Transatlantic Transfers. Richard Watts Joyce CTA, Wayne Bewick CA, CPA, Arun Nagratha CA, CPA

Transcription

1 Transatlantic Transfers UK, US and Canadian tax update Richard Watts Joyce CTA, Wayne Bewick CA, CPA, Arun Nagratha CA, CPA Global Tax Network

2 Global Tax Network (GTN) GTN is a worldwide affiliation of professional services firms providing tax and consulting services to international assignees and their employers The Network was founded in 1998 by ex Big 4 Partners Member Firms and Affiliates present in over 100 countries GTN board consists of partners from key regional centres as follows: EMEA Richard Watts Joyce, Global Tax Network (United Kingdom) Americas David Kolb, Global Tax Network LLC (USA) Asia Pacific Teresa Hui, Global Tax Network (Hong Kong)

3 Summary Recent trends Short term assignments Longer term assignments local hire versus assignee Employer compliance for UK outbound transfers Red flags for employers and employees Canadian tax update

4 Short term assignments Exemption under the US / UK Tax Treaty Extract t from Article 14 (a) the recipient is present in the other state for a period or periods not exceeding in the aggregate 183 days in any twelve month period, commencing or ending in the taxable year or year of assessment concerned (b) the remuneration is paid by, or on behalf of, an employer who is not a resident of the other state; and (c) the remuneration is not borne by a permanent establishment which the employer has in the other state

5 Moves to UK Treaty exemption What does this mean in practice? UK may be deemed Economic Employer if assignment is over 60 days and costs are recharged from US to UK entity Application must be made for Short Term Business Visitor Agreement to gain exemption from withholding, where treaty exemption is anticipated Report must be sent to HMRC by 31 May following each tax year end Information requirement per business visitor varies according to number of days spent in the UK during tax year

6 Moves to US Treaty exemption What does this mean in practice? Taxable from day one and filing requirement if recharge of costs (no threshold like UK) filing issues where no social security number Technical requirement to file a treaty claim in the US if tax exempt, but practically this is often overlooked $10,000 de-minimis limit under US/Canada treaty

7 Treaty exemption What does this mean in practice? Moves to Canada Taxable from day one and filing requirement if recharge of costs (no threshold like UK) $10,000 de-minimis limit under US/Canada treaty

8 Longer Term Assignments Assignment versus Local Hire Status Local Hire Typically tied to host country tax and social security rules Subject to local withholding Pension arrangements generally move to host country Low level of administration although potential red flags for trailing tax liabilities Assignee Typically remains on home country payroll Host country withholding may also be required Social security can be tied to home country Higher level of administration, but greater potential for planning Detached duty relief Overseas workday relief

9 Example Inbound transfer to UK Assume 150,000 gross income, 25% non UK workdays and 25,000 accommodation and subsistence expenses, for 24 month transfer* GBP Local Hire US Assignee CDN Assignee Tax cost 105,040 60,040 60,040 Social security (employee) 10,519 10,280 3,736 Social security (employer) 36,936 13,033 4,126 Approximate costs shown over 24 month period using 2011 rates

10 Employer Compliance UK outbound Tax residence status of employee new statutory residence test from April 2013 implications? Social security liability May rest with UK even if paid through overseas payroll Need to identify employer Use of EP/APP 7 Modified NIC arrangements Seek advice on how to avoid UK NIC Trailing liabilities and PAYE stock options: grant to exercise UK/US, grant to vest UK/Canada

11 RED FLAGS for Employers Review tax planning at contract stage Social security plan with care and comply! tax authorities i can disagree on treatment e.g. stock kbenefits Trailing liabilities UK and Canada focus is on home entity New UK statutory t t residence test t understand d the implications Severance payments no tax free threshold for U.S. Purposes Deferred compensation care must be taken with interaction of UK rules and US 409A rules

12 RED FLAGS for Employees UK US Review residence and domicile Remittances of income and structure of bank accounts Foreign bank reporting forms Foreign asset reporting forms Canada Breaking residency and filing of departure returns RRSP and non qualifying pensions

13 Richard Watts-Joyce CTA Regional Managing Director EMEA Global Tax Network Ltd Tel: Web: Wayne Bewick CA, CPA / Arun Nagratha CA, CPA Partners Trowbridge Professional Corporation (GTN Canada Member) Tel: wbewick@globaltaxnetwork.ca / anagratha@globaltaxnetwork.ca Web: