BDO USA, LLP. International Assignment Issues in Emerging Markets/Developing Countries (China, Latin America, Africa)

Transcription

1 BDO USA, LLP International Assignment Issues in Emerging Markets/Developing Countries (China, Latin America, Africa) Ken Guilfoyle, Senior Director Expatriate Tax Services, BDO USA, LLP September 23, 2014 BDO USA, LLP, a Delaware limited liability partnership, is the U.S. member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms.

2 PRESENTER Ken Guilfoyle, Senior Director Expatriate Tax Services BDO USA, LLP Page 2

3 Objectives Identify tax and global mobility issues for assignees and multinational employers in emerging markets Recognize expatriate and international tax concepts Recognize income and employment tax as well as compensation planning strategies Understand BDO s Global Expatriate and Mobility service offerings Page 3

4 What s this all about? BDO KNOWLEDGE Tax Webinar Series International Assignment Issues in Emerging Markets/Developing Countries (China, Latin America, Africa) Page 4

5 It s about Talent Aligning, people and their skills, their capacity and their commitment to perform, with the organization s mission in the right way. Page 5

6 Defining Talent Management Talent management is an integrated set of processes, programs, and cultural norms in an organization, designed and implemented to attract, develop, deploy and retain talent to achieve strategic objectives and meet future needs. Silzer, Robert Frank, and Ben E. Dowell, Strategydriven Talent Management: A Leadership Imperative. San Francisco: Jossey-Bass, Page 6

7 Supporting Talent Management Development Attraction TALENT MANAGEMENT Retention Page 7

8 So Talent Mobility is about People to jobs Function stays individuals or their skills move: - Geographically - Occupationally Jobs to people People stay functions move: - Geographically - Virtually Page 8

9 Talent Mobility is a decision. Choose! People to Jobs Occupational Trains and educates workers to move into new roles Jobs to People Virtual Supplements local workforce with virtual workers People to Jobs Geographic Relocates talent to areas where local skills are not sufficient Jobs to People Geographic Moves the entire function to areas where skilled labor is available Page 9

10 Why do I need to worry about this? BDO KNOWLEDGE Tax Webinar Series International Assignment Issues in Emerging Markets/Developing Countries (China, Latin America, Africa) Page 10

11 Why do I need to worry about this? Page 11

12 What are the Issues? Page 12

13 What are the Risks? Page 13

14 What are the Risks? Page 14

15 Where is your Talent? How do we find them? Who has responsibility? Page 15

16 Pre assignment Tax Planning Challenge: Many countries do not have tax treaties with the United States BDO KNOWLEDGE Tax Webinar Series International Assignment Issues in Emerging Markets/Developing Countries (China, Latin America, Africa) Page 16

17 China China does have an income tax treaty with the U.S., but no totalization agreement. Page 17

18 Latin America Treaty countries: Mexico Non-treaty countries: Argentina Brazil Venezuela Chile - signed but not ratified Page 18

19 Payroll Tricks and Traps Latin America Brazil: Other countries: Type of visa determines payroll reporting and withholding (lengthy process to obtain work permits 6 months or more) Often have to stay on home country payroll to continue pension contributions Must pay salary comparable to local peers when sending assignees into Brazil Expatriates leaving have to stay on Brazil payroll to get benefits such as unemployment compensation (FGTS/INSS) Could be considered taxable income if employer makes contributions on employee s behalf Have to be careful not to terminate employment in a secondment situation or employer will have to pay out Page 19

20 Africa Treaty countries: Egypt South Africa Non-treaty countries: Angola Ethiopia Kenya Nigeria Tunisia Page 20

21 Abundance of natural resources 30 90% of the world s gold, platinum, copper, etc. 10% of the world s oil reserves 60% of the world s arable land Page 21

22 Africa Hotspots -? Mozambique - Tete, Zambezi Valley - Coal Namibia Uranium Tanzania & Mozambique Mtwara & Rovuma - Gas Botswana Coal & Power Uganda Lake Albert Oil, Infrastructure & Industrial Ghana Oil, Mining & Commercial property Guinea Bauxite & Iron Ore Southern Zambia Kafue & Mumbwa Iron Ore & Cement Southern Angola Lobito Iron Ore, Oil Refinery Northern Kenya Oil Mozambique Niassa Province Coal Angola Cabinda & Soyo Oil & Industry Central Africa Iron Ore South Sudan Oil & Infrastructure Eastern DRC - Oil Page 22

23 10 common mistakes made when operating in Africa 1. Lack of knowledge and planning 2. Lack of knowledge of business culture in host country 3. Unrealistic expectations 4. What type of business entity to setup 5. Minimum share capital 6. Local participation 7. Foreign exchange regulations 8. Direct and indirect taxation 9. Taxation of employees 10.Work permits Page 23

24 Pre assignment Tax Planning Typical considerations BDO KNOWLEDGE Tax Webinar Series International Assignment Issues in Emerging Markets/Developing Countries (China, Latin America, Africa) Page 24

25 Assignment Policy and Terms Remain on U.S. payroll and entitled to U.S. benefits Compensation package what allowances will the employer pay the employee Typical allowances shipment of household goods, cost of living, housing, education Tax reimbursement tax equalization, tax protection, localization Tax support tax registration in foreign jurisdiction, tax return preparation assistance Page 25

