Global Mobility 101: Your U.S. Expat Work Abroad Guide

At a glance

• The main takeaway: The excitement of being a U.S. expat on a global mobility assignment also comes with proper preparation in navigating global mobility.
• Impact on your business: Deciding to take on an international assignment is an exciting opportunity that may make or break an employee’s career and the employer’s reputation.
• Next steps: Aprio’s Global Mobility Consultants can give the professional support you need to navigate international assignment policies, tax compliance, and global operations development.

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The full story:

Deciding to take on an international assignment is an exciting opportunity that may make or break an employee’s career and the employer’s representation, depending on how well it is executed. The excitement of being a U.S. expat on a global mobility assignment also comes with proper preparation in navigating global mobility.

Aprio’s Global Mobility consultants can help ensure a smooth transition when taking on an international assignment. In this article, we answered some of the most frequently asked questions when working abroad.

U.S. Expat Q&A: FAQs Answered

1. Will there be difference between my expat compensation package and my current one?

Employees sent to work abroad will receive a different compensation package from their employer depending on their assignment details. Employers take into consideration several factors such as location, duration, assignment type, tax implications, fluctuating exchange rates, and different costs-of-living.  It is important for employers to review how these factors will impact the employees’ payroll and ensure the tax burden is neutralized so that employees are not negatively affected by the expat compensation & allowances.

2. Will my company-provided equity compensation be affected?

There are various types of equity-based compensation, such as Restricted Stock Units (RSUs), Incentive Stock Options (ISOs), Non-Qualified Stock Options (NSOs or NQSOs), Stock Appreciation Rights (SARs), Employee Stock Purchase Plans (ESPPs), Performance Shares and Phantom Stocks.  It is important for both employers and employees to understand if these types of equity-based compensation would trigger any tax implications in the home & host countries and ensure compliance with local rules & regulations. 

3. Will my retirement plan be affected when I work abroad?

It’s important to understand the structure of your employment agreement in both home & host countries.  Your employer and the retirement plan administrator should be able to confirm participation eligibility during your international assignment.  It is recommended to share the details of your retirement plan for any preferential tax treatments, which should be reviewed in conjunction with various tax treaties that the US has. 

4. Will there be a difference in the tax costs incurred during my international assignment and domestic employment?

It is likely that the employees’ tax costs would differ for various reasons, such as expat allowances, taxes in the host country and so on.  It is common for employers to review and implement reimbursement policies to ensure that employees are not negatively impacted by any additional tax costs.  

5. What is a tax reimbursement policy?

There are various types of tax reimbursement policies, with the most popular ones being a tax equalization policy or a tax protection policy. 

Both policies are designed to protect the employees from being negatively impacted by incremental tax costs incurred as a result of their international assignment.  It’s important for employers to understand the differences and the associated business costs and to apply the appropriate policies that meet the need of their globally mobile employees. 

6. I have never heard of hypothetical tax. How does my employer determine the “hypothetical tax” that will be retained from my paychecks?

Hypothetical tax (also known as Hypo Tax) is calculated based on their salary level, marital status, itemized deductions, and family size on their Stay-At-Home compensation (i.e., the compensation that they would’ve received excluding the expat allowances).  Unlike actual withholding taxes, hypo taxes do not get remitted to the taxing authorities.  Therefore, it is important for employers to document the hypo tax position with proper payroll records in employees’ profile.

7. Will my employer cover the international tax that may arise during my assignment?

There are some countries that do not have the concept of income tax, but in most countries, employees will likely have to pay income tax and file tax returns for the duration of their assignment.  Depending on the assignment length, relocation type & policies, the employer may or may not cover employees’ taxes in the host country.  It’s important to understand the scope of host country taxes & their implications as well as what type of tax policy your employer has implemented.

8. Why is there a significant difference between the hypothetical tax and the actual paid state taxes prior to my move outside the U.S.? (Only for U.S.-outbound employees)

The US has a complex system of state taxes, and each of the 50 states has its own tax rules & regulations.  State tax liabilities vary depending on various factors, such as the employees’ residency status for the duration of the international assignment, as well as the tax reimbursement policy that the company has implemented.  There are various state tax positions, so it’s important to review them in conjunction with the company culture as well as the business costs. 

9. Once I have filed my return, how will I know if I am responsible for the balance due to tax authorities or if I am eligible for a tax refund?

Due to the complexity of international taxes, it is common for employers to provide tax preparation services to their employees who are on global assignments.  The designated tax service provider for employers will be able to guide employees on how to file tax returns and make the tax payments.  If tax reconciliation is needed, they will share the overall cash flow outcome and advise on how to settle it to both the employer and the employee.

10. My hypothetical tax calculation was prepared, but why wasn’t I given the foreign earned income exclusion or foreign tax credits? (Only for U.S.-outbound employees)

An employee’s hypothetical tax is determined as if they have not accepted the international assignment and remained in the United States. The foreign earned income exclusion and foreign tax credits are not accounted for when calculating an employee’s hypothetical tax.

11. Do I have to file state income tax returns while working abroad? (Only for U.S.-outbound employees)

Because each state has different rules & regulations, employees’ state tax filing obligations should be reviewed in conjunction with their domiciliary and residency for the duration of their international assignment.  Even if the employee is able to break their state residency while they work abroad, it’s important to track their state travel (such business trips) in case they have any state filing obligations as a non-resident.

12. I have successfully completed my international assignment and returned back home. Until when am I covered by the company’s tax policy?

Every country has different tax rules & regulations, and oftentimes, even the tax year is different.  It is common for employees to have a tax filing obligation in the host country even a year or two after repatriation due to trailing liabilities, such as bonus & equity.  If the host country taxes need to be considered, it is common for the employer to apply the same level of tax preparation services to ensure employees are not negatively impacted by international taxes as a result of their previous international assignment. 

13. The original length of my international assignment is changing.  Are there any considerations? 

Quite frequently the original duration of employees’ international assignments are changing for business reasons (e.g., based on project status) and/or personal reasons.  This may impact immigration, corporate and employees’ personal tax matters.  Therefore, it’s important for all parties (employer, employees, immigration attorneys, tax advisors in home and host countries) to be aware of the changes so the employer and employee have a clear understanding of the potential impact.   

The bottom line

Global mobility goes both ways; as you bring your expertise to the table, you also get to immerse yourself in a new culture, work ethic, and lifestyle.

With Aprio’s global footprint, our dedicated team of Global Mobility consultants can give companies and their employees the support you need in international assignment policies, tax compliance, and global operations development. We will help you cross new borders with confidence.

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