GRANT THORNTON Global expatriate tax guide

GRANT THORNTON

Global expatriate tax guide

Organisations that send their greatest assets ? their people ? overseas to work can face certain tax burdens. Working overseas offers an opportunity for business and personal growth. However, employers have to make sure that remuneration is competitive and that tax, social security and pension issues associated with relocation are addressed.

Working with both companies and individuals and using our global network of specialists, we can advise on the pitfalls associated with working abroad and make sure that appropriate pre-assignment planning opportunities are implemented effectively to minimise the tax burden for both parties. Our tax specialists across the network work together on complex multi-jurisdictional issues to help employers to adopt a consistent and transparent approach to their expatriate assignments. This ensures that their employees are treated fairly and are clear about the terms of their relocation package.

Expatriate tax guide

This expatriate tax guide has been designed to provide an overview of the different tax systems around the globe and gives further information about tax systems and regulations in specific countries.

Contents 1 Albania 5 Armenia 9 Austria 17 Azerbaijan 23 Belgium 27 Botswana 31 Canada (non-Qu?bec) 39 Canada (Qu?bec) 47 Chile 51 China 55 Cyprus 59 Czech Republic 63 Denmark 67 France 71 Germany 75 Gibraltar

79 Greece 83 Guinea 91 Hong Kong 95 Hungary 99 Indonesia 101 Iran 105 Ireland 109 Italy 117 Japan 121 Kazakhstan 125 Kenya 129 Korea 133 Kosova 141 Latvia 145 Lebanon 153 Lithuania

161 Macedonia 165 Malaysia 169 Morocco 173 Namibia 177 The Netherlands 181 Norway 185 New Zealand 189 Pakistan 193 Peru 197 Philippines 201 Poland 205 Portugal 209 Puerto Rico 213 Russia 217 Senegal 221 Singapore

225 Slovak Republic 229 South Africa 233 Sweden 237 Switzerland 241 Taiwan 245 Thailand 249 Uganda 253 Ukraine 261 United Arab Emirates 263 United Kingdom 267 United States 273 Uruguay 281 Vietnam

Albania

Expatriates taking up employment in Albania will be subject to comprehensive rules and in most cases employment visa requirements. The tax, legal and outsourcing team can help expatriates and their employers in dealing with the Albanian tax and employment visa requirements, as well as with the Albanian labour and social security issues. In particular Grant Thornton Albania can assist expatriates and their employers in providing working and residence permits, reviewing tax equalisation policies, tax calculation and providing compliance services regarding the Albanian tax filing requirements.

Albanian resident taxpayers must prepare and file an annual personal income return to the tax authorities no later than 30 April following the subsequent period. Non-residents only pay tax on income generated within the territory of Albanian and can prepare and file (although not obliged to by law) an annual personal income return for their income derived from Albania sources only.

Facts and figures Pre arrival procedures Foreign citizens may enter the territory of Albania with or without visa (depending on nationality). As a general rule foreign citizens working in Albania for a period greater than one month are required to obtain a work permit, unless exempt by law or an international agreement. There is an exception to the general rule for EU countries and the Schegen area, they enjoy equal rights with Albanian citizens in the areas of employment and self employment. Application forms are obtained from the migrations department in the ministry of labour and social affairs in Albania embassies, consulates abroad and in regional labour office of the respective districts.

Employment visas

The Albanian legislation sets the annual quota for the employment of foreigners in the Republic of Albania, taking into consideration the needs of the employment market and migration policy. Additionally local employers must justify hiring foreign individuals and the number of foreigners working for an employer should not exceed 10% of the total number of staff in the previous 12 months. There are limitations for EU expatriates based on reciprocity Bilateral or Multilateral Agreements, for expatriates that do not require a work permit (WP) in accordance with law. Different types of WP are issued by the activity that the expatriate will perform as employer/employee, transferred within the company, investors, seasonal work, student and professional development etc. WPs are also issued for family members of foreigners residing lawfully in Albania and these have a priority in their issuance. Generally a WP is up to one year, with the option of being renewed. However there are cases where the WP is issued with validity of the required period for performing the work. After two renewals of a WP the foreign worker has the right to have a permanent work permit provided that certain condition is met.

