Expats/Inpats: Working Across Borders

Expats/Inpats: Working Across Borders Annick Nguessan 23 October 2015 International Tax Series

Agenda & Objectives Introduction Types of assignments Impact of Expatriates/Inpatriates on employer U.S. taxation of individuals Impact of assignments on Expatriates Impact of assignments on Inpatriates Copyright 2015, Weaver and Tidwell, LLP. All rights reserved. 2

Introduction Presenting Today Annick Nguessan, CPA Senior Manager International Tax Services Ten years experience in public accounting Practice emphasis in international taxation focused on: Expats services Multinational and/or domestic companies planning and consulting Transfer Pricing compliance Strong experience with US federal and state corporate taxation Copyright 2015, Weaver and Tidwell, LLP. All rights reserved. 3

Types of Assignment

Expatriate An expatriate refers to an individual who lives outside their native country Includes individuals who forfeit citizenship and exile themselves from their native country Expatriate/Outbound employee employer sending U.S. employee (U.S. citizen or permanent resident) to a foreign location to work Copyright 2015, Weaver and Tidwell, LLP. All rights reserved. 5

Inpatriate An inpatriate refers to an employee of a multinational company who is from a foreign country, but is transferred from a foreign subsidiary to the corporation s headquarters Inpatriate/Inbound employee foreign employer sending non-u.s. employee to a U.S. location to work For our use, the U.S. employer need not be the headquarters Copyright 2015, Weaver and Tidwell, LLP. All rights reserved. 6

Impact on Employer

Employer s Challenges Main challenges faced by employers when sending employees to work abroad: Permanent Establishment (PE) issues Payroll and related taxes (incl. Social Security taxes) Employment Legal Matters and employees rights Etc. Copyright 2015, Weaver and Tidwell, LLP. All rights reserved. 8

Permanent Establishment Issues Tax concept that indicates a particular level of business activity in the host state or source state Home country employer maintains an employee in a host country on home payroll may create a PE in the host country: Concept of dependent agent Treaty exceptions, typically based on number of working days in host country (<183 days) Copyright 2015, Weaver and Tidwell, LLP. All rights reserved. 9

Permanent Establishment Issues Issue can be prevented by seconding the employee to the host company and entering into an inter-company agreement to address any reimbursements Host company reimburses the home company for the value of the expatriate s services from which the host company benefits China real employer concept Copyright 2015, Weaver and Tidwell, LLP. All rights reserved. 10

Permanent Establishment Issues For example, if a U.S. company sends an employee to work in France, there should be an agreement stating the U.S. employee is seconded, or on loan, to the French company. The French company should agree to reimburse the U.S. company for the benefit received for services rendered by the employee. Copyright 2015, Weaver and Tidwell, LLP. All rights reserved. 11

Payroll Challenges Company should properly fulfill its global payroll obligations including: Withholding Social tax obligations Reporting requirements Withholding tax and payroll compliance rules vary among countries; Timing and amount subject to tax in multiple countries Copyright 2015, Weaver and Tidwell, LLP. All rights reserved. 12

Payroll Challenges Shadow Payroll Process by which host country wages, Withholding (W/H) and payroll (P/R) tax are calculated when employee is paid by home country Inbound UK employee works in the U.S.. He is paid by UK P/R and is subject to U.S. taxation. Employer uses shadow payroll to comply with U.S. W/ and P/R reporting requirement such as W-2, 941, etc. Foreign company may need to establish a U.S. company because a U.S. EIN is required to report payroll taxes Very complex calculations because of data availability, accuracy, inconsistent tax policies, FX and also lack of local payroll expertise. Copyright 2015, Weaver and Tidwell, LLP. All rights reserved. 13

Payroll Challenges Split Payroll Employee receives part of his/her pay in the from the home country and the rest of the pay from the host currency Main benefit: the employee is not totally at the mercy of the constant fluctuations of the exchange rate. In some instances split payroll is mandatory Expat to Brazil Expat to Thailand Copyright 2015, Weaver and Tidwell, LLP. All rights reserved. 14

Payroll Challenges Example Peter: U.S. Citizen on assignment in Thailand Paid from U.S. and also from Thailand Thailand Income and taxes are grossed up for W/H, SS and Medicare taxes. The whole amount is reported in W-2 as additional taxable income

