Global Employee Mobility

Global Employee Mobility
Tax and employment considerations for today's
international mobile workforce
Judith van Gasteren
Jan-Willem de Tombe
Agenda
1. Introduction
2. International mobile employees considerations
3. Mobility & Tax
4. Mobility & Social Security / Pension
5. Secondment constructions
6. Global Employment Company
Appendices: Tips & Tricks
© 2015 Baker & McKenzie Amsterdam N.V.
2
Introduction
Trends
1. Globalization
2. Emerging markets
3. Upcoming war for talent
4. Demographic changes (aging global population and declining birth
rates)
Talent and mobility strategies will become inscreasingly important 
a mobility strategy is key (also for complaince purposes) Increasingly
global economy  developments and expectations
-© 2015 Baker & McKenzie Amsterdam N.V.
3
Introduction (ii)
Business environment
-
Internal expectations
Talent environment
-
Globalization
New market entry
Workplace innovations
Pressure on global
workforce mobility
Talent shortage
Next generation workers
Need for global leadership
-
Global mobility (GM) that fits
the need of the business
GM as a standard business
practice
Return on GM investments
Compliance
environment
-
© 2015 Baker & McKenzie Amsterdam N.V.
Rapid regulatory changes
Increased scrutiny
Different requirements for
different countries
4
International mobile employees considerations
‒
‒
‒
‒
‒
Employment issues (appropriate structure and applicable law)
Employment tax (residence, tax treaties, 183 day rules)
Social security (A1 certificate)
Immigration (residence and domicile status)
Corporate tax (Salary costs / Transfer Pricing)
All elements must be considered together – decisions about one
aspect may impact on another
© 2015 Baker & McKenzie Amsterdam N.V.
5
Mobility & Tax (i)
Key factors for determining which country has the right to levy taxes in
secondment situations
 Residence place of employee
 Duration of secondment
 Salary costs borne by home or host country?
Step 1: check local tax laws
Step 2: check tax treaty
© 2015 Baker & McKenzie Amsterdam N.V.
6
Mobility & Tax (ii)
Main rule in tax treaties for employment income: working country –
taxation right
Exception “183 days rule” – residency country, if
‒
‒
less than 183 days per year / 12 months presence; and
salary costs borne by home country (i.e. not charged to employer
in host country)
 Continuation of local payroll
© 2015 Baker & McKenzie Amsterdam N.V.
7
Mobility & Tax (iii)
Who is responsible for paying taxes? Employer or employee?
a) Abroad
Local tax laws applicable
Employer (home base) – wage tax registration might be required
b) Netherlands
Dutch tax laws applicable
The Dutch group company may act as a wage tax withholding agent
on behalf of the foreign group company during a secondment provided
that parties confirm to the Dutch tax authorities in writing.
© 2015 Baker & McKenzie Amsterdam N.V.
8
Mobility & Social Security / Pension
1.
2.


Secondment within EU?  EU Decree 883/2004: remain socially secured
in home country
Secondment outside EU?  check social security treaty (website SVB,
e.g. India, Turkey and US).
Advice: request an “A1” to proof that employee is exclusivelly socially
secured in home country.
Alternatively: voluntarily continuation in NL
Pension, to verify:
(i) allowed under the company Pension Plan?
(ii) Tax-free build-up within limits?
Alternative: pay lump-sum amount to compensate pension loss
© 2015 Baker & McKenzie Amsterdam N.V.
9
Secondment constructions: pick the right
engaging entity
What are the Options?
© 2015 Baker & McKenzie Amsterdam N.V.
Key Considerations
Global Employment Company
Why a Global Employment Company
(GEC)?
Remote
access
workers
 Less administrative burden
Limited legal
infrastructure
 ‘Lighter’ tax registrations
 One size (employment) fits all
GEC
Compliance
© 2015 Baker & McKenzie Amsterdam N.V.
12
GEC in the Netherlands
For expatriates (not living/working in NL):
- No requirement to report earnings and pay individual income tax
in the Netherlands;
- No Dutch social security premiums due;
- No payroll reporting obligations for GEC.
For all employees:
‒ Same global employment agreement (governed by Dutch (tax and
social security) statute), however customized at mandatory local
law level)
 Due to this combination, the GEC could be of interest
© 2015 Baker & McKenzie Amsterdam N.V.
13
GEC steplist
Steps
What?
1
Set up legal entity (e.g. Dutch GEC)
2
Commercial and tax registrations of GEC
3
Set up of (global) benefit package (based on clients model)
4
Draft global template employment contract
5
Conduct global employment & tax survey to prepare mandatory employment modules
6
Draft local mandatory employment modules
7
Local commercial and tax registrations of GEC
© 2015 Baker & McKenzie Amsterdam N.V.
14
Appendices
Tax and Social Security - Tips and tricks


Require employee to administer days present per country
Confirm in writing obligation / responsibilities of home and host country
employer


Determine possible tax equalization and / or favourable local tax regimes
(like 30% ruling)
Request A1 form for social security (if applicable)

Determine if pension build up can be continued in home country
© 2015 Baker & McKenzie Amsterdam N.V.
16
Employment - Tips and tricks


Avoid several employment contracts
Avoid triggering more jurisdiction and jurisdictions with high protection
level

Adopt clear and limited definite term of assignment in the secondment
agreement (between home country and secondee)
Adopt clear relocation provisions back to country of origin
Thoroughly analyse choice of law issues (to avoid cherry picking by
secondee)
Adopt contractual right to prematurely terminate assignment by home and
host country and right to return of secondee
Reporting lines to host country
Careful with adopting provisions about general secondment construction
in global expat handbook
Check if minimum terms and conditions of employment according to local
laws during temporarily assignment are provided for






© 2015 Baker & McKenzie Amsterdam N.V.
17
Immigration - Tips and tricks

Prepare timely! (2 to 3 months in advance is not uncommon)

Determine the preferred immigration route (based on the company’s mobilization
intentions on a case by case basis -> business visit, short stay work activities (less
than 3 months), long term assignment (3 months or more)

Determine a timeline and steplist. Mitigate the risk of significant delay and possible
disappointment for the company and the expat

Do not conclude any binding arrangement(s) with the expat until you know whether
he/she will be able to obtain work and residence priviliges (timely)

Ensure that remuneration is ‘in line with Dutch market conditions’ and not merely
set to meet the relevant salary thresholds in order to obtain the preferred
residence/work permit

Ensure that the expat completes municipal (or RNI) registration and – if required –
TB examination

Ensure health insurance coverage in the Netherlands

Take into account sponsor obligations (obligation to provide information, duty to
keep records, duty of care)

End of assignment? Deregister and make sure the expat leaves the Netherlands!
© 2015 Baker & McKenzie Amsterdam N.V.
18
Contact
Jan-Willem de Tombe
Partner
Tax – Compensation & Benefits
Judith van Gasteren
Legal Director
Tax– Compensation & Benefits
[email protected]
+31 20 551 7837
[email protected]
+31 20 551 7412
© 2015 Baker & McKenzie Amsterdam N.V.
19
www.bakermckenzie.nl
© 2015 Baker & McKenzie. All rights reserved. Baker & McKenzie International is a Swiss Verein with member law firms around the world. In
accordance with the common terminology used in professional service organizations, reference to a “partner” means a person who is a
partner,
or equivalent, in such a law firm. Similarly, reference to an “office” means an office of any such law firm.
20
© 2015 Baker & McKenzie Amsterdam N.V.