Managing Global Payroll Risk

Contributed by Global Tax Network (GTN), 01 November, 2018

If you are part of a global company, chances are good that your organization has mobile employees traveling to and from different parts of the world, undoubtedly generating various related expenses. Chances are also good that there are payroll reporting and withholding requirements related to these expenses in both the employee's Home and Host locations.

It is critical that companies have the proper processes in place to consider the global reporting and withholding requirements for these relocation expenses. With year-end fast approaching, it is a great time to revisit internal payroll processes to make sure your company is compliant and properly managing payroll risks.

Reporting for relocation expenses

While most US companies have procedures in place to properly handle the payroll reporting and withholding for their employees' US relocation expenses, it is often more challenging to properly handle these requirements on a global basis. There are several factors creating these challenges for US payroll departments:

Create a relocation taxability matrix

Proper planning can assist multinational companies in addressing these challenges. Here, a tax matrix for each country where you have transfers (to or from) may be helpful. This matrix should include all relocation or transfer-related benefits and an indication of their taxability. You may wish to review the following questions for each country combination.

Once each country's payroll needs are determined, the following steps should be taken to gather information to create the taxability matrix:

At GTN, we have extensive experience in working with companies to develop tax matrices that list specific reporting and taxability requirements for relocation expenses. We also can assist and review relocation policies to help ensure they cover your employee population and your company's relocation objectives. For a free, 30-minute consultation with one of our specialists, please click here.

Once the matrix is complete, we recommend a complete review of paid relocation and assignment benefits to ensure that reporting is appropriate in each country. Depending on your policy, it may also be necessary to prepare tax gross-ups for those relocation items that have been determined to be taxable. Your relocation policy will generally drive whether a tax gross-up is appropriate for the type of relocation benefit.

A review of internal processes related to reporting relocation and assignment benefits in each location should be done periodically to ensure they continue to be followed on a global basis. Contact me if you would like more information about how to develop a taxability matrix or to learn more about the calculation of tax gross-ups for relocation benefits.

Review of global compensation

With year-end fast approaching, it is also a good time for global mobility teams to focus on a thorough review of global compensation items for the full calendar or fiscal year in the Home and Host countries. This review will ensure that all taxable items have been collected, coded for taxability, and reviewed for applicable tax gross-ups in accordance with the company's relocation policies.

Each country may have its own deadlines for compensation reporting so it is important to:

The above list is certainly not all-inclusive and will vary based on your population size and locations. The important thing is to develop a process for the collection and reporting process, document the process that works best for your team, and track the progress so that deadlines are met.

Each year our service teams work closely with our clients in this year-end process. Given this, we have extensive experience in year-end planning and would be pleased to discuss and review a process that would work for your team. For additional tips and a more detailed discussion of year-end planning, please see our October 2016 newsletter. If you have questions or would like further information, please contact me at or +1.650.485.4075, or visit our Mobility Tax Services page to see what assistance we can provide.

The information provided in this newsletter is for general guidance only and should not be utilized in lieu of obtaining professional tax and/or legal advice.

Tags: Working Abroad | Work | Working Abroad | Employment | Expat Services | Expats | Working Abroad | tax | individual income tax |



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