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Tax returns and compliance Albanian residents and those expatriates that have become Albanian tax residents by residing in the Republic of Albania for 183 days or more, must file their annual tax return before 30 April of the year following the calendar year.

Payment of Albanian tax ? the employer (the payer of the income) is obliged to withhold and pay in the name and behalf of the employee, the amount of personal income tax, during each separate payment.

Tax year The Albanian tax year is from 1 January to 31 December.

Income tax rates The personal income tax rate in Albania is a flat rate of 10%.

Sample income tax calculation

Employment income per month: Tax at 10%:

1000 100

Basis of taxation Charge to tax

A charge to Albanian tax is dependent on whether the income arises in Albania, and the extent of the charge will be determined by an individual's tax residency status.

Income from employment

An Albanian tax charge on employment income is derived from duties performed in the Republic of Albania. Assessable employment income includes all wages, salaries and other compensation derived from employment relations that are basic pay, overtime pay, bonuses, director's fees allowances and any other remuneration and benefits granted for the performance of employment.

Source of employment

As mentioned above, where duties are performed on the territory of the Republic of Albania, any remuneration received in respect of these duties is treated as Albanian sourced income and therefore subject to Albanian income tax regardless of the expatriate's tax residence status.

Benefits (in kind)

In general where the benefit is enjoyed in the Republic of Albania, an Albanian income tax charge will arise. Therefore, housing, meal allowances, provision of a car and relocation allowances will come within the charge to Albanian income tax in addition to the individual's salary. However if these benefits will be as the compensation in kind, paid not in cash by the employer, of such type as: food compensation, donation of vehicles, house appliances, etc., then the value of services in kind (goods or services) will be classified as an un-deductible expense of the employer for corporate income tax purposes and shall not be taxed as a personal income.

Residence

Taxation of individuals in the Republic of Albania is determined by their residency or the source of their earnings. Persons are a resident in Albanian for tax purposes if: ? they have permanent residence, family or vital

interests in Albania ? they are Albanian citizen, serving at the capacity

of consular, diplomat or at another similar function, outside the territory of Albania ? they reside in Albania for at least 183 days during a tax period, regardless of his/her nationality or the country of his/her vital interests. The calculation of the residence period in Albania includes all the days of physical presence, not only work days, but also holidays.

Individuals that are an Albanian resident, are taxed on their worldwide income and gains. Expatriates are only taxed on their income and gains realised on the territory of Albania.

Expatriate concessions The tax reliefs to expatriates seconded to the Republic of Albania are implemented under specific conditions.

Relief for foreign taxes Where income has been subject to tax twice (in Republic of Albania and a foreign jurisdiction) relief can be granted by the Albanian general tax directory in accordance with signed double taxation treaties.

Deductions against income The Republic of Albania grants a large field of tax deductions. Income tax shall not be payable on income generated on grounds of: ? income received from obligatory and voluntary

schemes for life, social and health insurance and allowances for families or individuals with no or low income ? awards, scholarships up to limit specified in the law, regardless of the source of payment

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? allowances received for diseases or disasters, up to 20% of the annual employment income earned by the recipient of the allowances

? compensation received with regard to expropriation as compensation of dispossession required by government for public interest

? income of individuals who enjoy diplomatic status

? compensation for damages received from insurance companies

? income in kind, such as food received for business

? benefits received in the cases of diseases, hardships in agreement with the relevant legal provisions in force

? income excluded by international agreements approved by the Albanian parliament

? donations received form non-profit organisation

? income received from public institutions for achievements in science, sports or culture

? compensation benefits received by the final decision of courts and certain compensation for court costs.

What taxes? Capital gains tax

According to the Albanian income tax code, capital gains are normally considered to be ordinary income and are taxed at the rate of 10%.

Transfer of ownership rights over immovable property

Capital gains derived from the disposals of real estate are subject to tax. The tax base equals the amount by which the sale price exceeds the acquisition cost. For real estate transfers, the sale price taken into account may be not less than the `reference price' for such a property. For this purpose the `reference price' is the objective value meter in the relevant area, as indicated in the reference table published by the Albanian institute of statistics for the main Albanian cities.

