Many OECD countries have a system for advance tax rulings, or "clearance procedures", if a taxpayer is uncertain how a transaction or arrangement impacts their taxes. In many jurisdictions, tax authorities will be bound to the rulings during tax assessment, assuming that the underlying information is accurate. There is a requirement that transactions be complete in order to prevent fishing expeditions. Tax authorities will bill for the service with simpler cases typically costing < USD $1,000.

An agency permanent establishment is when a foreign entity creates a PE in a jurisdiction, registered or not, through the use of an agent. This agent can take the form of an individual, a firm, or even ‐ as in a recent case against a brand-name credit card company ‐ equipment that performs automated tasks. Agency PEs are one of the main focuses in the BEPS project and resulting tax treaty updates.

In order to attract talented expat assignees within their borders, some countries allow special tax benefits for assignees and intra-company transferees. These can be deductions for relocation costs, tax-free fringe benefits for housing, cars, and education, and in a few countries, advantageous flat income tax rates for assignees, usually limited to less than 5 years.

The Balance Sheet Approach is the most common IA costing method for assignee renumeration used at MNCs. A simple 3-step version: 1) Take the employee’s gross salary and subtract an estimate of their tax burden (hypo tax) to get a net salary. 2) Take the net salary and add assignment-specific allowances, cash benefits, cost of living or other adjustments to get the adjusted salary. 3) Gross up the adjusted salary with the tax burden of the host country (or an equalized tax) to get the assignee’s final salary. This type of approach is sometimes called "net to net" or "net to gross", where the main idea is to reach the host country salary by grossing up the home country net salary.

The "Base Erosion and Profit Shifting Project" from the G20 and OECD is a comprehensive set of proposals to prevent tax avoidance in cross-border activity and delineate the artificial arrangements that facilitate the avoidance. The stated goal of BEPS is to realign the location of profits with the location of activity. "Base erosion" refers to lowering the tax base, and "profit shifting" refers to the artifical shifting of profits to another tax jurisdiction. It is estimated up to $300 Billion in tax is avoided each year through exploiting gaps and weaknesses in international tax law.

"Brain X" is a class of terms for talent demographic shifts, e.g. Brain drain/gain/waste/circulation. "Brain waste" refers to the inability of talent to gain meaningful career experience in a location; "Brain circulation" describes how global talent "circulates" whether through global rotations, country attraction, new global assignments, spiral careers, and the return home. Brain circulation is a well-researched phenomena that informs many governments' talent diapsora management as well as a large range of efforts by countries to court global talent.

“Cost of living adjustments/allowance” or sometimes called G&S ("goods and services differential adjustments/allowance"), are salary adjustments made during IA planning to reflect differences in the cost of living between home and host countries, such as in a “no gain no loss” IA policy. They also can refer to adjustments made during the assignment: Some organizations will schedule reviews 1-2 times per year to look at changes in basket-of-goods prices or other regional cost data to make adjustments. Good data vendors here will provide variations of the cost indices to suit a company's benefits level, e.g. "cost conscious", "standard", or a "custom lifestyle" COL index. Most MNCs will not implement a negative COLA/G&S if the COL is lower in the host country. We do think COLA/G&S is often unnecessary for OECD mobility, since the neighorhoods where highly skilled professionals live and work have similar costs among the most common OECD home-host country pairs. Adjustments for currency fluctuations may be a sufficient alternative to COLA.

Company climate often triumphs company culture and refers to the level of satisfaction or engagement of a workforce at a moment in time. Engagement levels are causally tied to the productivity and financial performance of a firm as well as perhaps to the broader levels of innovation and prosperity in a country. Engagement gaps may be driven by poor company performance, poor leadership decisions, bad talent strategies, poor-fit compensation and appraisal systems, or other factors creating low morale. With a background in AI-HR, the Worldly team has worked on AI/NLP tools to engage employees and analyze company climate.

"Continuity or Handover" is Worldly’s solution to the dilemma of employment relationships when there are multiple cross-border entities involved. MNCs have at least half a dozen common configurations for payroll, tax, and economic or legal employers when an assignee moves between entities in different countries. We consolidated these practices into two options for clients: “Continuity”, where clients can choose a more seamless continuance of the current employment, or “Handover”, where clients suspend the home country employment for the duration of the assignment. While both methods would still constitute dual employment for international tax purposes, they entail differences in compliance and are suitable for different assignment types.

