BDO USA, LLP, a Delaware limited liability partnership, is the U.S. member of BDO International Limited, a UK companyBDO KNOW limitedLEDGE by guarantee, Tax Webinar and formsSeries part ‒ Globally of the Mobile Employees: Exploring Tax “Equalization” and Assignment international BDO network of independent member firms. Benefits Options Page 1 Globally Mobile Employees: Exploring Tax “Equalization” and Assignment Benefits Options

Donna Chamberlain ‒ Principal, Global Employer Services ‒ Expatriate Tax Patty Brickett ‒ Principal, Global Employer Services ‒ Expatriate Tax

December 19, 2013

BDO USA, LLP, a Delaware limited liability partnership, is the U.S. member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. CPE and Support

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BDO KNOWLEDGE Tax Webinar Series ‒ Globally Mobile Employees: Exploring Tax “Equalization” and Assignment Benefits Options Page 3 CPE and Support (continued)

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BDO KNOWLEDGE Tax Webinar Series ‒ Globally Mobile Employees: Exploring Tax “Equalization” and Assignment Benefits Options Page 4 With You Today

Donna Chamberlain Patty Brickett Principal, Global Employer Principal, Global Employer Services ‒ Expatriate Tax Services ‒ Expatriate Tax BDO USA, LLP BDO USA, LLP

1001 Morehead Square Drive 8405 Greensboro Drive Suite 300 Suite 700 Charlotte, NC 28203 McLean, VA 22102 Direct: (704) 887-4218 Direct: (703) 752-2782 Fax: (704) 887-4290 Fax: (703) 893-2766 [email protected] [email protected]

BDO KNOWLEDGE Tax Webinar Series ‒ Globally Mobile Employees: Exploring Tax “Equalization” and Assignment Benefits Options Page 5 Agenda

 Global mobility policy types, trends, benchmarking, etc.

 Global mobility employee survey results

BDO KNOWLEDGE Tax Webinar Series ‒ Globally Mobile Employees: Exploring Tax “Equalization” and Assignment Benefits Options Page 6 Overview of Mobility Concepts and Market Practice

The most common Home–Country approach is the Home Equivalent Income Purchasing Based Balance Sheet Taxes Income Power Home–Country Approach (home based Salary Taxes Premiums pay plus supplementary allowances) Income Income Housing Taxes Housing Taxes

Objective: To maintain Housing Housing parity with home country Goods & peers. This has been the Goods & Services Goods & Goods & classic approach to mobility Services Services Services for the traditional long term assignments. At assignment Reserve Reserve Reserve Reserve end, allowances are removed and employee fits Assignment- Assignment– back into their home Location Location Costs Cost Supplemented country structure. by Company

BDO KNOWLEDGE Tax Webinar Series ‒ Globally Mobile Employees: Exploring Tax “Equalization” and Assignment Benefits Options Page 7 Overview of Mobility Concepts and Market Practice (continued)

Overview of Home Based Balance Sheet

Tax equalization Employee pays same tax as at home

Maintain home purchasing power in host Cost of living differential location, based on the difference in cost of a defined “basket of goods”

Provides host country housing at no greater Housing differential cost to employee

Quality of living or location Cash allowance to compensate for difference allowance in quality of life

Foreign service and mobility premiums – to Incentive allowances compensate for living and working abroad

BDO KNOWLEDGE Tax Webinar Series ‒ Globally Mobile Employees: Exploring Tax “Equalization” and Assignment Benefits Options Page 8 Flexibility and Cost Control are Key Themes Prevalence of each global mobility trend

60

40

20

0

Data based on Survey of Surveys, a compilation of data from six mobility surveys: two from relocation companies, two from data providers and two from firms over the past two years

BDO KNOWLEDGE Tax Webinar Series ‒ Globally Mobile Employees: Exploring Tax “Equalization” and Assignment Benefits Options Page 9 Key Market Themes Maximize return on the investment

 More assignment types — align programs with value to the organization

 Greater program flexibility — provide support as needed

 More mobile employees on “local terms” — cost containment

 Linkage with career management (protecting your investment)

BDO KNOWLEDGE Tax Webinar Series ‒ Globally Mobile Employees: Exploring Tax “Equalization” and Assignment Benefits Options Page 10 Different assignment models address different needs, some approaches require more flexibility

Short-term Long-term Assignment Career Assignee Permanent Transfer Assignment Summary  Temporary  12 month-5 year  Moves from one  Employee moves indefinitely assignment from 3- assignment away assignment to  May be employee-initiated 12 mos. from home country another  May resign from home country  Unaccompanied by  Family accompanies  Family family accompanies Applies to Includes: Includes: Includes: Includes: these  Project-oriented  Business expansion  Global teams  Indefinite or permanent • Training  Long term skills gaps • Special skills moves assignments  May be career • Assignee transitioning to • Short-term skills development local employment status gaps • Developmental assignments C & B Home country Home country Global/regional plan Local or Local Plus Approach Base Pay Home Home Global/regional plan Local Incentive Home Home scheme, host Global scale Local measure Benefit Home Home standard International Local, as possible benefits

