theory versus practice: what is the cost of my mobile ...€¦ · theory versus practice: what is...
TRANSCRIPT
Theory versus Practice:
What is the cost of my mobile
employees?
Yvonne Brazil, CEP – TubeMogul
Jennifer Kirk – Google
Laura Verri, CEP – E*Trade Financial Services Inc.
Marlene Zobayan, CEP – Rutlen Associates LLC
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DISCLAIMER
This presentation contains general information only and the respective speakers and represented firms are not, by means of this presentation, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This presentation is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor. The respective speakers and firms shall not be responsible for any loss sustained by any person who relies on this presentation.
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Agenda
Cost and Effect of mobility
Timeline complexities for mobile employees Taxation
Finance and accounting
Timeline of events and cost associated Equity plans compensation costs
Tax equalization
Social tax
Tax advice
Timeline of transactions
Audits and controls
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Google/Alphabet background
Over 60,000 employees in approx. 60 countries; broad-based grants of Google Stock Units (“GSUs”); used to grant stock options (stopped in 2010)
Over 5,000 permanent transfers are part of our gMobility Program
– Launched in April 2011
– Jan 2016 we launched state to state mobility
– We provide 1 year of tax services post-transfer
Fewer than 200 Googlers are on expat packages and tax-equalized but only do hypothetical tax withholding for equity for US inbounds
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TubeMogul background
TubeMogul is an enterprise software company that offers a self-serve platform for digital branding
Located in 11 countries, with approximately 100 employees overseas and 500 employees in the US
Currently a small number of expats, though we had a much larger expat population a year ago. Moving toward localization of our expats
We provide unlimited tax assistance while on assignment and 1 year of tax assistance post localization
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Types of mobile employees
Types of mobile employees covered in today’s presentation:
Assignees (including expatriate, inpatriate, foreign national, third-country national)
Permanent transfers
Business traveler
Can be domestic or global
Individuals may have more than one type of mobility during their careers
Not all costs we will discuss will apply to all types of mobile employee
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POLL QUESTION:
How do you feel about your mobile employees’ records and processes?
We have a good tracking system and technology in place. We have no major issues
We have ‘procedures’ in place and track with the use of spreadsheet. We feel this could be an issue
We don’t have (track) mobile employees. Is this area a major risk?
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Cost of mobile employees
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Cost of mobile employees – Stakeholders
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Costs to be considered for mobile employees
Equity plans compensation costs
Equity
Cash
Tax equalization/Agreement cost
Employer portion of social taxes
Cost of maintaining payroll records / shadow payroll
Cost of tax return preparation in home and host location
Cost of tax and policy advice
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Example of mobility costs overtime
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7
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Issues arising from events
Timing of event
Taxable year vs. Fiscal Year
Unpredictability of costs
Share price fluctuation
Foreign exchange
Tax rates /rules changes
Tax bracket
Inability to “close the books” for a mobile employee for long period of time
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Equity plans expense - considerations to be applied
Allocation of the equity expense
Allocation of expense > Recharge to subsidiary
Equity settled awards > Grant date to vest date
Cash settled awards > Trailing liability spans multiple years
Accrual of deferred tax asset
Benefit spans multiple years
Expense allocation ≠ current cost center
ASC718 accrual vs. IFRS2 accrual
Impact of transfer pricing and recharge agreement
Impact on local and home country budget
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POLL QUESTION:
Do you provide, or plan to provide any tax support to your mobile employees?
We provide full support, including tax equalization, tax advice, and tax return preparation
We provide some support for tax return preparation
No, not applicable
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Julie, a U.S. citizen is employed by ACME Co. in the U.S.
On Jan 1, 2013 she is granted NSO for 3,000 shares in ACME which vest over 3 years – 33% per year
On Jan 1, 2014 Julie is transferred to the UK subsidiary
On Jan 1, 2016 the NSO fully vests
ACME recharges NSO costs to its UK entity
Corporate Tax Rate : USA 35% - UK 22%
Case study example
Date Stock price Fair value
1-Jan-13 $10 $5
1-Jan-14 $10 $5
1-Jan-15 $12 $5
1-Jan-16 $15 $5
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Equity expense and DTA – An accrual comparison example
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Tax equalization / agreement cost
What is tax equalization?
Accruals and releases
Post repatriation tax equalization costs
Is cost center still open?
Impact on local budget
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Employer social tax
Certificate of coverage?
Social tax position if no certificate of coverage
Impact of chargeback of cost on employer social tax
Difference in social tax rates
Europe and South America higher rate
Transfer cost/accrual lower than local rate
Trailing employer social tax costs
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Employer social tax – An accrual comparison example
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Progress of social tax and other costs
2013 2014 2015 2016 2017 2018 2019
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Mobility event
Agree tax equalization
Agree certificate of coverage/social tax situation
Agree payroll situation
Tax returns preparation
Tax advice
Impact on equity compensation expense
Impact on deferred tax asset
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Transaction: timing of event
RSU at vest – Option at exercise
Impact of equity compensation expense
Impact of deferred tax asset
Impact of tax equalization
Impact on social tax expense including timing of payments by the internal payroll team
Impact on tax preparation and advice
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Repatriation: what’s next?
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Audit and controls
Keep current records of mobile employees
Detailed information from HR and subsidiary
Where do employee reside and where they work?
Processes and training material for all the parties involved
Ongoing communications between all stakeholders
Keep detailed records of expatriate vs. movers
U.S. and non U.S. regulations at hand
Documentation and controls for mobile employees
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Yvonne Brazil
TubeMogul
510-201-0457
Questions
Jennifer Kirk
650-214-5674
Laura Verri, CEP
E*TRADE FINANCIAL SERVICES INC.
650-331-5514
Marlene Zobayan, CEP
Rutlen Associates LLC
650-868-9282