Domicile is a residency-like concept in certain tax codes that also affords flexibility in tax claims. For example one can be a tax resident of the UK but non-domiciled in the UK, in which case they can favorably elect to have their global income taxed on a remittance basis when/if income enters the UK. Typically you only have one domicile (by default the country of your father's/mother's domicile), and you can only change domicile if you have permanently moved to a different country.

Over 3,000 bilateral tax treaties govern a wide range of cross-border taxation issues, while existing principally to avoid double taxation as well as double non-taxation. The bilateral treaties are based on the OECD Model or the UN Model. They want to incentivize cross-border economic activity in ways that are fair, and these treaties regularly bring MNCs, small companies, and individuals to tax courts in jurisdictions around the world. We leverage these treaties as much as possible to design mobility policies and apply treaty benefits in home-host country pairs. The treaties enjoy a wide range of acronyms, i.e. DTA (agreement), DTT (treaty), DTC (convention), but they are all ultimately contracts between states. Check out of our individual posts on recent DTA cases that we find illuminating.

Since family issues are the top reason that assignments fail, with “poaching” being a close contender, attention to spouses is paramount from the start in IA policy. “Dual career couples” refers to when the assignee's spouse has an active career and expects a work permit and career opportunities in the host country as well. Ideally the assignee's employer helps with work visas, placement, career development, and language and cultural training for spouses. Worldly understands the critical role of family in IAs and has put spouses and children in the middle of our service plans.

There’s an important distinction in tax law between legal employer and economic employer, where the latter refers to the employer that meets some or all of the criteria of: responsible for the work of the employee, main beneficiary of the work of the employee, provides day-to-day instruction to the employee, and ultimately bears the employee renumeration. This distinction often comes up in cross-border employment taxation cases.

"Exchange of information" refers to the system that enables tax authorities of different countries to exchange information with one another about taxpayers. EOIs are commonly used in foreign tax credit disputes. A tax deficiency in one country can spur tax collection in the second country, and sometimes without means of legal challenge for the taxpayer in the second country. There are some interesting tax cases in which EOIs are challenged on privacy grounds.

EPRG is a traditional MNC framework for subsidiary relationships: Ethnocentrism, Polycentrism, Regiocentrism, Geocentrism. It describes the level of centralization or decentralization among HQ, regional HQs, and subsidiaries. Briefly... Ethnocentrism strongly favors the HQ against subsidiaries and uses parent-country nationals (PCNs) at the center of talent management (See our Expat Kaleidoscope). Polycentrism empowers local subsidiaries and relies on host-country national (HCN) talent. Regiocentrism involves a few dominant regional HQs (typically North America, APAC, and Europe) which receive top talent. Finally, geocentrism gives independence to subsidiaries but enforces global standardization (a typical example being a global shipping company).

See our breakdown of highly skilled expat types in Expat Kaleidoscope.

This concept refers to the tax codes of a number of countries where a flat employment income tax rate is offered for non-residents, usually at a considerable advantage over the income tax rates for residents. Generally such countries use a 183-day rule to qualify individuals for non-resident rates, sometimes with exceptions such as long-term work visa holders. These rates might inform a split-year tax return strategy for short-term assignments or first year of long-term assignments, where allowed.

The EU champions the Flexicurity model for employment relations, with Denmark's labor system often cited as the prototype. Flexicurity recognizes that productivity and innovation is in fact tied to the ability to hire and fire skilled professionals easily. However, the "security" part means there are strong unemployment benefits under certain conditions of job loss, such as the job loss being out of control of the firm. The model also supports job transitions by use of outplacement or re-skilling if the job itself is made redundant.

FTCs and foreign tax deductions on tax returns are the main procedures for seeking relief from double taxation under bilateral tax treaties. Policies vary, and they are usually "non refundable" in nature, meaning they do not allow one to pay less tax overall than the amount the taxpayer is subject to in their home country. There are also rules that specify when you can claim credits as well as when particular taxes, income exemptions, or deductions of the other country will not qualify for relief.