BDO KNOWLEDGE Tax Webinar Series ‒ Globally Mobile Employees: Exploring Tax “Equalization” and Assignment Benefits Options Page 11 Different Assignment Types

Pros Cons • Able to differentiate policy according to • Defining types and differences may be needs and purpose of assignment challenging, e.g., how many are needed • May realize cost savings by eliminating to warrant a new type non-essential support • Judgment is still required • Reduces the need for exceptions, • Flexibility will still be required judgment calls • Provides more consistency among “like” assignees

Don’t be a fashion victim! Define only those assignments that are truly different and needed to support your business.

BDO KNOWLEDGE Tax Webinar Series ‒ Globally Mobile Employees: Exploring Tax “Equalization” and Assignment Benefits Options Page 12 Flexibility — Can Produce Cost Savings An illustration

C. DEVELOPMENT A. STRATEGIC MOVES Ongoing Support One-Time Support Ongoing Support One-Time Support • COLA (efficient) • Property Management • COLA (efficient) • Relocation Allowance • Reduced Host Housing • House Hunting Trip • Host Housing • Property Management • TEQ and Prep • Cultural Training • Housing Norm Waiver • House Hunting • Education Support (cap) • Language Lessons • TEQ and Prep • Cultural Training • Home Leave (reduced) • Reduced Destination • Education Support • Language Lessons • Spousal Allowance • Home Leave • Destination Services • Flexible w/in Budget • Car Support • Loss on Car • Spousal Support 25% Savings vs. Strategic Moves Project Costs Approximately $1.25M D. EMPLOYEE-INITIATED B. TACTICAL MOVES Ongoing Support One-Time Support Ongoing Support One-Time Support • Tax Preparation • Property Management • COLA (efficient) • Reduced Relocation Allowance • Minimal Host Housing • House Hunting Trip • Host Housing • Property Management • TEQ and Prep • House Hunting • Flexible w/in Budget • Education Support • Cultural Training • Home Leave • Language Lessons • Car Support, if needed • Destination Services • Spousal Support Value of AssignmentEmployee the to of Value • Flexible w/in Budget 50% Savings vs. Strategic Moves 15% Savings vs. Strategic Moves Value of Assignment to the Organization

BDO KNOWLEDGE Tax Webinar Series ‒ Globally Mobile Employees: Exploring Tax “Equalization” and Assignment Benefits Options Page 13 Permanent Transfers/Localization Must look at home and host combinations

 Considerations • How big is the difference in rewards, after tax rewards? • Pension — Will localized employees lose eligibility for retirement benefits or suffer major reductions? • Will local medical care be available or adequate? • Will local schools be appropriate? • How will immigration status be affected? • Labor laws — Will severance of home contract trigger termination indemnities?

Most successful transitions to local terms occur when employee wants to remain in country.

BDO KNOWLEDGE Tax Webinar Series ‒ Globally Mobile Employees: Exploring Tax “Equalization” and Assignment Benefits Options Page 14 Local Terms: The best “local” package depends on the home/host combination and your goals

Find the right place on the continuum Find the right place on the continuum

Pure Local Hybrid Local Naked Assignee Local rewards Might retain home Assignment allowances cease retirement and benefits or are phased out Local labor law Might be paid based on local May retain home salary rates Severs employment at home May be subject to local labor May retain home benefits law and retirement Not expected to return home May be temporary or May retain some supports permanent

Most “local” packages fall somewhere in the middle

BDO KNOWLEDGE Tax Webinar Series ‒ Globally Mobile Employees: Exploring Tax “Equalization” and Assignment Benefits Options Page 15 Pros and Cons of Transfer to Local Terms

Pros Cons • Provides long term staffing in locations • Each case must be considered with talent gaps individually • Generally less expensive than • Proper form of “local terms” should be traditional assignment package determined • Supports employee perspective of long- • Impact on both employee and employer term commitment to new market must be considered • Frees HR from ongoing administration • Continuing need for immigration and of mobile employee tax assistance may mitigate some of the • Transfers to local terms are most advantages successful when employee is agreeable to transition • Good option when there is no job at home for repatriating assignee

BDO KNOWLEDGE Tax Webinar Series ‒ Globally Mobile Employees: Exploring Tax “Equalization” and Assignment Benefits Options Page 16

Why Have a Policy?

