The assignment of employees abroad should primarily create one thing for both the employee and the company – added value. Therefore, tax risks on both sides should not play a role when deciding whether to send employees or not. A good Tax Equilization System should therefore fulfill three main functions:
The above requirements for a good tax equalization model are always the same. What varies, however, are the companies. Each has a different philosophy, different business goals, a different strategy, and so on. There are a lot of influencing factors that need to be taken into account when designing a tax equalization policy. Therefore, it is not surprising that there is not THE ONE model.
Nevertheless, in practice there are four basic techniques that can make up a tax equalization program tailored to the individual company:
Each of the aforementioned building blocks can, of course, be used on its own as a model of tax equalization or disadvantage avoidance, but this is hardly ever found in practice and also makes little sense. For an optimally designed tax equalization strategy that is tailored to the requirements of the company and its employees, the individual models should be sensibly combined or adapted with each other in order to make the best possible use of their different advantages and to compensate for their respective disadvantages.
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