employee from the U.S. to Italy. The employ­ee has a $28,000 income tax liability to Italy, but their U.S. liability would only be $25,000. You would then pay the additional $3,000 to the Italian tax authorities on your employee’s behalf.

**It is essential that the employee remain tax compliant while on assignment or after a permanent transfer. Failure to report income accurately makes the employee liable; however, if the company does not provide any support or assistance, then you run the risk of being seen as complicit as well.

How WHR Group Can Help

WHR Group provides a complete framework for tracking all expenses associated with an employee’s assignment or permanent trans­fer across borders. The data is collected and broken down into what was paid and which country the payments originated from. All of this information is then provided to a local tax expert in the relevant countries so that the appropriate tax filings can be completed. This process ensures that the employee has filed taxes in the correct countries and that the taxable relocation expenses have been considered as well.

Global Workforce Symposium 2016 Takeaways

by | Oct 10, 2016 | News

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As the world around us continues to feel more accessible every day, employers are forced to reassess the way they manage their global mobility strategies. Compliance demands, immigration changes, and pricing tariffs are all examples of trending topics global mobility professionals deal with on a daily basis. The Worldwide ERC®’s annual Global Workforce Symposium is a fantastic opportunity to learn from some of the most talented, world class experts in our field.

WHR Group sent its own top experts to the symposium once again this year. Some of them were able to share their thoughts, takeaways, and experiences.

Roger Thrun: CEO

I took away these main items this year:

• International short-term assignments from 6 months to 2 years are rising quickly

• Ireland is no longer the “it” country in Europe… Germany is the “new one” because of its employment base to choose from.

• If you cannot offer technology to complete a relocation on a handheld device in the next 5 years, you’re out as a viable relocation provider

• Companies want to be able to measure ROI, spend, and future costs on a dashboard at any time

• Technology is great, but customer service is still the backbone of the relocation… We move people with family, not machinery.

David Bronder: Vice President of Business Development

WHR Group is a member of ERC®’s Government Affairs Committee, which focuses on regulatory issues that impact the global mobility industry. Along with other industry representatives, I met with Senate and Congressional staff members to review three areas of concern for our industry: 1. Federal relocation (cost savings through industry best practices), 2. Tax (moving expense deduction), and 3. Immigration (the need for high-skilled immigration into the US). The Government Affairs Committee divided into three groups based on industry experience. All meetings were bi-partisan with the focus on educating staff members on our industry, the impact of tax and immigration regulations, and government relocation best practices.

WHR Group will continue to work with the ERC® Government Affairs Committee to ensure these important issues receive the support for the challenges they represent in our industry. A Senate staff member in the government relocation meeting stated, “The meeting was very beneficial, and bi-partisan support should not be an issue.”

Paul De Boer: President

The keynote speaker, Mick Ebeling, demonstrated a conviction of purpose that guides his life, and we can all take lessons from his experience. His life is “rich” in helping others as he drives Not Impossible Labs to help people overcome obstacles previously thought of as impossible. His motto is “If not now, then when?” Meaning you need to find something in the world you want to change and associate yourself with an amazing group of people that can solve the seemingly impossible.

What he has done and what he is doing with his life makes your daily issues and problems seem like small hills compared to the mountains he is climbing. I would highly suggest anyone to visit his website to see his story and the lives he is impacting: http://mickebeling.com/.