 Clarifies the reasons for mobility  Gets everyone on the same page  Helps to contain costs  Streamlines administration  Makes use of outside vendors more cost effective  Facilitates tax planning  Provides documented structure that will withstand scrutiny

BDO KNOWLEDGE Tax Webinar Series ‒ Globally Mobile Employees: Exploring Tax “Equalization” and Assignment Benefits Options Page 17 IPSOS-BDO Global Mobility Survey

This report captures the findings of the first comprehensive, international study into employee mobility of its kind that focuses on the employee’s—not the employer’s—point of view.

An international sample of 12,827 employees out of 18,872 adults aged 18–64 in the U.S. and Canada, and age 16-64 in all other countries, were interviewed. Approximately 1,000+ individuals participated on a country by country basis with the exception of Argentina, Indonesia, Mexico, Poland, Saudi Arabia, South Africa, South Korea, Sweden, Russia, and Turkey, where each have a sample 500+. Weighting was then employed to balance demographics and ensure that the sample’s composition reflects that of the adult population according to the most recent country Census data and to provide results intended to approximate the sample universe.

BDO KNOWLEDGE Tax Webinar Series ‒ Globally Mobile Employees: Exploring Tax “Equalization” and Assignment Benefits Options Page 18 Likelihood to Move to Another Country

% ‘Very likely’ (by region) Imagine there was a full-time job available in another country at least three to five house TOTAL 25% away by plane for anywhere between two or Latin America 34% three years with a minimum 10% increase in Middle East and… 32% your pay and all your moving expenses covered. How likely would you be to consider moving to Asia Pacific 24% this new job? Europe 21% One quarter say they would be ‘very likely’ to North America 20% take the assignment. Considering that an additional 32% are ‘somewhat likely’, an appetite appears to exist for going abroad for % ‘Very likely’ (by industry) work. TOTAL 25% Telecom 28% Construction 28% Commercial 25% Education 23% Medical 23% Finance 22% Government 21%

BDO KNOWLEDGE Tax Webinar Series ‒ Globally Mobile Employees: Exploring Tax “Equalization” and Assignment Benefits Options Page 19 Likelihood to Move to Another Country (continued) Top 4 countries to relocate: ALL

United States 34% United Kingdom 22% Australia 20% Canada 20%

Top 5 countries to relocate: employees from North America Australia 33% United Kingdom 28% United States 19% France 18% Canada 16% Italy 16%

Top 5 countries to relocate: employees from Latin America United States 42% Canada 25% Spain 24% Italy 23% France 20%

BDO KNOWLEDGE Tax Webinar Series ‒ Globally Mobile Employees: Exploring Tax “Equalization” and Assignment Benefits Options Page 20 Likelihood to Move to Another Country (continued) Top 5 countries to relocate: employees from Europe

United States 29% Switzerland 20% Australia 20% United Kingdom 20% Canada 18% Top 5 countries to relocate: employees from Asia-Pacific United States 28% United Kingdom 19% Singapore 18% Australia 16% Canada 16%

Top 5 countries to relocate: employees from Middle East and Africa United States 43% United Kingdom 29% United Arab… 24% Australia 20% Canada 19%

BDO KNOWLEDGE Tax Webinar Series ‒ Globally Mobile Employees: Exploring Tax “Equalization” and Assignment Benefits Options Page 21 Incentives to Relocate

Ratings of incentives: % ‘much more likely to take the job’ (All Employees) 45% Q1 A guarantee that you could move back to your current role after 2 years with further relocation assistance 43% Q2 You/members of your immediate family would each get one round trip airfare per person to either travel back home; or have two round trip tickets for people to come and visit you once a year; or, use the equivalent vale tickets for a destination of your choice 43% Q3 A trip to the country before the assignment so I see what the country is like, paid for by my employer 42% Q4 Paid language training if necessary 42% Q5 Provide immigration assistance for your spouse in order that they could obtain employment 41% Q6 Provide you with education courses to upgrade your skills 41% Q7 A 10% pay raise 38% Q8 Provide paid school tuition for your children 34% Q9 A monthly car allowance

BDO KNOWLEDGE Tax Webinar Series ‒ Globally Mobile Employees: Exploring Tax “Equalization” and Assignment Benefits Options Page 22 Incentives to Relocate (continued)

Ratings of incentives: % ‘much more likely to take the job’ (All Employees) 34% Q10 Give you another week’s worth of vacation to use however you wish 33% Q11 The country chosen has the same language as my own 32% Q12 Provide relocation for home and school search 31% Q13 A onetime relocation allowance equivalent to 5% of your gross salary to cover incidental household expenses 30% Q14 Provide temporary housing for up to four (4) weeks 29% Q15 If you own a house/condo, would provide a sale or leas agent and would pay the difference in market value if sold at a loss 27% Q16 The country chose is similar in culture to my own 22% Q17 Would cover for loss on sale of auto’s (up to a maximum two auto’s) 18% Q18 Would pay for pet(s) to be shipped to new address

