jun 2012 expat news

Expat news

Welcome to the fifthedition of GrantThornton’s Expat news.

The articles in this issue discuss recentchanges and laws made by somegovernments and revenue authorities,some of which may be beneficial tointernationally mobile employees andothers that may not.

From new tax laws in Austria, socialinsurance payments in China and socialsecurity payments in Italy to tax reliefs

Expat News June 2012 1

in Sweden and an update on the non-habitual tax resident regime in Portugalthis edition contains information fromall over the world – a necessity in theglobal economy we all now inhabit.

To find out more about the topicsfeatured in Expat news do not hesitate toget in touch with members of ourExpatriate tax team. Their contact detailsare included on the last page of thisnewsletter.

Expatriate tax team

For further information our Expatriate tax ebook has been designed to provide anoverview of the different tax systems around the globe. Click here to find out more.

This information has been provided by member firms within Grant Thornton International Ltd, and is for informational purposesonly. Neither the respective member firm nor Grant Thornton International Ltd can guarantee the accuracy, timeliness orcompleteness of the data contained herein. As such, you should not act on the information without first seeking professionaltax advice.

Italy TheNetherlands

Poland Portugal Sweden UnitedKingdom

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Who’s whoWelcome Brazil China IrelandAustria

http://www.gti.org/Services/Tax-services/Expatriate-tax/Expatriate-tax-ebook/index.asp


Austria

throughout the years 2013 to 2016 andwill affect employees with a grossannual employment income of above€185,000 (approximately).

Irregular remuneration items inAustrian tax lawAustrian tax law distinguishes betweenincome from employment as follows:• regular remuneration items for

example: base salary, commissionsand benefits in kind from using thecompany car privately

• irregular remuneration items forexample: 13th and 14th salary andperformance based annual bonuses.

As far as irregular remuneration itemsare concerned Austrian tax law offers avery favourable tax regime.

The following shows the old and newtax regimes for irregular remunerationitems.

Old tax regime for irregularremuneration items• applies for periods up to 31 December

2012 and then again from 1st January

2017 onwards

• tax free amount of €620

• 6% flat tax up to an annual ceiling amount

which is defined as one sixth of the

employee’s annual regular remuneration

items

• regular tariff tax rate to the degree the

ceiling amount is exceeded

Note: As the ceiling amount is income

based, high income earners profit

particularly from this tax regime.

New tax regime for irregularremuneration items• applies to periods after 31 December

2012 and before 1st January 2017

• tax free amount of €620

• 6% flat tax or higher solidarity tax up to an

annual ceiling amount which is defined as

one sixth of the employee’s annual regular

remuneration items

• regular tariff tax rate to the degree the

ceiling amount is exceeded

Note: The progressive solidarity tax rates do

not apply to severance payments

Solidarity tax on irregularremuneration itemsAustria has recently implemented taxlaw amendments for reducing the budgetdeficit in the so called ‘Stability Act 2012’which was passed through parliament on29 March 2012. The main change affectingexpatriate payroll is a temporarysolidarity tax to be levied on 13th and14th salaries and other irregularremuneration items that were to dateonly subject to a flat tax rate of 6% inAustria. The progressive solidarity taxrates of up to 50% will be levied



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The impact of the tax law amendmentExample 1: an employee with a monthly salary of €13,000 and 14 salary payments.

The new tax regime brings no changes as the13th and 14th salary do not exceed €25,000 afterdeducting social security contributions. The 6%flat tax and the €620 tax free amount apply asusual:

€Monthly base salary 13,000.00

One sixth of the employee’s annual 26,000.00

regular remuneration items (i.e. 12

regular salary payments)

Amount of 13th and 14th salary payment: 26,000.00

Social security levied on 13th and 14th 1,444.12

salary payment

Tax base 13th and 14th salary payment 24,555.88

Income tax on 13th and 14th salary 1,436.15

old regime


new regime

Example 2: an employee with a monthly salary of €50,000 and 14 salary payments.

