Countries all over the world are embracing the economic employer concept and abandoning the traditional model for granting income-tax exemptions to temporary foreign workers. We explain the economic employer concept and tell you how to protect your organization when sending expats on short-term assignments.
The global economy is evolving quickly, and tech and other startups are looking beyond traditional expansion targets like the UK and China. Popular targets now include relatively low cost, talent-rich countries like Israel, Ireland, the Czech Republic and Poland, which recently joined the ranks of FTSE Russell advanced economies, the first country to do so in nearly ten years
Keeping track of your employees’ international business trips is a critical, often overlooked component of operating a multinational organization. The size of your business doesn’t matter: to minimize risk, you need to understand and record where your employees are traveling and for how long. Business trips — also known as short-term expat assignments — pose a particular problem. They are often wrongly dismissed as low- or no-risk, which can prove costly. Many companies, for example, unknowingly trigger a taxable presence in another country by sending an employee on multiple business trips there, which can lead to fines and reputational damage.
The globalized economy presents new opportunities for growth, frequently requiring companies to send employees overseas on assignments. Sending key talent overseas can solve problems, but employers typically must navigate a common set of challenges, such as immigration status, in-country employment compliance, host and home country taxation, compensation planning and quality of life topics.
In my last post, I described a typical scenario involving a US company sending a US national to Germany on an assignment lasting between one and two years. I also gave an overview of German tax-residency laws under the US-Germany double tax treaty. In part two of this two-part series, I’ll discuss drafting an expat assignment letter and how to ensure that your company fulfills both its US and German tax obligations during your expat’s stay in Germany.
If your US company plans to send workers to Germany for a year or more, you’ll need to be aware of some important obligations in order to be compliant in both the US and Germany. The good news is that Germany and the US have Income Tax Treaties and Totalization Agreements in place. As we’ll see, these agreements help you and your expat employees offset the effects of double taxation.