BDO KNOWLEDGE Tax Webinar Series ‒ Globally Mobile Employees: Exploring Tax “Equalization” and Assignment Benefits Options Page 23 Conclusion

 ‘Safety nets’, including repatriation and guaranteed employment on return, are the most important incentives for talent to consider international assignments. They are followed closely by incentives that directly address family concerns and comfort or fear of the unknown; and  Enticing talent to consider a move abroad requires more than pay;  The destinations where talent is required and those locations that are most desired do not align on a macro level;  There is an eager minority who are keenly interested in working abroad. They are most likely to be senior executive/decision makers at their work and under the age of 35;  For those that are not interested in international assignments, family is the most notable issue. Finding incentives that will support their family needs, including trailing spouses and children, and their discomfort with the unknown are the most effective ways to entice them.

BDO KNOWLEDGE Tax Webinar Series ‒ Globally Mobile Employees: Exploring Tax “Equalization” and Assignment Benefits Options Page 24 Questions and Answers

BDO KNOWLEDGE Tax Webinar Series ‒ Globally Mobile Employees: Exploring Tax “Equalization” and Assignment Benefits Options Page 25 Speaker Biographies

BDO KNOWLEDGE Tax Webinar Series ‒ Globally Mobile Employees: Exploring Tax “Equalization” and Assignment Benefits Options Page 26 Biography Donna Chamberlain

Donna Chamberlain Donna J. Chamberlain is a principal and former Principal, Global Employer International Assignment Senior Tax Director in Services ‒ Expatriate Tax BDO’s Charlotte office. She has been specializing in BDO USA, LLP compliance and consulting, including tax and compensation planning and policy design for global companies for over 15years. 1001 Morehead Square Drive Suite 300 Donna has been with BDO for over 13 years serving Charlotte, NC 28203 such clients as Michelin, NA, Bank of America Direct: (704) 887-4218 (formerly NationsBank), SGL Carbon and Fax: (704) 887-4290 MeadWestvaco in the Southeast. Her focus is [email protected] working with professionals across BDO’s global network to help alleviate the uncertainty of tax matters and compensation issues for foreign nationals and expatriates on assignment.

Prior to joining BDO, Donna worked for a Big Four accounting firm.

BDO KNOWLEDGE Tax Webinar Series ‒ Globally Mobile Employees: Exploring Tax “Equalization” and Assignment Benefits Options Page 27 Biography Patty Brickett

Patty Brickett Patty Brickett, an experienced Principal of BDO USA LLP’s (BDO) Specialized Tax Services International Practice, has over 25 years of experience providing Principal, Global Employer international tax and human resources consulting services to multinational corporations and their global executives. Patty works with clients in all industries Services ‒ Expatriate Tax and in the not for profit community. Her clients range from those just beginning to expand globally, to those with mature international operations. Patty assists BDO USA, LLP clients with the following:

• Tax planning and compliance using Income Tax Treaty Network to 8405 Greensboro Drive minimize exposure Suite 700 • International compensation delivery • International payroll management and consulting McLean, VA 22102 • Tax equalization/tax protection policy development • Analysis of Status of Forces Agreements (SOFA’s), Direct: (703) 752-2782 • Technical Cooperation Agreements and other bilateral agreements Fax: (703) 893-2766 • U.S. tax withholding and reporting requirements on payments to foreign entities and individuals including assistance to companies under [email protected] Permanent Establishment Analysis • Review of foreign tax obligations created by Business Travelers and development of internal process and procedures to mitigate risk

Prior to joining BDO, Patty was a lead partner in Argy, Wiltse & Robinson P.C.’s International Services practice. She also worked for ’s International Tax and HR group. In 1991, she was assigned to Cairo, Egypt where she managed their regional expatriate practice. The experience she gained overseas, coupled with her many years of experience in the U.S. has given Patty the depth of knowledge to provide consistent, high quality services to multinational organizations.

BDO KNOWLEDGE Tax Webinar Series ‒ Globally Mobile Employees: Exploring Tax “Equalization” and Assignment Benefits Options Page 28 BDO is the brand name for BDO USA, LLP, a U.S. firm providing assurance, tax, financial advisory and consulting services to a wide range of publicly traded and privately held companies. For more than 100 years, BDO has provided quality service through the active involvement of experienced and committed professionals. The firm serves clients through 41 offices and more than 400 independent alliance firm locations nationwide. As an independent Member Firm of BDO International Limited, BDO serves multinational clients through a global network of 1,204 offices in 138 countries.

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BDO KNOWLEDGE Tax Webinar Series ‒ Globally Mobile Employees: Exploring Tax “Equalization” and Assignment Benefits Options Page 29