This employee would have only paid €5,876income tax on the 13th and 14th salary under theold regime. Under the new regime the employeewould pay €27,741 income tax on the 13th and14th salary since they are affected by theprogressive solidarity tax rates:

€Monthly base salary 50,000.00

One sixth of the employee’s annual 100,000.00

regular remuneration items (i.e. 12

regular salary payments)

Amount of 13th and 14th salary payment: 100,000.00

Social security levied on 13th and 14th 1,444.12

salary payment

Tax base 13th and 14th salary payment 98,555.88


old regime


new regime

Alexandra PlatzerGrant Thornton AustriaT +43 (0)1 914 42 56 E [email protected]

The new progressive solidarity tax rates on irregular remuneration items are shown in the following table:

Annual amount of irregular Tax rate Corresponds to an remuneration items in € approximate annual(within the ceiling amount and after income with 14 salarydeducting corresponding employee payments in €social security contributions)

first 620 0.00% –

next 24,380 6.00% 185,000

next 25,000 27.00% 185,000 to 360,000

next 33,333 35.75% 360,000 to 594,000

above 83,333 Regular tariff tax rate Above 594,000

(mostly 50.00%)



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mailto:[email protected]

Brazil

Brazil is also investing heavily on theAfrican continent with constructioncompanies, the oil and gas industry andalso expanding local industries into theAmericas and Europe. As a result, agreat number of Brazilian employees arebeing assigned to work overseas.

Such movement has caught theattention of the Brazilian labour and taxauthorities, who have reviewed andenacted special rules applicable toforeign workers in Brazil as well asspecial rules for local employeesworking abroad. In this present scenariothe authorities have been attempting toverify whether companies and theirexpatriates are fully compliant withimmigration, labour and tax obligations.If they are not, then potential assessmentfines and interest may apply. In addition,the company may face difficultiesobtaining further visas for theexpatriates, among other penalties.

Foreign individuals transferred toBrazilThere are three key points that need tobe observed when planning to transfer aworker to Brazil:

Immigration aspectsThe type of work to be performed willimpact the type of visa required. There are a few types of visas related to workingin Brazil. We have summarised three ofthem below:• temporary visa with local labour

contract: in this case the foreignemployee is hired as a regularemployee by the Brazilian legalentity and all local labour rights aswell as payroll costs will beapplicable to this expatriate

• temporary visa without local labourcontract: in this case the foreignemployee usually enters Brazil onbehalf of a service agreement setbetween the local company and the

foreign company for the transfer oftechnology or technical cooperationagreement purposes. Also a maritimevisa fits this situation and isapplicable exclusively to workers on oil rigs

• permanent visa: this visa is mostlyapplicable to individuals who will actas legal representatives,administrators or statutory directorsof the company as this visa allowsthe individual to sign legaldocuments and represent thecompany.

The application for a permanentvisa (administrator) requires theBrazilian company to guarantee aninvestment from its shareholders or aforeign quota-holder in foreigncurrency of an amount equal to orhigher than R$150,000 (approx.USD 75,000), as well as theagreement to generate 10 new jobsfor Brazilian employees in the next


The economic growth and investmentsfrom multinationals has considerablyincreased the number of foreignindividuals coming to Brazil to work.Also, the development of the oil and gasindustry, the upcoming Olympic Gamesand football World Cup, tied with thecurrent good economy in Brazilcontributes to attracting expatriatesfrom all over the world thus increasingthe expat population.



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Tax authorities have noticed that inseveral cases the employer has been payingthe income taxes on behalf of theexpatriate and this is being considered as afringe benefit for Brazilian tax purposesand accordingly subject to tax. Therefore,the companies providing benefits to itsemployees may cause adverse taximplications for the individual as well as tothe company and consequently incurhigher costs.

Labour aspectsAn expatriate who transfers to Brazilunder a labour contract with a Brazilianlegal entity will have the same labourrights as any other local employee, forexample; social security, severance fund,13th month salary and 30 days ofvacation.

The Brazilian labour law is knownfor being protective towards employeesand the labour taxes and othercontributions can be high, up to 60% ofthe employees salary . Such payroll costs

represent a significant amount whenplanning the compensation package of ahigh level professional assigned toBrazil. The key factor at this point ishaving an efficient advisor to assist onthe structuring of the compensationpackage.

Transfer of Brazilian employeesabroadLabour aspectsSince 2009, changes to Brazilian labourlegislation have considerably increasedthe costs of assignment programmes ofBrazilian employees abroad.

The employers of such expatriates areobliged to comply with variousobligations such as keeping the paymentof Brazilian social security and severancefund on a worldwide basis. In addition,the employer must pay for mandatoryannual salary adjustments, vacation pay,air tickets to the employee and family etc.

If the host country offers betterlabour conditions than the Brazilianlabour law the host rules may apply.

Taxation aspectsBrazilian residents leaving the countrypermanently or even temporarily whodo not return within 12 months mustcomply with the departure processwhich consists of the presentation of the‘Communication of definitive departure’and the ‘Definitive departure income taxreturn’.

