When you are considering moving employees across international borders, it is vital that you have control and full visibility of the associated costs. This can be particularly challenging when you are dealing with unfamiliar jurisdictions where tax rates can vary widely from country to country. Equally important is timely remuneration planning in order to optimise potential tax breaks.

Understanding the cost of international assignments

Sending employees on international assignments can be an expensive exercise for employers. Moreover, it is very difficult to accurately estimate the total cost of any given assignment, particularly given the vastly different fiscal regimes and varying income tax and social security rates around the globe.

In the course of planning an international assignment, whether long or short term, it is important to understand what home and host country liabilities might arise and the interaction of taxes payable in one or more jurisdictions. Receiving upfront information on tax-efficient delivery of remuneration in each location, and planning accordingly, can significantly reduce the cost of an assignment.

The solution

Obtaining a cost projection that gives clear and current information on the total cost, over the life of an assignment, allows you to make informed commercial decisions about the structure of any given assignment.

For shorter term assignments, cost projections can provide an early warning of tax and social security liabilities that employers may be unaware will arise.

In summary:

  • Projections can provide a simple and relatively accurate costing in almost any given scenario
  • Where an assignee will be tax equalised, projections can be completed using gross pay, or the desired net pay
  • Variations in remuneration delivery can be modelled to demonstrate potential planning opportunities.

How can BDO help?

In addition to providing you with cost projection calculations, we can discuss alternative assignment/remuneration structures with you and assist in arranging commercial, cost effective assignments for the business.

Using our extensive global network of BDO colleagues, we can advise so that potential tax and social security efficient ways of delivering remuneration in the relevant countries are both fully understood, and wherever appropriate, implemented.

Where tax and social security obligations are identified, we can support you in ensuring that those obligations are discharged in a manner that fully accounts for risk and commercial needs.

Example 1
Netherlands		 Example 2
United Kingdom
30% ruling

For certain employees who are assigned to work in the Netherlands, a special allowance known as the '30% ruling' can be granted.

If certain requirements are met, Dutch employers may grant a special tax-exempt allowance of 30% of the wage income, which is paid in addition to the employee's salary.

The allowance is calculated on the basis of the salary, as determined in accordance with the provisions of the Dutch Wage Tax Act. The salary is multiplied by a factor 100/70 to obtain the basis for calculating the 30% allowance.

With appropriate and timely assignment and remuneration planning you can take advantage of this special allowance, thus increasing the value of the remuneration package offered to your expatriate employees.

Cost projections clearly illustrate the savings available through the application of the 30% ruling and other Dutch tax reliefs associated with it.		 Temporary workplace relief

With the continuing moves by the UK Government to restrict tax relief, it is more important than ever to take full advantage of those reliefs that are still available.

For example, when an overseas company assigns one of its employees to work in the UK for a period of up to two years, the employee's assignment-related housing and subsistence costs can be claimed as a tax deductible expense, whether these are paid by the employee or by the employer.

With the high cost of UK accommodation and the top rate of UK tax currently at 45%, this can be a hugely valuable tax relief, but it does need to be structured and documented in the right way from the outset.

As an indication of the value of this tax relief, if an employee's qualifying assignment-related housing and subsistence costs totalled £1,500 per month (£18,000 a year), the tax saving for a 40% taxpayer would be £7,200 per annum. Furthermore, if the employee is tax-equalised, meaning that the employer is responsible for the grossed-up tax liability, the saving to the company would increase to £12,000 a year.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.