1. Bus 225D – International Transactions II Instructor: Carol Rutlen, CPA crutlen@rutlen.com 650-321-3999

2. Paying benefits-in-kind in lieu of cash payments Proper timing of the assignment Using pre- and post-assignment bonuses Proper structuring of home leave Tax Planning for Mobile Employees

3. Why Is Tax Planning Important? International assignments are expensive Home and host tax rates may be different Elimination of double taxation may be limited –Treaties –§911 and FTC interaction Maximize tax deductions and treatment as non-taxable income

4. Common Tax Planning Techniques Paying benefits-in-kind in lieu of cash payments Proper timing of the assignment Using pre- and post-assignment bonuses Proper structuring of home leave

5. Benefits-in-Kind Cash paid to an employee is taxable Employer pays expenses in lieu of giving employee cash Benefit-in-kind –Direct payment of expenses by employer –Favorable tax treatment Examples –Housing –Cars –Club dues –Education

6. Timing of Assignment Availability of treaty benefits Residency status Taxation of income –Bonus –Stock option exercise –Sale of capital asset Payment of local tax – e.g., ku tax in Japan Pre-assignment review is important!

7. Pre- and Post-Assignment Bonuses Differential in home and host country tax rates Substance of payment is important Hardship Allowance Pre-assignment: successful completion of old job Post-assignment: accepting new job

8. Home Leave Policy provides for 1 home leave per year Employee and family return to home –Maintain company relationships –Maintain family ties –Handle personal details Some countries don’t tax home leave if employee returns to home What does company policy require?

9. Issue recognition is key Compliance: cost vs. benefit Risk management Key Points