This process must also be completedby foreign individuals who have becomeresident of Brazil by the time they leavethe country permanently.

Pamela H. BorgesGrant Thornton BrazilT +55 11 3886-5116E [email protected]

two years. The permanent visa willbe restricted to two years and theinvestment will have to be integratedin the capital stock of the company.

It is also important to keep inmind that a ‘business visa’ is not awork visa and does not allow anindividual to undertake any kind ofwork in Brazil but only toparticipate in meetings, visit clientsand workshops among other similarevents.

Taxation aspectsThe type of visa granted to the foreignemployee will determine the fiscalresidency of the expatriate in Brazil.

Foreign individuals considered asresidents in Brazil are subject to taxes ona worldwide basis and are responsiblefor paying taxes which are calculatedbased on a progressive table that variesfrom 0 to 27.5%. Non-residents areonly taxed at non-resident tax rates onincome derived from Brazilian sources.



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China

• expats lawfully working in Chinamust participate in the Chinesesocial insurance scheme. Expatswhose home country has signed abilateral or multilateral agreementfor social insurance with China, shallfollow that corresponding agreement

• the cap and percentage ofcontributions for expat employeeswill be the same as Chinese nationals

• the employer is required to registerits expat employees in the socialinsurance scheme within 30 days ofthe employee receiving their workpermit

Although the regulations came intoeffect from 15 October 2011, thepractical requirements ofimplementation and the level ofenforcement vary depending on thelocation. For instance, Beijing haspromulgated the practical guidance andhas put it into enforcement fromOctober 2011, whilst Shanghai has yet todo this. In this regard, it is advisable tocheck with your tax advisors for the localrequirements and latest developments.

Wilfred Chiu (Beijing)Grant Thornton ChinaT +86 (10) 8566 5828E [email protected]

Rose Zhou (Shanghai)Grant Thornton ChinaT +86 (21) 2322 0298E [email protected]

According to ‘Social Insurance Law’(supplementary article No.3) of thePeople’s Republic of China (PRC),expat employees and their employers arenow required to make contributions tothe Chinese social insurance system.

Effective from 15 October 2011, themain requirements of the interimmeasures for the participation offoreigners employed in China in socialinsurance (Order No.16) are outlinedbelow:

• the expat employee may choose tomaintain or terminate the pensionaccount if they decide to leave Chinabefore the stipulated retirement agefor pension payments. If terminated,the employee can apply for a lumpsum withdrawal of the amountaccumulated in their personalaccount. It is noted that theemployer’s portion cannot bewithdrawn

• expats who retain their pensionaccount but reside outside of Chinaafter the stipulated retirement ageshould provide a certificate to thesocial insurance administrationagency annually in order to stillbenefit from the monthly pensionpayment.



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Special Assignee Relief Programme(SARP)A number of countries seeking to attractForeign Direct Investment (FDI) have aspecial expatriate tax regime in place tofacilitate multinational groups inrelocating key employees to thatcountry.

The new SARP introduced by theFinance Act 2012 provides for anexemption from income tax (but not PayRelated Social Insurance (PRSI) or theUniversal Social Charge (USC)) for30% of earnings between €75,000 and€500,000. This equates to a maximumannual deduction of €127,500. There area number of conditions that must be metin order for the relief to apply, and theseare discussed in further detail below.

The old regime will continue toapply in the case of individuals whoarrived in Ireland in 2009 to 2011 andthe new SARP regime will apply forthose who arrive in Ireland from 2012.

The foreign employer must beincorporated and a tax resident in acountry with which Ireland has a doubletax treaty or a tax information exchangeagreement. The relief can also apply toassociated companies, which can includean Irish resident company.

The relief can be claimed at sourcethrough the PAYE system once theclaim is made to, and approved by theIrish Revenue. The employee must file atax return for the relevant year by 31October in the following tax year inorder to retain the relief.

Additional benefits under thescheme:• the cost of one return trip for the

employee and their family to theirhome country can be recovered taxfree

• school fees of €5,000 per child canbe also paid by the employer tax free.

Finance Act 2012 – Tax changes forexpatriatesEmployment taxes and incentives forinternationally mobile employeesThe Finance Act 2012 introduced anumber of employment focusedinitiatives, particularly some verywelcome changes with respect tointernationally mobile employees. Theseinitiatives help to enhance Ireland’salready strong reputation as aninvestment platform for multinationalsseeking to establish a strategic Europeanbase.

