An excellent list of 12 tips the US expat should consider prior to accepting a foreign assignment. US taxes are #1!
Negotiation tips for expatriates
Before taking a role in a different country, consider these 12 factors that could affect your compensation and quality of life.
By Neil Amato, 1 May 2017
We recommends requesting a paid visit to the country you’re considering.
The professional and personal benefits of taking an overseas role are numerous, and international experience is increasingly sought after amongst senior finance leaders. However, given the complexity and costs involved in moving and living overseas, prospective expatriates should consider a broader range of topics when assessing their compensation than they would during a normal remuneration negotiation.
Whether relocating within a multinational organization with well-defined expatriate policies or moving to an overseas company as its first foreign employee, negotiating and evaluating your remuneration requires a deft touch.
Here are a few things to bear in mind:
Preparing foreign tax returns, especially in an unfamiliar language, can be daunting, so assistance with local tax preparation can be invaluable. If possible, contact a tax adviser shortly after arriving to learn what paperwork you should retain throughout the year and any local tax rules to keep in mind, such as how foreign income is taxed on things such as income from a rented house or capital gains on a property sale.
And don’t forget about the possibility of paying taxes in your home country or that of your employer. “The risk is double taxation,”. “Your new compensation should cover that extra expense if there is one.
Preview the country:
If you’re moving to a new country, you probably have plenty of questions. Before accepting a role overseas, a candidate should request a paid visit, possibly with a spouse, to learn more about the country.
An exit strategy:
Before leaving your current role, if transferring within the same company, have an agreement about the length of time you are expected to work abroad. Perhaps more important, know what the company’s plan is upon your return. Generally, this sort of assignment is for a set period of time. You’re not going to be gone forever. When you come back, is there going to be a role open for you?
Negotiate a termination benefit. “What happens if six months down the road, it doesn’t work out for whatever reason?” he said. “You have to come back to your country of origin and look for a job.”
Effective tax rate:
Many big organizations offer some form of tax equalization, so their intra-company transferees’ effective tax rate is the same as in their home country. If tax equalization is not offered, find out what your tax rate will be (including social security and other local income taxes) to allow a proper assessment of your take-home pay.
Assess your exposure to currency fluctuations, especially if you will be paid in a historically volatile currency. Consider asking to be paid in a “hard” currency (such as dollars or euros). Or build pay adjustments into your contract if the exchange rate moves beyond certain limits. At a minimum, ensure you are aware of obligations, such as rent or school fees, you will be taking on in currencies other than the one in which you will be paid.
If your employer will contribute towards your housing costs, confirm in advance how housing assistance will be provided. Will the company provide a rent stipend or offer different accommodation options and pay the cost directly? If you will be responsible for contracting directly with your landlord, find out what upfront payments are customary in the local market upon signing a lease, and consider how you would pay a sizeable deposit in local currency, potentially before you have received your first paycheck.
Insurance should be a key part of any expatriate package, especially in countries where health care without insurance is expensive or where access to high-quality medical treatment is limited. Ensure that the policy offered meets the needs of you and your family.
The following questions are worth asking: Can you use any care provider, or does the insurance mandate certain physicians? Can you be sure they will speak your language? Does it include services beyond primary or emergency care, such as dental or physiotherapy?
Expats should negotiate whether they can return to their home country, or pick another country, for more serious medical issues such as surgical procedures, as the quality of health care varies greatly among countries.
Language training tuition:
If you are moving to a country where you do not speak the language, consider the professional and social value of language instruction. If your employer offers to provide or subsidize lessons, it is worth being specific: How many classes a week will it provide? Will the company provide lessons indefinitely? If not, for how long? Would it consider paying for a month or two of full-time intensive lessons before you start?
Language can be a significant issue. Not speaking the local language can be problematic in many ways, he said, beyond just alienation.
Visas and paperwork:
Most employers will pay for your employment visa. In addition, consider requesting the services of a relocation agent to help navigate local bureaucracy such as obtaining a tax identification number or a local driving license, negotiating an apartment lease, or opening a bank account. If the local language is new to you, professional assistance is particularly valuable.
If you intend to be abroad for only a couple years, there is likely little value in paying into a local pension. If you are moving within the same company, you may be able to continue contributing to your existing plan. If not, consider asking your employer for a cash payment in lieu of pension contributions which you can pay into a pension plan at home.
Shipping furniture and other personal items is expensive, so see if your employer will pay for all or part of these costs. Additionally, enquire about a “disturbance allowance” to cover items such as socket converters and new electrical goods to replace those that will not work with the voltage in your new country. Remember to consider the cost of shipping your belongings home when you leave. Your employer is likely to be less inclined to help with these costs if it was not agreed upfront.
Also bear in mind that international shipping can take months. Will your employer pay for rented furniture until your containers arrive? And, if your expat term is short, and you plan to return to your existing residence 12 or 18 months later, consider negotiating for upkeep of that residence.
Many overseas placements include paying for occasional travel back to your home country. It is worth being specific: How many tickets will be offered per year? Will they include your family? Can you travel to a country other than your “home” base? Are tickets transferrable to friends and family coming to visit?
As with any negotiation, it is unlikely that your prospective employer will agree to everything, but being aware of these points will allow a better assessment of the full value of the package on offer and a more informed decision about whether this is the right role for you.
If you’re an expat who needs help with tax planning or tax preparation, contact the expat tax specialists at Protax Consulting.