As if all the above is not enough there can be other complications to payroll which it is unlikely your provider will pick up unless you tell them.
- If you have provided stock options or equivalent, there are regulations as to how these must be accounted for in payroll. Some countries tax these at grant, others (the majority) at exercise. If you do not provide this information to the payroll provider in a timely way and correctly calculated according to any local rules, then the company will be in breach of regulations governing payroll.
- Many employees in a foreign jurisdiction make payments locally and then expense these for reimbursement. If any of these are effectively remuneration e.g. payments for medical or life insurance, then they must be identified and reported in payroll – have you organized your processes to take care of these?
Expats add even more complications.
Not all countries have a December 31 year end. For example, Australia is June 30 and the UK is April 5. The US only allows tax credits on the US return against taxes paid or accrued during the tax year. So, if taxes are not paid (to the local Tax Authorities) throughout the year or by 12/31, the employee (or the company if it is a tax equalized assignee) may lose foreign tax credits on the US tax return – this could make for a disgruntled employee (or CFO!) on April 15.
If the company relocated an employee (who is not tax equalized) during the tax year, it may be necessary to gross up relocation costs.
Processes will need to be set up with the local jurisdiction’s accountants to report back ALL expat compensation such as housing, children’s education, any local tax payments since all these in the US will need to be reported to the IRS who require ALL compensation accounted for no matter where paid.
These are general guidelines, for more information on your specific country or situation, please connect with us.