To qualify for the new relief, theemployee must:• earn a salary of at least €75,000,

excluding bonuses, share awards andbenefits in kind

• work in Ireland for a minimumperiod of 12 months

• have been employed by the foreignemployer for at least 12 monthsprior to arrival in Ireland,performing their duties ofemployment for that employeroutside of Ireland

• have been non-resident in Ireland forthe five years immediately precedingthe year of arrival in Ireland

• carry out duties of employmentpredominantly in Ireland, withincidental overseas duties permitted.

Ireland



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Foreign Earnings Deduction (FED)A new tax relief aimed at employees sentby Irish employers to work in BRICScountries (Brazil, Russia, India, Chinaand South Africa) was introduced in theFinance Act 2012. It is hoped that therelief will encourage Irish basedemployers to expand operations in thesejurisdictions.

The relief is provided by way of areduction of taxable income, subject to amaximum deduction of €35,000 perannum.

The following is a summary of themain provisions of the relief:• applies for tax years 2012 to 2014• the individuals claiming the relief

must be Irish tax residents• a minimum of 60 days in a

continuous 12 month period must bespent in a BRICS county

• to be counted towards the 60 daythreshold, each visit must be at leastfour days in duration.

Example:An Irish resident individual has beenworking on an assignment for hisemployer in India for four months (120qualifying days). His remuneration forthe year comprises a base salary of€120,000 and share based remunerationof €20,000. He has worked for thisemployer for a number of years. FED iscalculated as follows:

120 x €140,000 = €46,027, capped365 at €35,000

FED in this instance, results in areduction of taxable pay of €35,000 and a repayment of tax of €14,350 (i.e. €35,000 x 41%).


The relief is calculated on the ratio ofqualifying days spent in BRICScountries to the total number of days inthe tax year that the individual held theposition and is applied to the incomeearned from the employment in the taxyear:

Qualifying days x qualifying incomeTotal number of days in tax year

Qualifying income does not includebenefits in kind, however, it does applyto share based remuneration. The reliefdoes not currently extend to USC.

Frank WalshPartner, TaxT +353 (0)1 6805 607E [email protected]

Lorcan HandDirector, TaxT +353 (0)1 6805 770E [email protected]

Emma MeehanManager, TaxT +353 (0)1 6805 774E [email protected]



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Italy

Italy has entered into Social SecurityAgreements (SSA) with 17 non EUcountries (see sidebar). The SocialSecurity relationships with Europeancountries are ruled by the EuropeanConvention on Social Security; thisagreement is also applicable for fiveadditional countries which are not partof the European Community (EC) but,for social security purposes, areconsidered on an equal footing with the27 European members.

These Countries are: • Switzerland• Ireland• Norway• Liechtenstein• Turkey

For all of the above countries there isfull protection from the double paymentof social security contributions (SSC).For example, in case of a secondment toItaly, a worker duly covered by acertificate of coverage (COC) for thework activity rendered in Italy will payno SSC to the Italian Authority.

The 17 non EU countries with a SSA with Italy are:1. Argentina2. Australia3. Brazil4. Canada including Quebec5. Korea 6. Croatia7. Cape Verde8. Israel9. Jersey10. Ex-Yugoslavia (Bosnia,

Macedonia, Serbia, Montenegro,Kosovo and Vojvodina)

11. Monaco12. San Marino13. Tunisia14. Uruguay15. USA16. Vatican17. Venezuela.

Solidarity surchargeConsidering the exceptionalinternational situation and the country’shigh public debt, the EuropeanCommunity asked Italy to act to balanceits budget and reduce its public debt.The Italian government intervened withthe introduction of the so called‘Adjusting measures decree’.Social security compliance forexpatriates Social security rules applicable to expatsare sometimes more complicated thanyou might think. It often happens thatforeign employees who perform theiractivity in Italy are put into difficultpositions due to a lack of informationfrom their employers/consultants.

The main issues that should beconsidered to avoid situations that couldput the employer and the employee atrisk for not fully complying with thesevery important laws are outlined in thisarticle.



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Notably, not all the SSC are covered bythe SSA, in some cases the SSA coversonly the pension plan and not other SSCthat are due to special funds such as:• illness• pregnancy• unemployment allowance• family allowance• redundancy protection.

The SSA that only partially cover theSSC are: Argentina, Brazil, Canada(including Quebec) and USA. In thecase of secondment from these countriesa percentage of SSC is due in Italy, thepercentage depends on the job title ofthe worker, the size of the company andthe sector of activity.