Transfer of quotas or shares

Realised income from the difference between sales price and purchase price of participation quotas, or capital shares are taxable. This category of income includes income generated from quota sales that a partner owns in a business or partnership, income generated from sale of shares, income from sales or liquidation of a business of any form. The tax base, in such cases, is equal to the following: ? shares realised: income from shares sales and

nominal value or the purchase value

? capital participation quotas: income realised from shares sales and nominal value or the purchase value

? liquidation: difference between the sales value or liquidation value of a business and book value.

Expatriate's capital gains are taxable if realised on the territory of the Republic of Albania unless the provisions of double tax treaty apply.

Inheritance, estate and gift taxes Gift/estate taxes are levied on immovable property located in the Republic of Albania. An individual who transfers/donates the ownership of immovable property should pay taxes before the registration of such property in accordance with relevant laws. Gift/estate taxes are taxed as income at a flat rate 10%.

Investment income Investment income taxes are levied on all investment income generated in the Republic of Albania. The following are taxable at 10%: ? dividends received by individuals' shareholders

or partners in commercial companies ? income in the form of interest is considered

income from loans ? interest on bonds or other securities ? interest from bank deposits and securities.

Local taxes The local tax offices are responsible for the collection of all local tax. Local taxes are applied either as a percentage or as specific amounts and varies depending on location and/or others factors. There are different types of local taxes.

Real estate tax All physical persons and legal entities whether local or foreign, who own real estate property in the Republic of Albania are subject to real estate tax. The real estate tax rate is 10% and is based on the relevant contract.

Income from leasing contracts ? under Article 784 and onwards of the Civil Code, (income from leasing contracts) income from a contract through which a person is entitled to use and improve an immovable property. Income from leasing contracts is periodic compensation in cash or in kind that an individual generates from leasing real estate. If the tenant, according to the contract agreed among the parties, improves and adapts that property for the tenant's needs, the expenses incurred by the tenant are considered to be the income generated from leasing contracts for the owner of the property.

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The register of real estate, reports the real estate owners identity, limits of property, date of registration and the relative deed of ownership acquisition and plans that show the location of property. In addition, any mortgage, assignment of easement, right to use and any other right connected to or deriving from the real estate that is transferred to any third party, should be recorded in the register.

Social security taxes Employees are obliged to pay obligatory social security contributions on gross salary as follows:

%

Pension and disability social contribution

21.6

Contribution for health insurance

3.4

Contribution for employment

0.9

Maternity

1.4

Diseases

0.3

Accidents and insurance occupational diseases

0.3

Stock options No specific rules in the Republic of Albania govern the tax treatment of employer-provided stock options. Stock options are subject to personal income tax at the moment of exercise.

Tax planning opportunities The tax planning mainly involves the structuring of employment arrangements to take advantage of the relatively low flat personal tax rates (as compared to EU member states).

For further information on expatriate tax services in Albania please contact: Maja Filipceva E maja.f@grant-.mk

The expatriates are also obliged to pay the obligatory contributions as the residents of the Republic of Albania, unless the law or bilateral agreement foresees otherwise.

Employers and employees contribute a percentage of the calculated monthly salary to a social security fund. The total contribution is 27.9%, of which 16.7% is paid by the employer, and 11.2% is paid by the employee. The 27.9% contribution consists of a social security contribution of 24.5% and a health security contribution of 3.4%. The total contribution is capped at ALL 95,130. The contribution must be paid to the tax authorities by the 20th day of the following month. Self-employed persons must pay a contributions of 30% calculated on the amount exceeding the minimum amount of salary.

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Armenia

The experts of Grant Thornton provide legal and tax advisory services to the clients on all aspects of taxation of foreign persons in Armenia, including: ? clarifications on the Armenian tax legislation ? calculation of taxes payable by foreign

persons in accordance with the Armenian legislation ? ad-hoc legal and tax advisory services ? filling in and submission of individuals' tax returns to the Armenian Tax Authorities ? elucidation on the Armenian legislation in connection with obtaining visa and work permit.