Payroll Challenges Compensation Subject to Tax Typical expatriate compensation components (in addition to base, bonus, commissions, 401(k), etc.) Relocation allowance Home leave Taxable relocation Temporary housing Housing & utilities Goods & services allowance Transportation/car & gas Equalization settlement Foreign taxes paid Gross-up Visa & immunizations Misc. foreign benefits Copyright 2015, Weaver and Tidwell, LLP. All rights reserved. 16

Payroll Challenges Differences in Tax Treatment U.S.-based deferred compensation arrangements not necessarily tax-deferred under the laws of foreign jurisdictions. Compensation may become taxable at vesting to employees, even when no cash payment was made to help them to fund the tax. Determine whether and to what extent foreign pension plan participants may have U.S. taxable income resulting from retirement plan participation. Copyright 2015, Weaver and Tidwell, LLP. All rights reserved. 17

U.S. Taxation of Individuals

Individual U.S. Taxation Fundamental principle: U.S. tax residents are taxed on their worldwide income, regardless of where it is earned Major distinguishing feature concerns the source of income and its taxability: Generally, nonresident aliens are subject to federal income tax only on U.S.-source income US citizens and resident are taxed on their worldwide income; regardless of the source of the income Copyright 2015, Weaver and Tidwell, LLP. All rights reserved. 19

Taxation of U.S. Tax Residents The term U.S. tax residents refers to U.S. citizens and U.S. residents aliens (under Green card or Substantial presence test) U.S. tax residents are taxed on their worldwide income regardless of source To prevent double taxation, income tax paid on foreign source income can offset U.S. tax liability Copyright 2015, Weaver and Tidwell, LLP. All rights reserved. 20

Resident vs. Non-Residents Aliens reference in U.S. immigration laws (immigrants, nonimmigrants, and undocumented (illegal) aliens) different from the Tax Code (Resident and Nonresident Aliens for tax purposes) Resident alien Nonresident alien Dual Status First year choice Copyright 2015, Weaver and Tidwell, LLP. All rights reserved. 21

Resident vs. Non-Resident Determination of whether an individual qualifies as a U.S. resident (taxed on worldwide income) or a non-u.s. resident (taxed on U.S.-sourced income) can be determined in a number of ways. Copyright 2015, Weaver and Tidwell, LLP. All rights reserved. 22

Resident What is a Resident? Non-U.S. citizen who meets either the green card test or the substantial presence test for the calendar year Copyright 2015, Weaver and Tidwell, LLP. All rights reserved. 23

Resident Green Card Test: Met when the privilege to reside permanently in the U.S. as an immigrant is given by U.S. immigration laws. Status continues until application for abandonment is filed with USCIS or U.S. consular officer, and, notification of termination is sent to Homeland Security Even if a green card holder returns to his/her home country (or any other country outside the U.S.), he/she continues to be a U.S. tax resident (and thus still taxable on WW income in the U.S.) Copyright 2015, Weaver and Tidwell, LLP. All rights reserved. 24

Resident Substantial Presence Test - met if, during the calendar year, a non-u.s. citizen (not green card holder) is physically present in the U.S. on at least: 31 days during the current year, and 183 days or more during the 3-year period that includes: All days of presence in the U.S. during the current year, plus 1/3rd of the days of presence in the U.S. during the first year before the current year, plus 1/6th of the days of presence in the U.S. during the second year before the current year Copyright 2015, Weaver and Tidwell, LLP. All rights reserved. 25

Resident Note that even if you meet the substantial presence test, you can be treated as a nonresident alien if you: Are present in the United States for less than 183 days during the year, Maintain a tax home in a foreign country during the year, and Have a closer connection during the year to one foreign country in which you have a tax home other than to the United States (unless you have a closer connection to two) Copyright 2015, Weaver and Tidwell, LLP. All rights reserved. 26

Resident Tax treaty usually has an article 4 tie-breaker rule Individual is resident under both the U.S. and other country s laws Example: French national individual worked in U.S. from October 2013 to October 2014 Lived in France before and after Qualified as Resident in 2014 but filed 1040NR because tiebreaker rule (Form 8833, Treaty Based Return Position Disclosure) Copyright 2015, Weaver and Tidwell, LLP. All rights reserved. 27

Nonresident (NR) What is a Non-Resident (NR)? Non-U.S. citizen who is not a resident alien for tax purposes. Taxed based on the source of income and whether or not income is effectively connected (ECI) with a U.S. trade or business. Non-U.S. citizen who is not a resident alien for tax purposes. File Form 1040NR, U.S. Nonresident Alien Income Tax Return. Form 1040 NR and any tax due are due no later than April 15th when wages earned in the U.S. Taxed based on the source of For other kinds of income (partnership, investment income, etc.), Form 1040 NR can be filed by June 15th. income and whether or not income is effectively connected (ECI) with a If additional time is needed to file Form 1040NR, an extension can be requested until October 15th. U.S. trade or business. Copyright 2015, Weaver and Tidwell, LLP. All rights reserved. 28

Nonresident (NR) File Form 1040NR, U.S. Nonresident Alien Income Tax Return Form 1040 NR and any tax due are due no later than April 15th when wages earned in the U.S. For other kinds of income (partnership, investment income, etc.), Form 1040 NR can be filed by June 15th If additional time is needed to file Form 1040NR, an extension can be requested until October 15th Copyright 2015, Weaver and Tidwell, LLP. All rights reserved. 29

Nonresident Alien (NR) If ECI: Deductions are allowed Taxed at graduated tax rates Examples: Compensation for personal services; partnership involved in U.S. trade or business, taxable portion of U.S. source scholarship/fellowship grants received by a nonimmigrant Visa holder; G/L from the sale or exchange of U.S. real property interests (whether or not they are capital assets), Investment income can be ECI in certain circumstances Copyright 2015, Weaver and Tidwell, LLP. All rights reserved. 30

Nonresident Alien (NR) U.S. source investment income Taxed on gross income with no deductions permitted Taxed at a 30% rate via withholding unless reduced by tax treaty (Form W-8BEN Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting (Individuals) Copyright 2015, Weaver and Tidwell, LLP. All rights reserved. 31

Nonresident Alien (NR) U.S. source Fixed Determinable Annual and Periodic (FDAP) income Interest, dividends, rents, royalties 30% statutory rate on gross income U.S. Payer is withholding agent Certain statutory and treaty exemptions exist Capital gains generally tax free to foreign investors Exception for gains from the disposition of U.S. real property (FIRPTA) Copyright 2015, Weaver and Tidwell, LLP. All rights reserved. 32

Dual Status Residents What is a Dual Status Resident? Non-U.S. citizen that is both a NR and resident alien during the same calendar year Non-U.S. citizen that is both a NR and Usually resident occurs in the alien initial during year of arrival the into same the U.S. and in the year of departure from the U.S. calendar year Pay U.S. tax on U.S. source income only during the part of the year they are considered NR and pay U.S. Usually tax as U.S. occurs tax resident in alien the on initial worldwide year income of arrival earned into beginning the with U.S. the and residency in the starting year date or ending on the residency termination date. of departure from the U.S. Copyright 2015, Weaver and Tidwell, LLP. All rights reserved. 33

Dual Status Residents Pay U.S. tax on U.S. source income only during the part of the year they are considered NR and pay U.S. tax as U.S. tax resident alien on worldwide income earned beginning with the residency starting date or ending on the residency termination date. Copyright 2015, Weaver and Tidwell, LLP. All rights reserved. 34

Dual Status Residents First Year Choice NR may opt to be treated as a U.S. resident for the entire year for tax purposes Be present in the United States for at least 31 days in a row in 2014, and Be present in the United States for at least 75% of the number of days beginning with the first day of the 31-day period and ending with the last day of the year. For purposes of this 75% requirement, you can treat up to 5 days of absence from the United States as days of presence in the United States. Copyright 2015, Weaver and Tidwell, LLP. All rights reserved. 35

Dual Status Residents Choosing Resident Alien Status NR can also choose to be treated as a U.S. resident for the entire year if all of the following apply: NR at the beginning of the year Resident alien or U.S. citizen at the end of the year Married to a U.S. citizen or resident alien at the end of the year Also applicable when both spouses are NR at the beginning of the tax year and both are resident aliens at the end of the tax year Copyright 2015, Weaver and Tidwell, LLP. All rights reserved. 36

Dual Status Residents Why choose resident status where default is non-resident? Take advantage of lower tax rates that often apply to resident aliens Need to compare benefits of being treated as a resident vs being treated as a NR Copyright 2015, Weaver and Tidwell, LLP. All rights reserved. 37

Expatriate Assignments

Outbound Employees Short-Term Assignments Usually less than a year Reimbursements for away-from-home expenses taxed like reimbursements for any other business trip Reimbursements must be substantiated under an accountable plan or will be taxable to the employee Per diem or combination of both can be used Copyright 2015, Weaver and Tidwell, LLP. All rights reserved. 39

Outbound Employees Issues w/short-term Assignment General understanding is that if X spends less than 183 days in a foreign country, X does not have to pay tax in that country Really depends whether or not U.S. has a tax treaty with the host country Copyright 2015, Weaver and Tidwell, LLP. All rights reserved. 40

Outbound Employees Issues w/short-term Assignment U.S. tax treaty article on dependent services has usually 3 main conditions: The employee does not exceed 183 days in the host country in a 12-month period The remuneration is paid by the home country entity (home payroll) The remuneration is not charged back to an entity in the host country ST assignee needs to keep track of all travel days in/out of host country Copyright 2015, Weaver and Tidwell, LLP. All rights reserved. 41

Outbound Employees Issues with LT Assignments Usually more than a year U.S. tax residents on LT foreign assignments are referred to as expatriates (expats) Foreign allowances are considered fringe benefits to the expat and increase his/her compensation and thus his/her tax burden To alleviate such impact on expat, employers usually pay an additional amount to help with added the tax liability (tax assistance) This tax assistance is often referred to as "gross-up." The gross-up payment itself also is taxable to the employee and subject to W/H and P/R taxes Copyright 2015, Weaver and Tidwell, LLP. All rights reserved. 42

Outbound Employees Issues with LT Assignments Double Taxation and Foreign Tax Credit To prevent double taxation, U.S. allows expats to use income tax paid in host country to offset U.S. tax liability on foreign source income. Referred to as Foreign Tax Credit (FTC) FTC may not completely offset double taxation due to differences in tax rates and limitation formulas (not a dollar for dollar credit in certain instances) To qualify for the FTC:» The tax must be a legal and actual foreign tax liability» The tax must be imposed on the taxpayer (TP)» TP must have paid or accrued the tax, and» The tax must be an income tax (or a tax in lieu of an income tax) Copyright 2015, Weaver and Tidwell, LLP. All rights reserved. 43

Outbound Employees Issues with LT Assignments Double Taxation and Foreign Tax Credit FTC is reported on Form 1116, Foreign Tax Credit Use separate Forms 1116 for each category of income (General category, passive category, section 901(j), etc.) FTC is limited to the lesser of the following:» U.S. tax on the net foreign source earnings, or» The foreign taxes paid or accrued by the U.S. taxpayer during the year plus C/O from prior tax years of foreign taxes. Foreign source income x U.S. Tax = U.S. tax on foreign source earnings WW Income FTC can be carried back 1 year and C/F 10 years Copyright 2015, Weaver and Tidwell, LLP. All rights reserved. 44

Outbound Employees Issues with LT Assignments To reduce tax burden, U.S. expats may elect to exclude two items from gross income: u Foreign Earned Income Exclusion (FEIE)» Up to $99,200 for 2014 and $100,800 for 2015» Only foreign earned income may be excluded Copyright 2015, Weaver and Tidwell, LLP. All rights reserved. 45

Outbound Employees Issues with LT Assignments v Foreign Housing Exclusion/Deduction» To the extent the housing expenses exceed a base amount $15,872» Generally limited to 30% of the maximum FEIE unless city has high cost of living and is listed in IRB 2014-18 Notice 2014-29» Housing costs include rent, utilities (except phone), insurance, residential parking, and repairs related to maintaining foreign home.» Housing costs do not include mortgage interest, RE taxes, or any other expenses directly or indirectly related to personal residence Copyright 2015, Weaver and Tidwell, LLP. All rights reserved. 46

Outbound Employees Issues with LT Assignments The exclusions are elective and an individual may elect either or both exclusions Election is made on Form 2555, Foreign Earned Income For those periods that are less than a full calendar year (typically, the first and last years), FEIE limit is scaled back to reflect the number of qualifying days within the calendar year. Each qualifying spouse may claim the FEIE For compensation partially related to services performed outside and inside the U.S., one should determine foreign earned income based on relative business days spent inside and outside the U.S. Copyright 2015, Weaver and Tidwell, LLP. All rights reserved. 47

Outbound Employees Issues with LT Assignments To elect the FEIE or the Foreign Housing Exclusion/Deduction, the expats needs to show they have a foreign tax home and also meet the Bona Fide Test or the Physical Presence Test Tax Home requirement Determination of a tax home depends on where an individual primarily conducts his or her business As a general rule, most U.S. citizens or residents who accept a foreign assignment that lasts longer than one year will meet the tax home requirement Copyright 2015, Weaver and Tidwell, LLP. All rights reserved. 48

Outbound Employees Issues with LT Assignments Bona Fide Test: Met when U.S. citizen establishes a bona fide residence in a foreign country or countries for an uninterrupted period that includes an entire calendar year, January 1 through December 31. Temporary visits back to the U.S. after establishing a bona fide residence do not affect qualification. An expat may move to another foreign residence without affecting qualification. 911(d)(1)(A) limits the bona fide residence test to U.S. citizens. However, the IRS ruled (see Rev. Rul. 91-58) Bona Fide Residence may be available to green card holders, nationals and/or tax residents of certain treaty countries. Copyright 2015, Weaver and Tidwell, LLP. All rights reserved. 49

Outbound Employees Issues with LT Assignments Physical Presence Test: Not limited to U.S. Citizens Requires that a U.S. taxpayer be physically present in one or more foreign countries for at least 330 days during any 12- month period. The 330 days do not need to be continuous. The tax home (principal place of business or employment) must be in a foreign country during the 330 day period. One must keep track of all U.S. and foreign days to properly claim the exclusion Presence for as little as a minute within a day counts as a whole day. Copyright 2015, Weaver and Tidwell, LLP. All rights reserved. 50

Outbound Employees Issues with LT Assignments Note that return should be extended if Bona Fide Test or Physical Presence Test not met by return s due date using either regular extension form 4868 or form 2350 (specifically for TPs expecting to qualify for FEIE after October 15th deadline) FTC, FEIE and Foreign Housing exclusion can be claimed on the same return (not on the same $ amount) Form 673, Statement for Claiming Exemption From Withholding on Foreign Earned Income Eligible for the Exclusion(s) Provided by Section 911,can be used to claim an exemption from U.S. income tax withholding on wages earned abroad to the extent of the FEIE and Foreign Housing Exclusion. Copyright 2015, Weaver and Tidwell, LLP. All rights reserved. 51

Outbound Employees Impact on SS and Other Benefits Expatriate stays on home payroll, no change (SS and Medicare taxes W/H) May be subject to host country SS taxes To avoid double SS tax obligations, the U.S. has entered into Social Security Totalization Agreements ( TA ) with a number of foreign countries (25 so far) Copyright 2015, Weaver and Tidwell, LLP. All rights reserved. 52

Outbound Employees Impact on SS and Other Benefits Two principal purposes of TA: Relief from double taxation TA provides that a taxpayer is subject to SS tax in only one country. To claim benefits under a TA, employer must request coverage from the SSA (Certificate of Coverage) of home country Certificate of Coverage usually valid for 5 years Coordination of benefits TA provide continuity of benefits for persons who have worked in multiple countries Copyright 2015, Weaver and Tidwell, LLP. All rights reserved. 53

Outbound Employees Impact on SS and Other Benefits Other benefits to consider include 401(k) plans, pension plans, stock option plans, health and dental plans, life insurance, etc. Benefit plans with tax deferred status in the U.S., such as the 401(k) plan, may be subject to foreign tax. If expat is on the host country P/R, he may be eligible to participate in the benefit plans of the foreign corporation. Review tax treaty, if any, for deductibility/taxability of employee s contributions Employer s contributions to pension plans are usually taxable to expat Copyright 2015, Weaver and Tidwell, LLP. All rights reserved. 54