For a US expat belonging to a tradeand service company with over 200employees, the percentage of SSC dueon the salary earned because of the workrendered in Italy is 3.03% calculated onthe whole salary without any ceiling.

The percentage is not significant butit is important that this duty is paidbecause citizens of these countries (inorder to legally work in Italy) also needa permit of stay. In the first instance theItalian police issue a ‘permit of stay’valid for 12/24 months; then in the caseof a request of renewal the policerequest confirmation of the compliancewith the payment of SSC. In cases wherethere is a lack of payment of the SSCthat is not covered by the SSA, therenewal of the permit of stay will be injeopardy and the police could refuse torenew it.

Gabriele Labombarda Grant Thornton Bernoni & PartnersT +39 0278 3351E [email protected]

The above 17 agreements can be dividedin three groups:• Australia: the SSA with Australia

does not provide for any exemptionfrom SSC. This SSA is valid forpension payments only.

• Korea and Israel: the SSA withthese countries does not provide for a COC. These agreements providefor a local exemption from paymentof SSC.

• All other countries: if the worker is duly covered by a COC, thenpayment of social security is not duein Italy, where the worker rendershis/her activity, the payment is dueto the home country.



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The Netherlands

This announcement was made by theDutch State Secretary of Finance, inanticipation of a review of Dutch taxlegislation due to European Court caselaw. Current Dutch tax legislationalready allows a mortgage interestdeduction for non-resident taxpayers,but only when a number of strictconditions are met. The major objectionagainst the current legislation is theexisting ‘claw-back’ rule. This ‘claw-back’ rule currently withdraws previoustax advantages (such as a mortgageinterest deduction) in case the non-resident taxpayer does not meet theconditions anymore. By abolishing this‘claw-back’ rule, every tax year will betreated separately. This will strengthenthe legal certainty for the taxpayer.

In practice, the new measure enablesa Dutch mortgage interest deduction forindividuals who are living in the Dutchborder region (e.g. Germany, Belgium)or the United Kingdom, but whoseincome is subject to taxation in theNetherlands.

Lita MannoeGrant Thornton Expatriate Services B.V. T +31 20 547 57 89E lita.mannoe @gt.nl

Relaxation of mortgage interestdeduction for foreign principalresidence Non-resident taxpayers of theNetherlands, who earn at least 90% oftheir income in the Netherlands, arenow entitled to a mortgage interestdeduction in relation to their principalresidence located outside of theNetherlands under virtually the sameconditions as resident taxpayers of theNetherlands.



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mailto:lita.mannoe @gt.nl


Poland

Double tax treatiesSeveral of the recent double tax treaties(DTT) in Poland may affect expats’settlements as outlined:• Poland-Cyprus

This protocol was signed on the 22March 2012, however, the changeswill come into force in the yearfollowing its ratification (probably asof January 2013). The mostimportant change that may affectexpats is the change to the methodfor double taxation avoidance whichsees the elimination of the so called‘tax sparing’ rule – the income taxmay be reduced only by the taxactually paid abroad, not thepotential tax.

Implementation of the newprotocol also brings change toexpatriates with employmentcontracts. The period of 183 dayswill be calculated taking into accountthe 12-month period commencing orending in the tax year (previouslythis concerned just a 12 monthperiod).

• Poland-MaltaThe protocol came into force inPoland starting 22 November 2011,but took effect as of 1 January 2012.The most important change concernsthe method for double taxationavoidance that assumes liquidationof ‘tax sparing’ – the income tax maybe reduced only by tax actually paidabroad.

The second important changemay impact expats who becamePolish tax residents. These expatswho receive income in Malta will beexempt from income tax in Poland(except dividends, interests, royaltiesand sale of assets when the tax creditmethod applies).

The protocol also assumes thatexpatriates with employmentcontracts will have a period of 183days calculated by taking intoaccount the 12-month periodcommencing or ending in the taxyear (previously it was relative to thecalendar year).

• Poland-Isle of ManThis is the first DTT between Polandand a tax haven that concernsincomes of natural persons. TheDTT came into force in Poland from28 October 2011 and took effect asof 1 January 2012.

Tax identification number replaced bypersonal identity numberFrom January 2012, private individualswho do not run their own businesseswill not use a tax identification number(NIP) in Poland. NIP has been replacedby the personal identity number ofCommon Electronic System forPopulation Register (PESEL) given interalia to Polish citizens and foreignerswith permanent residence or with atemporary stay for more than threemonths and persons who are subject tothe Polish security system. For expatsthis means that they will no longer haveto apply for NIP for tax purposes.



