Taxation of international executives
Are there special residency considerations for short-term assignments?
No. As discussed above, determination of residency status is a function of presence rather than intent.
Are there special payroll considerations for short-term assignments?
No. U.S . source wages are subject to withholding regardless of the nationality of either employer or employee or the intent of the assignment.
What income will be taxed during short-term assignments?
Unless exempt by treaty, all U.S . source income is subject to U.S. tax. In general, compensation paid for services performed in the United States is U.S . source income.
For an individual whose assignment is not expected to, and in fact does not, exceed one year in duration, and whose tax home (regular or principal place of business) remains in his or her home country, certain travel, meals, and lodging expenses (away-from-home expenses) may be excludable from income.1
Business expenses and reimbursements do not have to be reported on an assignee’s U.S. income tax return if an assignee fully accounts to the employer for the expenses.
If any reimbursement exceeds an assignee’s substantiated expenses, the employer must report the excess amount as compensation and the amount is includible in the assignee’s income.
Are there any additional matters that should be considered before initiating a short-term assignment in the United States?
Before initiating a short-term assignment in the United States, it is important to remember that proper immigration procedures must be followed, such as obtaining the appropriate visa and work permits. Also, the intended length of the assignment should be adequately documented for purposes of the exclusion of certain travel, meals, and lodging expenses (mentioned above).
For further information on short-term assignments, extended business travelers, and cross-border commuters, see the KPMG publication: Thinking beyond borders:Management of extended business travelers.
1I.R.C. § 162(a).
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