COVID-19 - A Case for Action #3 - Timing is Everything

This is part of a special Global Mobility Tax client alert series - sharing stories and situations we are encountering in these extraordinary times.

April 15, 2020

The COVID-19 global pandemic calls for quick action based on government directives in the interest of public health and safety. In this environment, arriving at practical mobility solutions can be challenging. Here's how Global Mobility Tax has supported mobility programs in recent weeks :
Action #3: Treaty Exemption Achieved
Recently departed tax equalized employee not returning to his current assignment in China.

Chinese tax implication - The employee is now expected to be treaty exempt in China for 2020.

ACTION: Adjust the Chinese payroll to reverse prior months' reporting
IMPACT: The employee can attend to his personal affairs
SAVINGS: Refund of the Chinese taxes paid YTD to the Company.
Claiming refunds of Chinese taxes after the fact is a lengthy and uncertain process; the quick action of the reversal of payroll reporting saved this company $15,000 in tax equalization gross-ups and $10,000 in administrative, payroll, and filing fees.

US tax implication - The employee is incurring a US tax liability while working in the US

ACTION: Timely shutoff of hypothetical tax withholding and restart US federal/state tax withholding
IMPACT: Minimized payroll disruption and helping employee to be paid in properly for federal taxes, as if he had never left
SAVINGS: Estimated tax penalties and payroll reporting penalties of up to 20% are avoided.
We are here to provide you and your program with practical solutions, tax planning and optimization. 
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