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• Poland-Czech RepublicThe Poland-Czech Republic DTTwill shortly be replaced by a newone, this will more than likelyhappen in 2013. The most importantchange that may affect expats is thechange to the method for doubletaxation avoidance that concerns theelimination of ‘tax sparing’ – theincome tax may be reduced only bytax actually paid abroad, not thepotential tax.

Implementation of the new DTTalso brings a change for expatriateswith employment contracts as aperiod of 183 days will be calculatedtaking into account the 12-monthperiod commencing or ending in thetax year (previously concerned just a12 month period).

Planned changes for 2013The ministry of finance announcedchanges in the PIT Act for 2013. Someof them will certainly affect expats.Among these changes there is theelimination of allowance for the internet,some changes will also be introduced inallowances for children. The project hasnot been subject to consultations inparliament, therefore the final changesare not yet known.

Katarzyna CiesielskaGrant Thornton PolandT +48 61 625 1329E [email protected]

Alicja GiebieńGrant Thornton PolandT +48 22 205 4933E [email protected]

• Poland-SwitzerlandThe protocol came into force inPoland starting from 17 October2011 and took effect 1 January 2012.Under implementation of thisprotocol expatriates withemployment contracts will have aperiod of 183 days calculated bytaking into account the 12-monthperiod commencing or ending in thetax year (previously it was relative tothe calendar year).

• Poland-Saudi ArabiaThe introduction of the Poland-Saudi Arabia DTT is the first onebetween these countries. The DTTcame into force in Poland startingfrom 28 of October 2011, and tookeffect as of 1 January 2012.



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Portugal

To be considered as a non-habitualresident in Portugal the followingconditions need to be met:• the individual must become tax

resident in Portugal, according toany of the criteria set out in thepersonal income tax law

• a tax residence certificate must beobtained and also a certificateattesting the effective taxationabroad

• the individual must not have beentaxed in Portugal as a resident overthe past five years.

Under this regime, employment andself-employment income that is derivedfrom high value-added activities (aslisted below) and earned by the non-habitual tax resident in Portugal will besubject to a flat rate of 20%. In thisrespect, the 2012 State Budget has alsointroduced a withholding tax rate of20% that is applicable to this income.

High value-added activities:• architects, engineers and similar

technicians• artists, actors and musicians• auditors• doctors and dentists• professors• psychologists• liberal professions, technicians and

similar• investors, directors and managers.

Pension income earned outside ofPortugalPension income earned outside ofPortugal will be exempt from tax underthis regime as long as:• such income is taxed in the source

country, according to the applicableDTT (even if effectively taxed at a0% rate)

• the income is considered notobtained in Portugal under domesticlaw.

In addition, the non-habitual taxresident may benefit from a taxexemption on the income earned abroadas long as the income was subject totaxation (even at a 0% tax rate) in thesource country and the source country is not included in the black list.

Susana MeloGrant Thornton PortugalT +351 214 134 634E [email protected]

Non-habitual tax resident regimeAs covered in the second edition ofExpat news, the non-habitual taxresident regime provides a beneficial taxtreatment for qualifying income arisingfrom a Portuguese source for non-habitual residents (those that become taxresidents in Portugal after being a non-resident for at least 5 years).



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Sweden

The tax relief exempts the followingremuneration from Swedish tax andsocial security contributions: • 25% of salaries and benefits• moving expenses (to and from

Sweden) • home travel expenses, two return

tickets per year to the home countryfor the individual and familymembers

• children’s school fees.

As of 1 January 2012 it is also possible tobe granted tax relief based on the level ofthe employee’s monthly salary includingbenefits. If the foreign key employeereceives a salary exceeding two basicamounts per month (88,000 SwedishKrona for the income year 2012) theywill be granted the tax relief.

Aino Askegård AndrésenGrant Thornton SwedenT +46 (0) 856 307 285E [email protected]

Tax relief for key expatriateemployees working in Sweden Under certain conditions, expatriatesclassed as a ‘key employee’ working inSweden for limited periods may qualifyfor a reduction of the income taxliability on their earnings. The reductionthat amounts to 25%, is only applicableif the employer/employee has appliedfor a ruling within three months ofarriving in Sweden; if this is not metthen normal Swedish progressivetaxation of personal income applies. Thetax scheme can only apply for threeyears and only if the stay in Swedendoes not exceed five years.