26 Tax Costs What taxes are due home and foreign jurisdiction Income tax Social tax How much will the employer and employee pay in taxes home and foreign jurisdiction Double taxation due to lack of tax treaty Page 26

27 For Example Page 27

28 U.S. to Brazil: Scenario 1 Tax Costs Equalized Gross-up Only 6% savings Page 28

29 U.S. to Brazil: Scenario 2 Tax Costs Equalized Non-Equalized 36% savings Page 29

30 U.S. to China: Scenario 1 Tax Costs Equalized Gross-up Only 33% savings Page 30

31 U.S. to China: Scenario 2 Tax Costs Equalized Non-Equalized 65% savings Page 31

32 U.S. to South Africa: Scenario 1 Tax Costs Equalized Gross-up Only 34% savings Page 32

33 U.S. to South Africa: Scenario 2 Tax Costs Equalized Non-Equalized 88% savings Page 33

34 Employee Presence and PE Issues BDO KNOWLEDGE Tax Webinar Series International Assignment Issues in Emerging Markets/Developing Countries (China, Latin America, Africa) Page 34

35 China Page 35

36 Chile Page 36

37 Africa Page 37

38 Africa - Nigeria Page 38

39 Human Resource and Compensation Planning Security, medical benefits, education, housing BDO KNOWLEDGE Tax Webinar Series International Assignment Issues in Emerging Markets/Developing Countries (China, Latin America, Africa) Page 39

40 Concerns for International Assignees Maintain home country compensation Maintain home country benefits Duplicate living costs Family relocation/visits Page 40

41 Intel: Medical Benefit and Education (2.5 billion investment in Dalian China) Page 41

42 Security and Housing - Africa Latin America Nairobi Luanda Sao Paulo 60,000 to 300,000 KES USD $675 to $3,400 USD $10,000 to $30,000 USD $2,000 to $10,000 Utilities 10,000 KES 3-hour commutes to centre city 30-month lease USD $115 A British Journalist of the Daily Mail found that a Hamburger costs $50 but an AK 47 costs $20 Page 42

43 Cost Allocation, Transfer Pricing Currency controls BDO KNOWLEDGE Tax Webinar Series International Assignment Issues in Emerging Markets/Developing Countries (China, Latin America, Africa) Page 43

44 Currency Controls Countries with foreign exchange controls are also known as "Article 14 countries," after the provision in the International Monetary Fund agreement allowing exchange controls for transitional economies. These include: Belize Brazil China Egypt Libya Morocco Namibia Nigeria South Africa Sudan Tunisia Venezuela Zimbabwe Page 44

45 China Circular 19 Transfer Pricing Implications Example: What happens when the expat is 100% employed by the U.S. company? Page 45

46 China Putting it all together Example: What happens when the expat is 100% employed by the U.S. company? Page 46

47 BDO in Africa, China and Latin America BDO KNOWLEDGE Tax Webinar Series International Assignment Issues in Emerging Markets/Developing Countries (China, Latin America, Africa) Page 47

48 BDO Africa Desk - Footprint Page 48

49 BDO Latin America - Footprint Page 49

50 BDO China - Footprint Page 50

51 Questions BDO KNOWLEDGE Tax Webinar Series International Assignment Issues in Emerging Markets/Developing Countries (China, Latin America, Africa) Page 51

52 Speaker Biography BDO KNOWLEDGE Tax Webinar Series International Assignment Issues in Emerging Markets/Developing Countries (China, Latin America, Africa) Page 52

53 Biography Ken Guilfoyle Ken Guilfoyle Senior Director Expatriate Tax Services BDO USA, LLP 50 West San Fernando Street Suite 200 San Jose, CA (408) Kenneth Guilfoyle, CPA, GPHR, GMS-T has a master s degree in International Business Administration from the University of South Carolina and joins BDO national expatriate services group, with over 21 years of professional experience including 10 years of expatriate practice experience in Tokyo Japan, London United Kingdom, and most recently Athens Greece. Ken knows firsthand the challenges faced by international assignees and employers. Ken has worked both in industry and Big Four public accounting with Fortune 100 investment banks, insurance companies and international start ups. Ken s strengths include relationship management, international business and strategic human resource management consulting. Page 53

54 BDO is the brand name for BDO USA, LLP, a U.S. professional services firm providing assurance, tax, financial advisory and consulting services to a wide range of publicly traded and privately held companies. For more than 100 years, BDO has provided quality service through the active involvement of experienced and committed professionals. The firm serves clients through 49 offices and more than 400 independent alliance firm locations nationwide. As an independent Member Firm of BDO International Limited, BDO serves multinational clients through a global network of 1,264 offices in 144 countries. BDO USA, LLP, a Delaware limited liability partnership, is the U.S. member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. BDO is the brand name for the BDO network and for each of the BDO Member Firms. To ensure compliance with Treasury Department regulations, we wish to inform you that any tax advice that may be contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding taxrelated penalties under the Internal Revenue Code or applicable state or local tax or (ii) promoting, marketing or recommending to another party any tax-related matters addressed herein. Material discussed in this publication is meant to provide general information and should not be acted on without professional advice tailored to your individual needs BDO USA, LLP. All rights reserved. BDO KNOWLEDGE International Assignment Issues in Emerging Markets/Developing Countries (China, Latin America, Africa) Page 54