Labor and contract law

Before starting a cross-border staff assignment, we provide support for employment and contractual questions related to foreign assignments. An important role is played by the preparation or review of the corporate policies in respect to assignments. The content of the assignment agreement is of central importance for the assigned employee. The arrangement of contracts between affiliated group companies also has implications for the tax planning of assignments, in particular with regard to reasonable transfer prices.

In detail, our services include:

• Preparation and review of corporate policies in respect to assignments
• Employment counseling with a view to the assignment (for instance with questions regarding applicable employment law, the drafting of employment and assignment agreements, and the optimal design of remuneration components)
• Modification of employment contracts as well as the preparation or review of assignment agreements
• Preparation and review of contractual documents between affiliated group companies and the accompanying legal advice

International Social Security

In the case of cross-border assignments, there is often the question of whether, and under which conditions, the employee and his/her family members can receive insurance coverage from German social security system (pension, health, nursing care, accident and unemployment insurance). The answer of this question depends on the national and supranational or rather bilateral social insurance law, the employee’s assignment, and always requires a case-by-case examination.

In detail, our services include:

• Review of the national and supranational or rather bilateral social security legislation on the membership of social insurance in the home country
• Particularities of executives and managing directors with a view to activity in various Member States
• Determination of the need to conclude contract for insurance entitlement during the assignment
• Applications to stay in the home social insurance system (so-called A1- applications) or request a certificate of exemption

International tax advice

The central task of the global mobility planning is to advise internationally-active companies and their employees on tax issues regarding the assignment of employees, specifically of executives and managing directors. This includes both domestic tax law issues, as well as issues surrounding bilateral double taxation agreements. The questions surrounding these topics are concerning the employer, such as the creation of a permanent establishment, or reasonable transfer prices for employees’ assignments between affiliated group companies, as well as issues relating to the assigned employee.

Our services include in particular:

• Advice on permanent establishments as well as the respective tax implications as a result of employee assignments (i.e. fixed place of business or representative’s permanent establishments)
• Advice on employees’ assignments between affiliated group companies at reasonable transfer prices
• Design and review of corporate policies in respect of cross-border assignments
• Consultancy on the design and implementation of net salary agreements as well as Tax Equalization agreements between employer and employee
• Taxation of the income from employment of assigned employees and tax allocation between home and host country
• Interviews before the beginning and end of international assignments to familiarize the employees with the respective tax situation
• Clarification of tax issues concerning the employer’s obligation to withhold and pay wage taxes
• Supervision of wage tax audits for payroll with cross-border implications

Tax consultancy for employers and employees often also provides advice on detailed questions, including:

• Application of special regulations for executives or managing directors under double taxation agreements
• Tax treatment of assignment related allowances
• Impact of share-based payment systems (i.e. Stock Options, Restricted Stock Units)
• Questions regarding the primary place of work with a view to the taxation treatment of travel costs and refunds
• Questions regarding double housing costs for posted employees

International payroll accounting

A key issue in relation to employee assignments, at home and abroad, is the correct settlement of the employee´s salary. In the case of cross-border activities in several countries, the wage-tax treatment of income from employment of the assigned employee must be well planned in advance to the assignment. This also involves tax allocations between the home and the host country (the so-called salary split) or the consideration of the importance of share-based compensation.

In the case of any type of mistake, the employer risks serious liabilities in wage tax audits or comparable examinations abroad. In the case of international payroll accounts, it is also important to consider the membership of social security system of the home country and / or host country.

Our services include in particular:

• Set-up of a payroll accounting in the home country and/or host country
• Registration of the employer and assigned employees in the host country, if required
• Preparation of coordinated test calculations
• Implementation of the monthly payroll
• Recording of new employees/entries
• Registration and de-registration for social insurance of the assigned employees
• Processing of travel expenses for internationally-active employees and taking into account the relevant effects on wages
• Preparation and electronic transmission of wage tax certificates
• Support for human resources departments in statistics
• Applications in case of assignments(i.e. applications for wage tax class 1 for restricted taxpayers or wage tax exemption applications)
• Coordination of payroll accountings in several countries and supply human resource departments with all necessary information

Declaration activities

During the global mobility process, the focus is on the effective coordination of the employee in the home and host country. The central task here is the correct and timely fulfillment of compliance requirements. All remuneration components granted during the assignment are to be treated according to the legal requirements of the host country and in accordance with the respective double tax agreement.

Mazars supports assigned employees with the preparation of income tax returns in the home country and in the host country, as well as in the preparation of Tax Equalization calculations in the case of net salary agreements.

Our services include in particular:

• Preparation of income tax returns in the host and home country and coordination between the consultants in the host and home country
• Review of tax assessment notice
• Communication with the responsible tax authorities and where appropriate, carry out objection proceedings
• Performance of Tax Equalization / Tax Protection calculations to place the employee as if he/she remained in his / her home country