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United Kingdom

National Insurance Contribution (NIC)from its current level of £208 to a lowerlevel of £188. Whilst this remains highby international standards, employerswill draw some comfort from thereduction.

Abolition of ordinary residence forincome tax The government has now confirmedthat ordinary residence will in fact beabolished while the basis for overseasworkday relief (tax relief for short termresidents in respect of duties performedoutside of the UK) will be put on astatutory footing with effect from2013/14.

This was one of two options putforward in respect of ordinary residencein the consultation document on astatutory residence test published inJune 2011. The other was retainingordinary residence and defining it inlegislation.

There are a number of concerns withthe adopted approach.

Firstly, the statutory basis proposedfor overseas workday relief (available forthe year of arrival and following twoyears if not resident in the previous fiveyears and a home is retained outside ofthe UK) would deny relief to manyindividuals who currently qualify, asthere is currently no requirement tomaintain a home outside of the UK.

Secondly, ordinary residencecurrently has tax implications which arewider than overseas workday relief. Forexample foreign service relief ontermination payments is available forperiods of service during which thetaxpayer was resident but not ordinarilyresident in the UK.

Draft legislation will be publishedshortly in this regard, and internationalemployers will be keen to understand indetail the consequences of theseproposals.

Increases in personalallowances/changes to NIC bandsThe increases announced in personalallowances to £8,105 in 2012/13 and to£9,205 in 2013/14 are welcome, but willprincipally benefit basic rate taxpayers.However, the amount at which personalallowances are phased out entirely willincrease from £114,950 currently to£116,210 in 2012/13 and £118,410 in2013/14. Decreases in the upper earningslimit for NIC in 2013/14 will alsodeliver a marginal benefit for higher ratetaxpayers.

Pensions tax reliefDespite rumours to the contrary pre-budget, no change was made to themaximum annual amount of taxfavoured saving to registered pensionschemes (the annual allowance), whichremained at £50,000. The maximumamount of benefits which can be builtup in a UK pension scheme in total (thelifetime allowance) was reduced from£1.8m to £1.5m as announced in theBudget last year.

Budget 2012: implications forinternational assignments?The UK Budget, announced on 21March 2012 contained some new itemsrelevant to international assignments,together with confirmation of severalchanges relevant to this area which hadbeen announced previously.

Reduction of the top rate of tax from2013/14The reduction in the top rate of incometax from 50% to 45% from 2013/14 willbe welcome for international employers.This will reduce the cost of a net benefitof £100 grossed-up for income tax and



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Further consultation will now becarried out, with a view to includinglegislation in the Finance Bill 2013.International employers will be keen tounderstand the detailed proposals andparticipate in the consultation to ensurethat any proposed rule does not impactvaluable reliefs commonly used byinternational employers.

Confirmation of other previouslytrailed proposalsA number of other previouslyannounced proposals relevant tointernational assignments andrelocations were confirmed in theBudget including:• From 2012/13 the charge for

accessing the remittance basis oftaxation (remittance basis charge)will be increased from £30,000 to£50,000 for those non domiciledindividuals who have been residentin the UK for 12 out of the previous14 tax years.

• A statutory residence test will beintroduced from 2013/14, with asummary of the responses to lastyear’s consultation paper and draftlegislation published shortly.Although most businesses willwelcome the greater certainty onresidence, they will be interested tounderstand to what extent the largenumber of responses to last year’sconsultation have been incorporatedinto legislation.

Clive FathersGrant Thornton UKE [email protected]

Payments into a registered pensionarrangement for an employee’s spouse,which had previously been used bysome employers as part of flexiblebenefits to allow an employee’s spouseto build up a pension and utilise theirannual allowance, will be caught by thenew provisions and therefore no longereffective. Unfunded arrangements,although mentioned in the Budgetreport, have not attracted additionallegislation and remain a tax efficient way of offering retirement benefits toemployees as a top up to UK registeredpension schemes.

General anti-avoidance ruleThe government has announced that it accepts the recommendation of lastyear’s Aaronson Report that a generalanti-avoidance rule, targeted at artificialand abusive tax avoidance schemes,would improve the UK’s ability totackle tax avoidance.



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United States

The US FCPA has two provisions:1) anti-bribery provision2) books and records and internal

controls provision.

The anti-bribery provision prohibitsindividuals from paying or offering topay money or anything of value to aforeign official in order to obtainbusiness. The definition of a publicofficial is very broad. The books andrecords provision requires companies tofile periodic reports with the Securitiesand Exchange Commission to keepbooks and records that accurately reflectbusiness transactions and to maintaineffective internal controls.