“Global employment companies” are global entity networks created and owned by an estimated 15% of MNCs. They centralize HR operations and provide for agile global mobility of their workforce. Essentially the MNC creates a network of companies with an HQ or regional HQs, and assignees are hired by the GEC entity as the legal employer/EOR. Employees are then deployed among countries in the GEC network.

First appearing in Harvard Business Review in the 1980s, "Glocalization" or "Glocal" refers to the struggles of MNCs and international joint ventures to find the optimal tradeoff between globalization and localization. This tradeoff spans matters like subsidiary independence, talent decisions, mobility, compensation systems, knowledge sharing, appraisal systems, management styles, and company culture. It turns out the optimal solutions aren't straightforward. The global leadership adage of "Think global act local" is now replaced by "Think and act both globally and locally."

Related to the Vienna Convention and LOBs, this is a principle invoked in tax treaty case law stating that court proceedings should be guided by the “spirit” or original purpose of the treaty. Consequently, courts regularly invoke “Principal Purpose” tests, “Beneficial Owner” tests, or “Alternative Structure” tests to see why arrangements or transactions are structured as they are, which entity or individual is actually benefiting, and if transactions could easily be structured in alternative ways.

GTM² refers to global talent management (GTM) and global talent mobility (GTM). Those experienced in strategic HRM will know these two terms at many levels means the same thing. An effective talent management strategy must utilize global mobility, while the motivation for global mobility is usually talent management.

While at IBM Hofstede was a pioneer in company culture comparisons at the global level. While many other company culture frameworks have come out since, notably Project GLOBE and Trompenaars and Hampden-Turner, the basic Hofstede dimensions remain relevant. In the same tradition, we use cultural dimensions in our analysis such as: It's important to note that country-based company culture analysis paints with broad strokes and the imagined cultural differences are often overstated or unimportant. That said, global company culture "convergence" is a risky and usually incorrect assumption, it's more accurate to discuss in terms of "crossvergence" instead.

Costing workflows and tax equalization rely on an estimation of an employee’s current tax burden (an estimate because it's impractical to get assignees' home country tax returns). Thus companies use a hypothetical tax to represent the home tax burden of an assignee or class of assignees. This amount is used to derive the net salary in a salary workflow, or to serve as the baseline in global tax reimbursement. Most hypo tax calculations used at MNCs will include any state/provincial/cantonal tax, any local/municipal tax, and social fund taxes, sometimes along with hypothetical deductions and credits. An end-of-year reconciliation may take place to reimburse or charge the difference of the hypo tax and the employee's actual burden.

A company will shift from ad-hoc global mobility to international assignment (IA) policies once they get burned on an IA for the first time. A mature MNC mobility department might have a small database of IA policies corresponding to assignment types, employee roles, and particular home-host country pairs. A well-designed policy lays out assignment procedures, costing, tax concerns, requirements of the assignee, services for the assignee's family, repatriation, exception handling, and more. IA policies usually aim for continuity, such as no gain no loss, so that the employee experiences the least friction and change possible in moving, settling, and working in a new country. The assignment agreements should reference the relevant policy. As you may know, IA policy design and maintenance is central in Worldly’s mobility workflows.

For a deeper dive in global talent management, we recommend our review of the leading country reports and indexes in the space. Check out Worldly's 3-part Index Zoo Series.

This is an employee leasing arrangement, for which some jurisdictions have created a registration requirement for the lessors and a tax for the lessees. It occurs, broadly, when a foreign enterprise leases its employees to a domestic enterprise, directly or indirectly, and the work performed is substantive or supporting the core business of the domestic enterprise. It is a concept related to international PEO and labor outsourcing.

A variation on secondment, International PEO establishes a dual employment relationship but here the economic employer and main beneficiary of the employee’s work is the first (original) employer, not the second employer. International PEO is basically a legal employer/employer-of-record (EOR) service for companies who want to employ workers in foreign jurisdictions without first registering an entity. As a result, International PEO has to some extent gained a reputation for being a means of tax avoidance through PE avoidance. Given it does not actually offer PE protection from a legal perspective, and given the current anti-avoidance expansions, it remains a risky practice.

Limitation of Benefits are tax treaty provisions that prevent attempts to exploit the granting of treaty benefits, mainly when a transaction is found to be structured primarily in order to claim a treaty benefit. LOBs apply in a wide range of cases related to agencies, conduit arrangements, associated enterprises, thin capitalization, and many other setups that courts actively identify.