Facts and figures

Pre arrival procedures

As a general rule, the expatriates, wishing to work in Armenia, are required to obtain a visa and work permit. Nationals of certain countries, eg Belarus, Russian Federation, Ukraine, other CIS (the Commonwealth of Independent States) countries, Georgia, Argentina, etc., can visit Armenia for up to 180 days without a visa within a one year period, but will need to be granted a work permit to take up employment. Holders of all other passports and travel documents are required to obtain an entry visa or must present document confirming their residence status. Work permits are not required: for people having permanent or special status of residence, for the spouses and relatives of Armenian nationals or of legally staying expatriates having temporary, permanent or special status of residence (during the term of the given status), for refugees, etc. Entry visa, residency status or working permit seekers must pay an appropriate state duty. Some exemptions are envisaged by the Armenian legislation, eg relatives of refugees, Armenian nationals and minors are exempted from paying the duty foreseen for visas and residency status.

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Employment visas

All expatriates seeking employment in Armenia must first obtain a visitor visa and then apply for work permit.

A visitor visa entitles a foreigner to enter Armenia and stay in the country for up to 120 days. Prolongation is possible up to 60 days. A visitor visa may be issued for single or multiple entries (within up to a year period). No sponsor is required for obtaining visas. Normally entry visas are granted to individuals and if so required may be also provided to groups (for implementation of joint activity).

The work permit obtaining procedure is as follows.

Any expatriate, having the same labour legal capacity as citizens of Armenia, which is guaranteed by the Armenian legislation, may conclude an employment (labour) contract with an Armenian employer based on the work permit granted by appropriate authorised authorities. Work permits apply to all non-Armenian guest workers, regardless of rank or seniority or professional or other qualification, when approved after due consideration by the Armenian employment authorities and their respective employers. While granting a work permit to expatriates, the Armenian employment authorities thoroughly consider and assess the needs and development of the labour market of Armenia. Armenian employers are required to file an application for filling a vacancy from within the resident labour force during the timeframe which still needs to be specified under the Armenian government resolution, which is aimed at assessing the needs of the local labour market. Should the employer and the Armenian employment authorities fail during the established time frame to fill a gap from within the resident labour force meeting the employer's requirements, the given employer may find an expatriate who meets the set forth requirements and file an application to the Armenian employment authorities to provide the relevant expatriate with a work permit by submitting the required documents (the list of which still needs to be specified under the government resolution).

A work permit is issued for a certain period of time based on the terms of the employment contract to be concluded and against a state duty levied from the employer in accordance with the law `On State Duty'.

A work permit can be denied if: (i) the condition of the local labour market based on the results of the assessment thereof is unfavourable for such work; (ii) the work should be performed by an Armenian national as required by the legislation; (iii) the required documents or information are falsified; (iv) the employer employing the expatriate has previously violated the requirements for the expatriate employment; (v) there are certain threats to national security; and (vi) the employer lacks a license to perform the activity which is subject to licensing.

Tax returns and compliance

When paying income to foreign citizens and stateless persons, tax shall be withheld (imposed) by a tax agent (employer) at the source of payment of the income. When tax is withheld by a tax agent at the source of payment of the income, the expatriate has no filing obligations and the amount of tax withheld at the below rates shall be considered as the final amount of the income tax, with the following exception. When the non-citizen is a resident or conducts entrepreneurial activity in the territory of Armenia or has an income that is not taxed by the tax agent in this case the expatriate must submit annual electronic tax returns on his/her annual income within the tax year, but no later than the 15th of April of the following year. Late filing of the tax returns entails respective penalties. The respective tax should be transferred to the state budget no later than 1 May of the following year.

Tax year The tax year in Armenia is a calendar year.

Income tax rates

When paying income to expatriates and there is a tax agent, tax shall be withheld (imposed) by a tax

agent at the source of payment of the income at the

following rates:

? salaries, wages and other payments deemed

equal thereto:

Amount of monthly

Tax amount

taxable income

Up to AMD 120,000

24.4% of taxable income

AMD 120,000 ? 2,000,000 AMD 29,280 plus 26% of the

amount exceeding AMD 120,000

Over AMD 2,000,000

AMD 518,080 plus 36% of

the amount exceeding

AMD 2,000,000

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