Outbound Employees Tax Equalization Designed to protect an expatriate employee from any adverse tax consequences resulting from foreign assignment Theory: assignment should be tax neutral (no tax benefit or detriment) to the employee Employer guarantees to the expat that she will pay the same amount of tax while on foreign assignment as he/she would have paid had he/she remained in the U.S. Tax equalization calculation is prepared after the U.S. tax return has been filed for the tax year. Copyright 2015, Weaver and Tidwell, LLP. All rights reserved. 55

Outbound Employees Tax Equalization Equalization takes into account those items of income and expense that the expat would have earned or paid had he remained in the U.S. (hypo tax) Hypo tax is compared to the actual taxes that expat paid to the tax authorities (home country + host country) The net owed to or from expat is referred to as the tax equalization settlement If careful planning done before start of assignment, tax equalization settlement should be minimal Copyright 2015, Weaver and Tidwell, LLP. All rights reserved. 56

Outbound Employees Tax Equalization The tax equalization settlement can be either: Included in expat s taxable income in the year paid Deducted from expat s income (Claim of right doctrine) if repayment is due to employer If <$3K schedule A itemized deductions IF > $3K, refigure your tax liability under 2 methods Choose the lower tax amount liability (see pub 525) Tax protection is very similar to tax equalization Main difference is that the employee gets to keep the tax savings instead of reimbursing employer Less common than tax equalization Copyright 2015, Weaver and Tidwell, LLP. All rights reserved. 57

Inpatriate Assignments

Inbound Employee Challenges First year of move residency challenges: Inpatriate could qualify as a NR/Resident/Dual Status Getting Tax Identification Number for their dependents (ITIN) (Form W-7), Application for IRS Individual Taxpayer Identification Number May not be eligible for certain deductions/exemptions on tax return If NR and married, spouse has to file separate tax return (except residents from Canada, Mexico and South Korea) Depending on length of assignment, income can be exempted from U.S. taxation under tax treaty (usually less than 183 days) Copyright 2015, Weaver and Tidwell, LLP. All rights reserved. 59

Inbound Employee Challenges Once inpat becomes U.S. tax resident, he is now subject to same filing requirements as U.S. Tax residents Tax and reporting burden can be heavier as inpats have assets in home country that need to be reported in the U.S. Copyright 2015, Weaver and Tidwell, LLP. All rights reserved. 60

Common Challenges Foreign Assets Disclosures Foreign Bank Account Report (FinCEN 114 or FBAR) Any U.S. person with interest in foreign bank accounts or other foreign financial accounts and the aggregate balance of these accounts exceeds $10,000 at any time during the year is required to report that interest on FinCEN Form 114 (Foreign Bank and Financial Accounts Report, or FBAR)) Foreign accounts include bank accounts, brokerage accounts, mutual funds, pension accounts, exercised stock option accounts, etc. in which you have a financial interest or have signature authority FBAR needed to be completed and filed by June 30 of the following year. For taxable years beginning after December 31, 2015, law changed and FBAR is due by April 15th. If needed, the FBAR can also be extended until October 15th. Information return Very stiff penalties for failing to file (including potential jail time), so compliance with this requirement is imperative Copyright 2015, Weaver and Tidwell, LLP. All rights reserved. 61

Common Challenges Foreign Assets Disclosures Form 8938, Statement of Specified Foreign Financial Assets Reporting requirement in addition to the FBAR Accounts reported are very similar to the ones reported on FBAR + other specified foreign financial assets (incl. any interest in a foreign entity) Filing requirement threshold is higher than FBAR and also takes into consideration marital and filing status, as well as U.S. or foreign status residency Informational form attached to Form 1040 Copyright 2015, Weaver and Tidwell, LLP. All rights reserved. 62

Common Challenges Foreign Assets Disclosures Form 5471, Information Return of U.S. Persons With Respect To Certain Foreign Corporations Form 8865, Information Return of U.S. Persons With Respect To Certain Foreign Partnerships, Etc. Copyright 2015, Weaver and Tidwell, LLP. All rights reserved. 63

Comprehensive Example Peter, a U.S. Citizen, sent on assignment to Bangkok, Thailand for a period of 3 5 years Used to live and work in Boston, MA Left the U.S. 02/14/2014 Regular comp + allowances (see next slides) Part of his wages paid from Thailand Split payroll + shadow payroll to report salary received from Thailand Total taxes due in Thailand = $90,811 Tax Equalization settlement due to employer - $50K Copyright 2015, Weaver and Tidwell, LLP. All rights reserved. 64