"Long term assignments" are IAs lasting 1 year or more but are not intended as permanent transfers (PTs). Usually more straightforward than STAs from a compliance perspective, almost all LTA assignees will achieve residency status for tax purposes in the host country, excepting special taxation provisions for assignees.

"Mutual Agreement Procedures" refers to treaty provisions that allow the taxpayer to initiate arbitration at a country-to-country level, outside of the scope of domestic tax laws of one of the involved countries. MAPs are usually associated with transfer pricing disputes of MNCs but can also occur if the taxpayer feels they were not taxed in accordance with bilateral tax treaties.

The OECD's Multilateral Instrument (MLI) is the means by which thousands of tax treaties globally have adopted the BEPS provisions, and in short time horizons as it does not require a re-negotiation of tax treaties, just a signing of the MLI. The treaty updates have come into effect or will soon in over 100 jurisdictions starting January 2019.

A continuity approach to global mobility which holds that the assignee should experience neither a gain nor a loss in income due to the change of country. Hence, a costing workflow might aim to equalize taxes, adjust for cost of living and currency, and offer select allowances and accustomed fringe and healthcare benefits. The continuity strategy might even include "split currencies" renumeration. In MNC context the concept might also include convergence of company practices and culture among subsidiaries so that the assignee here too experiences less change.

"Non-discrimination" is a tax treaty concept that's often the reason for lodging a challenge against a tax assessment, in some jurisdictions more than others. It states that foreign and domestic entities should essentially be treated the same under a domestic tax regime, notwithstanding bilateral agreements. It also sometimes refers to Most Favored Nation clauses found in some tax treaties, under which an advantageous tax rate for an activity in one partner country must be extended to all other partner countries with similar treaties.

The OECD Model Tax Convention forms the basis of the large majority of tax treaties entered into by developed nations, primarily to avoid the double taxation of income and capital but also to counter general anti-avoidance of taxes. It is a collection of 32 articles as well as expansive article commentary. The actual bilateral DTAs sometimes exclude or modify provisions of the OECD articles and commentary. However the OECD model and the expansive tax treaty case law in tax courts around the globe cover pretty much all aspects of cross-border taxation between developed nations. Overall the spirit of the OECD Model is to incentivize cross-border economic activity in a way that is fair for all countries. The 2017 edition contains major anti-avoidance updates related to the OECD BEPS project.

"Permanent Establishment" (PE) is a comprehensive international taxation topic. Overall, it is the vehicle by which countries lay rights to taxation on non-resident entities and individuals engaged in economic activity in their borders. More succinctly, it is the threshold for source-country taxation. The nature of PE, types of PE, and elaborations on PE-avoidance arrangements have been expanded in tax treaties over the decades but especially since the 2017 OECD Model updates driven by the BEPS project. While registering and managing a PE is sometimes the easier thing to do, triggering a PE is often a concern for many MNCs, smaller companies, and individuals engaged in cross-border activity who wish to avoid triggering taxation in a jurisdiction. The case law clarifies that there are no hard-fast rules for triggering or not triggering PE outside of assessing the actual nature of the activity. Surface factors like company size, a number-of-days test, location of contracts, fixed location, technical form, etc. are not decisive factors. Instead, courts have given themselves a lot of maneuvering room in declaring a PE for a given company or individual, and for tax planning purposes one always has to start from the substance and beneficiaries of the cross-border activity.

Also the “principle of source", is a simple and common tax treaty concept that states that countries have the right to levy taxes on economic activity that occurs within their borders. Naturally they have the right to levy taxes on foreign entities or individuals extracting value from within their borders, directly or indirectly, where the legal mechanism for exercising this right is Permanent Establishment (PE).

Repatriation agreements (RAs) are critical in global mobility for the employer and assignee. They are drafted prior to the start of an IA and specify the terms and timeline for the resumption of the previous home country employment. Ideally repatriation agreements specify the employee’s role upon return with some consideration for the newly obtained global skills. RAs help employees feel secure and connected to the home employer. IAs are notorious for employee turnover after repatriation, so RAs will help with retainment, and they are a main step on our mobility platform.

