Shekhar,an HR manger in an IT company,just received an email that his company has acquired a large Belgian entity. His excitement was short lived as he was requested to send a team on deputation. This was the first time his company would be sending employees outside India. He was immediately surrounded by thoughts of dealing with these employees and meeting various complex requirements of the foreign country laws. The first thought that passed Shekhars mind was,How should the employees be compensated to support them in the host country? The answer to this would depend on the period of the assignment. For short-term assignments,usually a living allowance and housing benefit in the host country would suffice. However,employees on long-term assignments may have to be compensated additionally. One should analyse the tax implications of each salary component before picking the components,which would be provided to the employees. The next important question was Who would take care of employees taxes? Most employers have a well-designed tax equalisation policy for cross-border employees,which takes care of any additional taxes arising for employees as a result of the assignment. This ensures that the employees are neither better off nor losing out due to the overseas assignment. Shekhar would have to immediately start drafting a tax equalisation policy. Another thought that struck him was,Will the employees get doubly taxed? The answer is no. India has signed double taxation avoidance agreements (commonly referred to as tax treaties) with most countries. Employees would be able to claim reliefs/exemptions or foreign tax credit under the relevant treaty. In cases where there are no tax treaties,tax credit is available under Indian income tax laws. Another important aspect is social security taxes which are imposed on international workers by most countries,including India. There are some social security agreements which India has entered into and these could come to the rescue of employees. Employees should also remember to carry out key compliances in both the home and the host country while on an assignment and most importantly,file their personal tax returns on time. After going through the chain of his never-ending thoughts/questions,Shekhar reached a conclusion that the most important aspect of any secondment to a foreign country is to have control over the various compliances/processes that need to be met during the period of secondment. He also reached the conclusion that in order for the employees to have a good experience and for the company to comply with the applicable laws,a company needs to ensure that the employees are updated on the required obligations * The writer is manager,Tax & Regulatory Services,Ernst & Young