2.11.2014 US to Thailand Peter Regular Pay Expatriate Compensation Regular Pay $115,845.06 $115,845.06 Retro Pay Annual Bonus $21,385.97 $21,385.97 Vacation Auto Allowance Xpat Differential Xpat Housing Mobility Allowance (COLA) Distance Allowance Xpat Quality of Living ADJ$ $63,931.80 Note 1 $63,932.00 Relo-Taxable $130,327.12 Note 2 $130,327.12 2010 Performance Shares $18,217.94 $18,217.94 Stock Option Stock Gross Up $480.12 $480.12 Financial Planning Dental ($90.87) ($90.87) Medical ($520.86) ($520.86) Xpat Medical - ($5,250.00) ($5,250.00) Dental Pre Tax $0.00 Limited Flex Spending $0.00 BEN PERSNL REWD $0.00 GTL $106.56 $106.56 401k ($11,954.12) ($11,954.12) BOX 1 $332,478.72 $138,219.80 $194,259.12 Federal Taxes ($69,696.28) SS Taxes ($7,254.00) Medicare Taxes ($6,294.13) Medicare Sur Tax State Withholding ($2,501.27) Note 1 Details of Adjustment Salary paid in Thailand $46,895.00 Gross Up $17,036.80 Note 2 Details of Relo Taxable Rent $32,838.64 Car rental $5,008.60 Tuition Assistance $28,714.71 Host country taxes $25,569.70 Misc. exp (passport for the familiy, etc.) $5,701.33 Tax gross Up $35,644.47 Copyright 2015, Weaver and Tidwell, LLP. All rights reserved. Adjustment ($3,150.33) 65

Example: Computations 2.11.2014 US to Thailand Peter Regular Pay Expatriate Compensation Regular Pay $115,845.06 $115,845.06 Retro Pay Annual Bonus $21,385.97 $21,385.97 Vacation Auto Allowance Xpat Differential Xpat Housing Mobility Allowance (COLA) Distance Allowance Xpat Quality of Living ADJ$ $63,931.80 $63,932.00Note 1 Relo-Taxable $130,327.12 $130,327.12Note 2 2010 Performance Shares $18,217.94 $18,217.94 Stock Option Stock Gross Up $480.12 $480.12 Financial Planning Dental ($90.87) ($90.87) Medical ($520.86) ($520.86) Xpat Medical - ($5,250.00) ($5,250.00) Dental Pre Tax $0.00 Limited Flex Spending $0.00 BEN PERSNL REWD $0.00 GTL $106.56 $106.56 401k ($11,954.12) ($11,954.12) BOX 1 $332,478.72 $138,219.80 $194,259.12 Copyright 2015, Weaver and Tidwell, LLP. All rights reserved. 66

Example: Notes Federal Taxes ($69,696.28) SS Taxes ($7,254.00) Medicare Taxes ($6,294.13) Medicare Sur Tax State Withholding ($2,501.27) Note 1 Details of Adjustment Salary paid in Thailand $46,895.00 Gross Up $17,036.80 Note 2 Details of Relo Taxable Rent $32,838.64 Car rental $5,008.60 Tuition Assistance $28,714.71 Host country taxes $25,569.70 Misc. exp (passport for the familiy, etc.) $5,701.33 Tax gross Up $35,644.47 Adjustment ($3,150.33) Copyright 2015, Weaver and Tidwell, LLP. All rights reserved. 67

Q & A Copyright 2015, Weaver and Tidwell, LLP. All rights reserved. 68

About Weaver 550+ Employees 75+ Partners

About Our International Tax Practice Global structuring, restructuring and refinancing strategies Cross-border transactional planning and management Transfer pricing compliance, documentation and planning Strategic resourcing of income and expenses Global vat, custom duties and tariff compliance and planning International tax planning for intangibles including migration Cross-border supply chain planning Strategies to optimize utilization/repatriation of off-shore cash Copyright 2015, Weaver and Tidwell, LLP. All rights reserved. 70

Annick Nguessan Senior Manager International Tax Services Weaver Direct: 972.448.9241 annick.nguessan@weaver.com