Residency is an important concept for tax purposes, as there is often substantial difference in the taxation regimes of residents, non-residents, or third residency categories such as domiciliary status, temporary residents, non-permanent residents, resident aliens, etc. Primarily, residency status impacts income tax rates, contribution obligations, and taxation of global income or income remittance. Determination of residency varies per country, though in practice many use a 183-day rule. It’s not uncommon in global mobility to have two tax residencies, with the bilateral tax treaty containing a “tie-breaker test” to determine tax year residency; the tie-breaker usually comes down to where employment activity actually occurs.

Secondment resists an exact definition as it refers to a set of varying practices used by companies around the globe. It is basically a form of employee loaning where an employee of one company is moved to another company through a secondment agreement. The first company often maintains its employment relationship, so that the secondee (employee) has dual employers, while some companies will first terminate the employment relationship (here the secondment agreement also serves as a rehire agreement after the secondment). In secondment the economic employer and main beneficiary of the secondee’s work is the second employer, not the first (original) employer.

A Services PE is a PE established by ongoing managerial, technical, or consultancy services in a jurisdiction by non-resident entities, individuals, or agents. From its origins in international trade centuries ago, international tax law has evolved with the rise of service-based or knowledge-based economies. Taking things into the digital era, the UN has even published guidelines for Digital Services PEs and Virtual PEs.

There are many types of Self-Initiated Expats (SIEs) and overall they are an important class of skilled professionals for any global talent management strategy, perhaps ranking in sheer volume, globally, to that of company assigned expats (AEs). A firm often will use an SIE national of the firm's home country as a cheaper and less risky altnerative to an AE; they are also a particularly productive class of talent. A complete breakdown of SIEs is offered in our expat explorations post.

"Spiral Careers" is described in a 2011 book by Lynda Gratton as the new expectation in knowledge-based economies that professionals will change their careers many times. There's an upward "spiral" in the sense that professionals amass greater knowledge and know-how over years of professional experience and so become increasingly qualified to manage and contribute to a broader range of activities. The term is often invoked with discussion of "boundaryless careers," "project based economies", and the generational preferences for professional experiences abroad.

Some firms debate which currency to pay assignees in and how to offer compensation for currency fluctuation over time. Assignees might complain if either the renumeration currency depreciates or if the alternate currency gains value during the assignment. An elegant option is to split renumeration between home and host currencies. Typically the base salary will be paid in the home currency, while allowances, cash benefits, etc. are paid in the host currency; the assignee might likewise distribute payments among a home account in home currency for long term savings and a host account in host currency for short term expenses.

Split year returns are possible in some jurisdictions during the first year of an IA. Taxable income can be divided between non-resident and resident periods typically with the 183-day mark serving as the boundary. Split year returns are advantageous when there are favorable non-resident taxation rates.

"Short term assignments" are IAs that last 1 year or less, but of a greater duration and scope than business travel. For Worldly clients STAs are at least 60 days, after which jurisdictions typically have unambiguous taxation rights over the employee, although depending on the nature of the employee's activity taxation rights can happen much sooner.

Related to good faith, "substance-over-form" refers to a doctrine in tax treaty case law where courts primarily look at the substance of an activity/arrangement instead of its technical form. This is a common interpretive lens to pierce artificial arrangements or focus on real economic activity over surface elements.

As a converse to flat non-resident rates, there are of course tax advantages related to having the status of resident over non-resident, especially as relates to income exemptions, deductions, and tax credits. A “substantially-all” provision usually means for non-residents if 90% or more of worldwide income for the year is derived from the non-resident country, then they are eligible for certain tax advantages of residents.

The OECD estimates that 1/2 of global GDP growth in the last decade was due to earnings of the tertiary educated. Talentism is a proposed economic system that might be viewed as an evolution of Capitalism. It starts with widescale investment in human capital development like education, up/re-skilling, and lifelong learning. A company's core talent metrics become viewed as equally as important as financial ones. Highly skilled professionals and researchers receive formal certification. They get access to new types of employment arrangements, global talent visas, a special tax residency status, perhaps even special entities, but they are also subject to easy hire-and-fire rules and must carry the burden of their own career development.

