It is important for employers to establish a process for recording the noncash and cash payments to ensure that the correct taxes are withheld for expat employees. A number of businesses employ individuals who live overseas, and it is important to ensure that their payroll is properly managed.
An Introduction To Expatriate Payroll
Electronic systems which are used to record the payments which are made to expats must account for the payroll systems which are used in their host countries. This includes transactions which are accounts payable as well as expense reports. The job positions within the company should be specified which are responsible for offering data which is related to the compensation of expats, as it allows for accumulation tracking and procedural documentation.
The problem with using the names of employees as opposed to job positions within the procedural documents is that any requests which are made for payroll could be incorrectly sent to parties that are no longer responsible for tracking the payroll data of expatriates.
Compensation accumulation is one of the most important aspects of expatriate payroll management. It allows for payroll filings to be accurately completed and is essential for the completion of expat tax returns. Furthermore, compensation accumulation makes it simple to build an administration process. If a company doesn’t do a great job at this, or lacks formal procedures, compensation accumulation will be problematic to say the least.
Procedures and systems for audits which are used for expat payroll must be able to recognize and eradicate any errors in regards to data collection, as these will cause problems that necessitate the filing of adjustment forms or paying extra to fix. It is best for these audits to be performed at regular intervals.
The Role Of Payroll Staff
Payroll staff must be responsible for carefully reviewing the taxability for the various payment types which are tracked for compensation accumulation, and they must be able to recognize the payments which must be taxed differently due to the host country where the expat is based and the home country where they originate. This is necessary to guarantee compliance with the nation’s tax code as well as their filing requirements.
A number of employers outsource the compensation accumulation for expats to third party firms, but should carefully scrutinize the ability of these vendors to account for the procedures and tax laws for both the home and the host country when payment data is processed. A vendor that does not correctly track the nuances between host and home country taxation could cause mistakes which the business that hired them will end up being responsible for.
Businesses that develop plans for expat payroll must recognize that treaties may exist between host and home countries which could determine how the expat employees are taxed. Employers must carefully study double taxation laws, which in many cases will use a 183-day period as the maximum number of work days within a year that an employee working overseas can go without being taxed by the host country.