As multinational companies expandglobally and enter foreign markets,corruption and bribery are seriousobstacles to doing business. Companiescontinue to be faced with a complexbusiness environment and high volumeof demands for bribes. In addition,expatriates may be told that this issimply ‘normal business practice’.

Brazil, Russia, India and China(BRIC) are emerging markets and manycompanies are seeking to invest andexpand into these locations. However,the BRIC countries have a higher levelof corruption risk including:• Brazil: a wide range of regulatory

agencies due to the federal structureof the political system; this mayincrease the likelihood of demandsfor bribes by public officials

• Brazil: complex tax systemrepeatedly prone to corruption

• Russia: inconsistent application oflaws/regulations leading to weakenforcement of laws and courtdecisions

• India: government bodies chargedwith combating corruption haveconflicting mandates and lack ofqualified staff and funding.

• China: companies having difficultieswith authorities because of corruptbehaviour by their agents/intermediaries.

The global community is gainingawareness of corruption as an issue. InChina, for example, the governmentacknowledges that corruption isthreatening political stability andeconomic growth. Therefore, China hasrecently updated their anti-corruptionlegislation.

The US Foreign Corrupt Practices Act(FCPA) – How expatriates areimpactedThe importance of ethics in today’sglobal economy is a key concern forinternational companies. However, acompany’s expatriates are often on thefront line when facing corruptionoverseas. The US Department of Justicehas more current potential FCPAviolations under investigation than everbefore. In addition, more and moreindividuals rather than corporations arebeing held responsible for FCPAviolations.



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Expatriates travelling to countrieswith a high risk of corruption should beprovided with enhanced guidance. Thereshould be a clear understanding of howany questionable transaction or paymentshould be reported to senior leadershipwithin the organisation. Expatriatesshould not feel they are ‘on their own’when dealing with corruption issuesoverseas. Multinational companiesshould implement and enforce sufficientanti-bribery compliance policies andprocedures.

Linette BarclayGrant Thornton UST +1 832 476 3663E [email protected]

Beth PenfoldT +1 312 602 8284E [email protected]

In addition, the United KingdomBribery Act was effective on 1 July 2011.Companies that have operations in UKhave to apply careful considerationbecause the new act clearly prohibitsfactors as simple as providing hospitalityto foreign public officials or any suchgesture. The UK Bribery Act goesfurther than the FCPA in respect tocorruption and having an FCPAcompliant policy alone is not sufficient.Adequate procedures must be in place toprevent corruption.



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Who’s whoContributors

© 2012 Grant ThorntonInternational Ltd. All rightsreserved.

This information has beenprovided by member firmswithin Grant ThorntonInternational Ltd, and is for informational purposesonly. Neither the respectivemember firm nor GrantThornton International Ltd can guarantee theaccuracy, timeliness orcompleteness of the datacontained herein. As such,you should not act on theinformation without firstseeking professional taxadvice.

Grant Thornton InternationalLtd (Grant ThorntonInternational) and themember firms are not a worldwide partnership.Services are deliveredindependently by themember firms.

AustriaAlexandra PlatzerT +43 (0)1 914 42 56 E [email protected]

BrazilPamela H. BorgesT +55 11 3886-5116E [email protected]

ChinaWilfred Chiu (Beijing)T +86 (10) 8566 5828E [email protected]

Rose Zhou (Shanghai)T +86 (21) 2322 0298E [email protected]

IrelandFrank WalshT +353 (0)1 6805 607E [email protected]

Lorcan HandT +353 (0)1 6805 770E [email protected]

Emma MeehanT +353 (0)1 6805 774E [email protected]

ItalyGabriele LabombardaT +39 0278 3351E [email protected]

The NetherlandsLita MannoeT +31 20 547 57 89E lita.mannoe @gt.nl

PolandKatarzyna CiesielskaT +48 61 625 1329E [email protected]

Alicja GiebieńT +48 22 205 4933E [email protected]

PortugalSusana MeloT +351 214 134 634E [email protected]

SwedenAino Askegård AndrésenT +46 (0) 856 307 285E [email protected]

UKClive FathersT +44 (0)20 7728 2632E [email protected]

United StatesLinette Barclay T +1 832 476 3663E [email protected]

Beth PenfoldT +1 312 602 8284E [email protected]




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jun 2012 expat news

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