Norris McLaughlin & Marcus, P.A.

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PART III. Going Global: A Review of Critical Issues of Executive Mobility – Tax Issues

Posted on March 22nd, 2012 | Author: admin

Previously, we published PART I & II of our series, Going Global: A Review of Critical Issues of Executive Mobility.  Here is Part III, another issue to consider when developing a Global Executive Mobility Strategy:

Tax issues related to the executive’s foreign assignment are complicated and can potentially create concerns for both the employer and the executive. For instance, the executive’s activities on behalf of the employer could potentially create a taxable presence in the foreign jurisdiction for such employer and thereby create the risk of double taxation. Different countries use multiple standards to determine a whether a “taxable presence” exists for Tax purposes. These issues are typically addressed in a Tax Treaty which attempts to standardize the circumstances by which an employer maintains a “Permanent Establishment” for carrying on a trade or business in the jurisdiction for Tax purposes. In addition, will the executive become subject to taxation in the foreign jurisdiction? Once again, Treaties generally define the terms and condition of residency and whether there will be tax on local-source income only or on worldwide income earned. US taxpayers are generally subject to taxation of worldwide income ( with a partial exclusion for certain foreign-source income and housing allowances and a foreign tax credit may be available for all or part of foreign taxes paid). Currently, theU.S. has entered into Tax Treaties with 68 countries. It is critical that these issues be fully analyzed by competent Host country and international tax advisors.

There are a multitude of issues that need to be considered in connection with the development of a Global Executive Mobility Strategy and a whole host of legal, tax, accounting and immigration law implications. This series of posts will highlights major issues to consider and suggests several potential Best Practices.  However, this series is by no means exhaustive, comprehensive nor complete. The author strongly urges anyone involved with these issues to consult with qualified legal and tax counsel before committing to any course of action.

UPDATE:
PART I. Going Global: A Review of Critical Issues of Executive Mobility
PART II. Going Global: A Review of Critical Issues of Executive Mobility – Immigration
PART IV. Going Global: A Review of Critical Issues of Executive Mobility – Employee Benefits and Executive Compensation Issues