Tax equalization is a continuity strategy used by the majority of MNCs such that an assignee pays the same amount of tax in the host country as they would at home. In tax equalization it's the employer who bears or benefits from the tax difference between jurisdictions. Even though employees are still “protected” from extra tax in tax equalization, there is a common variation called “tax protection” where employees gain from the tax decrease while the employer bears the increase. In MNCs tax equalization is often extended to income of the assignee's partner and sometimes to the assignee's non-organizational income, e.g. capiital gains, dividends, or rental income, but MNCs usually set pre-determined limits on reimbursement amounts for these categories.

“Tax wedge” refers to the gap between the employee’s take-home pay and the employee’s cost to the employer. For example you can sum the employee’s personal income tax, employer and employee contributions, and any other payroll taxes, and express that total as a percentage of the total cost of the employee. Tax wedges are important in payroll planning and for comparison if deciding on global mobility destinations.

Many tax treaties contain technical service clauses where non-resident individuals or firms engaging in managerial, technical or consultancy services are subject to taxation with or without a PE. In most treaties it is taxed in the same way as royalties, and the tax burden often falls on the payer of fees rather than the recipient.

Most domestic tax laws and bilateral tax treaties specify that resident companies or individuals will be taxed on their worldwide income (or on remittance of worldwide income), whereas non-residents will only be taxed on income derived from within the country’s territory. While this is the rule of law in most countries, there are tax cases in certain jurisdictions where non-residents have unrelated global income declared as part of that country's tax base, so the territoriality principle is not always a safe assumption.

Many countries have bilateral totalization treaties, designed to avoid double contributions to statutory social funds ("double social taxation") as well as to recognize the social fund contributions made by foreign employees in their country. “Substantially similar” taxes to the standard social fund contributions are typically recognized as well. The “totalization” refers to the totaling of contribution credits made between the two countries, so that mobile employees aren’t at a disadvantage for social fund benefits.

While "Transnational corporation" (TNC) is often used as a synonym for "Multinational corporation" (MNC), we borrow from the global HRM literature and use TNCs to refer to MNCs that have developed a type of international strategy and operation. Typically this means effective knowledge sharing across the organization; sharing top talent among subsidaries; leveraging the field of assignment types and talent expatriates (see expat overview); country-specific and situational-appropriate adjustments in appraisal, compensation, and management; a balance of independence and integration among subsidiaries; and strong performance on key employee metrics like engagement (see company climate).

Treaty override occurs when domestic tax law is able to override provisions in bilateral tax treaties. In certain countries such as the US and UK an override is in-theory possible by constitution or common law, while in others like Japan or the Netherlands it is not possible; in many, the case law leaves the legal relationship ambiguous. It's a good idea to look at precedents of treaty override in home-host country pairs for tax planning.

The United Nations Model Convention is an analog of the OECD Model for treaties between developed and developing nations. However it also submits globally impactful proposals for changes to tax conventions, in particular related to updating tax conventions for the digital age.

The Vienna Convention on the Law of Treaties (VCLT) is the “treaty about treaties”. It’s often invoked in tax treaty case law to determine how domestic laws should be applied against a bilateral treaty or vice versa. Its “good faith” provision encourages interpretion of cases with respect to the sprit of the particular treaty, taking into account all context, objects, and the treaty’s purpose, leading to dynamic rulings in cross-border taxation disputes.

"Human capital is by far the most important source of competitive advantage in the global economy." - Nobel laureate Gary Becker. "War for Talent" is a term coined by McKinsey consultants in the 1990s, and it has grown to underly modern HR at all levels including global mobility. Competitive talent management is not only a driver of change for firms but also for ecosystem builders like governments, universities, IGOs, and social partners. We can now look at decades of "macro talent management" efforts and outcomes, captured in our 3-part Index Zoo series.

“Wild withholding tax” is a phenomena in tax treaty case law where courts essentially make a mistake and levy taxes that shouldn’t be levied according to a treaty. As a result the entity or individual is unable to claim a tax credit in the other jurisdiction for the taxes paid. There are numerous cases where tax courts make incorrect or irregular rulings, and it serves as a reminder that while audits are not always predictable, audit outcomes are not always either.

"X Pat" refers to both the range of expat portmanteaus out there and the many classes of expats and expat related strategies in global talent management. Flexpats, inpats, lopats, repats, expatpreneurs, virtual-expats, SIEs (along with traditional HCN, PCN, and TCN classes of MNC assigned expats). Definitions and details are found in our expat explorations post.