Tax Implications of Working Abroad

Foreign Work Reimbursement When it comes to job situations that involved a lot of travel or otherwise involve being away from home, working a foreign assignment would surely have to be near or at the top when it comes to the complexity and considerations that are involved. There are some massive legal and lifestyle implications involved including paying for lodging/food while working abroad, the tax implications and so forth.

The assignment for this paper asks the author to offer an opinion on the most "essential" reimbursement types when it comes to working abroad. While some may point to cost of living, rent or food, the real issue would be taxes due to the complexity and variance of the tax codes and treaties that exist between the United States and other modernized countries of the world.

Analysis Many employers operate and exist in multiple countries and this sometimes necessitates having domestic employees work in foreign countries (As partially noted in the introduction, the adjustment necessary when working in a foreign country when it comes to currency conversion, cost of living differences, rent and food are typically going to be handled in large part by the employer (IRS, 2015).

It would probably be typical that the employer pays the rent or suite fees for the employee directly rather than making the employee pay out of pocket and then pay the company back. While a lot of food would have to be paid for by the employee, the employer would surely provide a lot of that as well at the company sites, at the very least.

When it comes to traveling to and fro in the form of rental cars, taxis and the airfare, a lot of that can be prepaid by the company and anything that has to be paid for on the stop can be reimbursed. It is indeed not that complicated a process and true business expenses are not typically taxable to the employee (IRS, 2015). However, the tax implications involved are a whole other matter.

Just as one example, many countries have their own versions of what the United States knows as Social Security. Indeed, the United States makes people working in the country on immigrant visas pay Social Security and Medicare even though they are not citizens unless they have an exemption like those on student visas.

What this all means for a worker from the United States working abroad is that they could absolutely face the prospect of paying Social Security taxes to their American homeland as well as the equivalent tax in the country they are temporarily working in. However, a lot of this is thankfully negated by tax treaties that the United States has with other countries.

The way they typically manifest is that the American worker would pay one but not the other, with their home country usually being the one that gets paid since they will be returning there after completing their assignment (IRS, 2015). If the employee is moving to the new country on a permanent basis, this could change things. There are also other taxes to be concerned with including Value Added Taxes (VAT), income taxes and so forth (Rampell, 2010). Obviously, these would vary by the country, state/province, or locality in question.

In short, the tax considerations and variables would differ based on the home country of the person, the country the employee will be working in, how long they will be working there, their level of income and so on (IRS, 2015). The employer may choose to reimburse any extra taxes realized due to the move (as compared to what they would have been had the assignment not been taken, usually), but that itself would be taxable income and that is a consideration to factor in as well (IRS, 2015).

Conclusion The many different ways that countries tax their people and those that visit their country makes for an interesting and complicated situation a lot of the time when it comes to people working abroad. Even so, there are ways in which the government and/or the company of the employee can mitigate the impact to the employee as a reward or adjustment so as to.