As globalisation increases, so does the importance of international employee secondments (expatriates). Companies are increasingly sending employees to their own foreign branches or assigning them to projects abroad. Global companies are therefore confronted with an increasing complexity of (wage) taxation for cross-border assignments.
In order to ensure the smooth handling of a secondment, national and international tax legislation must be complied with. There are also opportunities for tax optimisation potential. This can raise a multitude of questions, especially in more complex situations. Our Global Expatriate Services experts help companies and their employees to answer these questions and find the best solutions.
We offer customised tax and cost-efficient concepts, which can lead to a significant reduction of secondment expenses for both expatriates and companies, whilst at the same time meeting compliance obligations at home and abroad.
At WTS, we can rely on our global network and resolve all issues by working directly with our local colleagues.
Our experts support companies, their seconded employees and private individuals with the issues below.
Legal advice is provided by WTS Legal Rechtsanwaltsgesellschaft.
Posting guidelines for employers and employees are the foundation for a posting abroad. Attractive posting guidelines can also be an incentive to employees to take the step of moving abroad.
Our WTS experts review the existing posting guidelines and analyse the cost-benefit-expenditure and the administrative processes and expenses involved. This analysis forms the basis for the optimisation of old posting guidelines or the creation of new ones.
Our WTS tax experts create attractive tax compensation models for companies sending employees abroad, which means that the involved parties need not worry about additional tax burdens.
We advise on both net and gross wage agreements, tax equalisation, tax protection and laissez-faire approaches. We do of course also calculate the hypothetical taxes or prepare the annual tax compensation calculations using the relevant tax compensation guidelines.
Our WTS experts use the existing posting guidelines, processes, etc. to analyse the posting costs that will be incurred. These are assigned to the applicable positions and the possible tax deductibility for the company can then be determined. This allows for an optimisation of the cost-efficiency of foreign postings and for a reliable cost forecast even during the planning phase, for example, when initiating projects abroad.
The cost of the processes behind secondments should not be underestimated:
From the division of taxable and tax-exempt wages at home to the fulfilment of employer obligations abroad - our WTS experts support companies in optimising and adapting all payroll and HR processes to the requirements of foreign postings.
We also prepare income tax applications (e.g. DTA exemption requests, applications to enter tax class 1 with limited tax liability, § 41c notifications, tax rebate requests, etc.) and advise on special cases such as long-term incentives, deferred compensation, stock option plans, split pay, split contract, dual contract, retirement, pension commitments, sabbaticals, multiple employment, etc. - especially as part of external income tax audits.
An employee working abroad may lead to a foreign tax authority presuming that the German employer has taken on a permanent establishment abroad. Special attention must be paid to the new OECD publications on the subject of BEPS, which lead to an increased risk of having a permanent establishment status due to the broadened definition of a permanent establishment (e.g. representative or service premises).
This leads to far-reaching registration, reporting and declaration obligations, as well as to a possibly avoidable, higher tax burden on the company.
Based on the circumstances of the secondment, the foreign project and the tax situation in the respective country, our experts analyse whether it makes sense to avoid permanent establishment status and how this can be done.
Our WTS experts can also assist with the handling of a permanent establishment status, especially in connection with seconded employees.
Our WTS experts meet with company employees to explain the tax situation that results from their posting. They also advise on issues such as giving up a place of residence, tax treatment of the various types of income, taking into account the applicable double taxation treaties, the possibility of deducting promotional costs, special expenses and one-off charges, and the effects of progression.
Depending on the countries where employees are staying or have been posted to and the special features of the tax situation in these countries, the tax return for seconded employees, taking into account their individual situation, can become extremely complex. We prepare and optimise the tax returns for these employees in all countries involved. This allows the seconded employees to fully concentrate on their new working environment and professional duties.
Our Global Expatriate Services experts regularly provide information on developments and new regulations of various tax and social security aspects arising from the assignment of employees abroad.
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