What Is Global Mobility and Why Should You Care?
March 28, 2023
At a glance
- The main takeaway: The business landscape is more globalized and connected than ever before, and as a result, many employees are interested in expanding their horizons by working abroad.
- Impact on your business: Though global mobility offers optimal flexibility and can make your business a more attractive place to work, it is also important to consider the tax and compliance responsibilities that come with it.
- Next steps: Aprio’s Global Mobility Services team can provide sophisticated tax, talent, compliance and administrative support that balances the needs of your business with the expectations of your employees.
Schedule a consultation with Aprio today
The full story:
The post-pandemic world has ushered in a flood of economic, business, health and societal changes. Perhaps one of the most profound changes is the rapid expansion of globalization, particularly when it comes to how and where we do business.
Not only are companies expanding their operations internationally, but their employees are also moving abroad for both business and personal reasons, given the popularization of remote work. Thanks to the benefits of technology, employees can now set up to do their work anytime and anywhere.
But a few critical questions remain: what obligations do companies have to meet when their employees work abroad? What steps should companies take to ensure they are complying with laws in the jurisdictions where their employees work? What are the consequences if they don’t do this properly? This is where global mobility solutions come into play. Below, we will explain what global mobility means, as well as the challenges and opportunities that lay in front of leaders who choose to support employees’ international ambitions.
First and foremost: what is global mobility?
Global mobility is a function of an organization that allows employers to seamlessly transition employees from one foreign location to another while complying with US and local tax regulations. These transitions can be classified as business travel, short-term or long-term assignments, and permanent transfers.
In many cases, an organization’s global mobility program is led by its human resources (HR) department, since many of the functions that support global mobility may fall under or work side-by-side with HR. Those functions may include immigration, employment law, relocation, payroll, tax compliance and other tasks that not only enable employees to work seamlessly but also ensure companies do not make regulatory missteps.
Why should companies establish a global mobility program?
Post-pandemic and beyond, it is safe to say that remote work is here to stay. According to a 2022 study conducted by McKinsey & Company, 87% of respondents said they jump at opportunities to work flexibly, and 32% of them said they work remotely five days out of the week. By providing employees with options to work abroad, companies significantly increase their appeal as employers and are enabled to attract more diverse, talented candidates.
With a strong global mobility program in place, organizations offer opportunities to allow employees to live and work abroad, while ensuring that both the employer and employee comply with US and local tax and payroll regulations.
As an employer, you may assume that where your employees work, and the countries in which they pay individual taxes, does not concern you. However, an employee’s taxability in a foreign country could also create various corporate tax exposures for your company, such as payroll reporting obligations and permanent establishment (PE).
Global mobility is an integral part of an organization and can require a significant amount of time and administrative resources. That’s why many companies choose to outsource these duties to qualified and experienced global mobility consultants.
What are some additional tax provisions affecting global mobility?
The IRS recently announced the foreign housing cost exclusion and deduction amounts for 2023. To recap, a US citizen (or resident alien) who lives overseas can elect to exclude their foreign earned income and exclude or deduct their housing cost amount (which is their total housing expenses minus a base housing amount), subject to certain limitations per IRC Section 911.
For 2023, the Section 911 base housing amount is $19,200, as long as the entire tax year of the qualified individual is within the applicable period. In addition, for 2023, housing expenses are limited to $36,000 of the qualified individual whose entire tax year is within the applicable period. On this point, it’s important to note that the IRS does allow a higher housing cost expense ceiling for taxpayers living in certain high-cost geographic locations relative to the US.
How Aprio can help
For over two decades, Aprio’s Global Mobility consultants have supported organizations and individuals to ensure compliance. Our consultants provide a coordinated approach to workforce mobility, international and employment tax compliance, and talent management.
Our goal is to enable organizations and employees to stay compliant with tax and payroll filing requirements across international jurisdictions. To learn more about Aprio’s Global Mobility Services and how to leverage them in your organization, get in touch with our team today.
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About the Author
Jungsub Lee is Senior Manager of Global Mobility at Aprio, where he helps multinational companies of all sizes expand, place and source talent in the U.S. and internationally.