Following up on our earlier post about the Ontario Non-Resident Speculation Tax that became effective June 1, the following is a summary of current status as obtained from reliable sources but which cannot and should not be relied upon as legal or tax advice and Weichert clients should review this tax law status with their applicable tax advisors.
Quite simply, several material developments have occurred that corporate clients and relocation companies should be aware of as they undertake home sale transactions within the Greater Golden Horseshoe* Region (GGH).
Foreign national purchasers (essentially any buyer who is not a Canadian citizen or permanent resident or a couples purchase in which neither spouse is a Canadian citizen) will be subject to paying the 15% purchase price speculation tax, and relocation companies and clients should be prepared accordingly. Please note that some special foreign purchaser exemptions may apply, and would need to be pursued by experienced local counsel with the Ontario Ministry of Finance.
Last week, Marianne Schmidt, our VP of US Domestic Tax and Reporting, conducted an engaging webinar on ways companies can save cost by re-examining their tax gross-up processes. Attendees had a lot of questions, and while we didn’t have time to address them all during the Q&A segment of the webinar, we have, as promised, presented them here, along with Marianne’s responses, for your reading pleasure. Marianne remains happy to continue this dialogue with anyone interested; feel free to reach out to her directly or through your Weichert contact.
In what situation would a person only gross up deductible items for FICA only? If items are deductible wouldn’t they normally be non-reportable on the ER side?
Deductible moves and deductible expenses are two entirely different subjects. A deductible move is one that meets all the criteria (is closely related to the start of work, meets the distance test and meets the time test). HHG and final move expenses (except meals and mileage > IRS limit) are not reportable if paid to a third party and are only reportable (not taxable) if they are reimbursed to the employee. Deductible expenses are taxable expenses that have been paid to or on behalf of your employee and are the types of expenses that are deductible on schedule A of your 1040. Those deductible expenses should be grossed up for FICA only, otherwise your employees will experience a tax gross up windfall.
I thought the US payroll is pay-as-you-earn, therefore you need to issue the withholding payments and report the income when the transaction occurred to be compliant?
We do not withhold taxes from payments, we only provide gross up calculations to payroll. Once payroll assigns a check date, normally the taxes are due the next day.
What is the risk involved with moving to gross-up once per year?
Moving to an annual reporting schedule is the decision of your company, the risk would be whatever you make it or not. From my perspective, however, the risk is no different than other frequencies. Our clients have always been compliant and have never failed or been questioned under audit. Continue Reading →
On April 20, 2017, the Province of Ontario enacted a 15 per cent non-resident speculation tax (NRST) on the purchase or acquisition of properties in Metropolitan Toronto and its surrounding areas, referred to as the “Greater Golden Horseshoe” (GGH).
The GGH incorporates the greater Toronto area, including Toronto itself as well as Brant, Dufferin, Durham, Haldimand, Halton, Hamilton, Kawartha Lakes, Niagara, Northumberland, Peel, Peterborough, Simcoe, Waterloo, Wellington and York.
Similar to the 15% NRST tax imposed for greater Vancouver area in British Columbia in August 2016, the Ontario NRST, which went into effect on April 21, 2017, is intended to hamper the bid-up by foreign buyers/corporations in the metropolitan Toronto residential housing markets. The announcement was included as part of the 16-point proposal introduced in the Ontario government’s Fair Housing Plan, which aims to bring stability to Ontario’s real estate market.
Among the greatest challenges facing managers of mobile employees and business travelers, three stand tall: remaining compliant with ever-changing visa/immigration laws, accurately tracking days in specific locations for tax purposes, and the ability to contact expatriate employees in the event of emergency. We are proud to announce the first app to simplify and streamline all three, the Weichert Global Organizer.
This app improves visa/tax compliance by tracking time in each location, alerting the employee and HR of pending tax or immigration events—such as visa renewal or days in a certain jurisdiction triggering tax liability. These features allow HR managers to be proactive, rather than reactive, to any concerns. Further, at tax time, all of the critical data that the employee and company need for filing and reporting is easily accessible in one place.
Additionally, in the event of an emergency, the app empowers HR managers to instantly locate their employees at any point on the globe, alert them to danger and, if necessary, evacuate them to a place of safety.
The Weichert Global Organizer represents a quantum improvement in managing these processes for today’s companies, many of which rely on a corporate travel agent or a tax provider for this information. But these solutions have limitations; travel agency data merely suggests that someone bought a ticket, not that they actually traveled, nor does it indicate a traveler’s precise location. This would not meet the IRS’s requirement that companies have an adequate process to track their employees. Likewise, Big Four firms usually bundle their trackers with larger advisory services and they do not include integrated immigration or duty of care.
Simply put, today’s companies need a better way to keep track of their entire globally mobile population, where they are going and what they are doing. That’s why we developed the Weichert Global Organizer. In detail, here’s what it tracks:
global taxation: through direct link to their phones’ GPS system, the app tracks the time employees spend in country and monitors it against local, federal and state compliance requirements, and provides alerts to potential compliance issues.
visa/immigration: the app monitors employees’ time in country against visa and immigration requirements, providing renewal reminders and live alerts of potential infringements.
emergency communication: when emergencies unfold, the app instantly pinpoints your global assignees and travelers and allows you to transmit instant safety alerts.
With the steady increase in demand for a highly flexible and mobile workforce, Companies are growing concerned about a number of risks when it comes to business travel. These include employees using business visas to circumvent work visa obligations, violations of tax laws, the inability of their company to track length of trip stays, and employees misrepresenting their business travel activities. In this post, I’ll present statistics that demonstrate the urgency of the situation, identifying red flags and recommendations for overcoming the obstacles in managing extended business travelers.
A recent survey (2015) sponsored by NFTC and conducted by the law firm Berry Appelman and Leiden revealed the following statistics:
• Although about 60% of companies reported that their employees take over 500 international business trips annually, only one third of all respondents has a written business visa travel policy.
• The overwhelming majority of respondents (77 percent) would like to have improved capability to track business visa travel. Today, only one in ﬁve global mobility pro grams track all business visa travel.
• Authorization for business travel is generally approved by the business unit or employee manager in the employee’s home country. Companies then rely on a variety of resources (e.g. law ﬁrm, visa processing company, internal resources) to process the business visas.
In response, we felt it appropriate to create what we consider to be the Best Practices for extended business travelers. To get started, it makes sense that your company understands your areas for exposure, engages in due diligence and identifies specific risk areas: Continue Reading →
As the end of the year approaches, so do the gentle reminders that tax season will soon be upon us. While the tax filing and reporting process can be cumbersome, for folks who have relocated for work over the past year, it can be extremely complex.
To shed some light on the process, our in-house tax affiliate, Weichert Mobility Tax Services, has developed a year-end tax planning guide. This informative piece will be a handy guide for reviewing the past year’s tax activities, and also offers invaluable tax planning techniques that can help save you time and money.
Please consider this required reading as you take down the decorations and mistletoe.
Through this blog, we’re proud to regularly bring you domestic and global tax insight from Weichert Mobility Tax Services. This month, subject matter experts from our friends at BDO discuss major changes to the UK tax treatment of equity awards for Internationally Mobile Employees (IMEs) and how companies should consider the impact on existing and new awards. Companies that move assignees to the UK will want to take note.
In the wake of a new ruling in April 2015, UK equity income is now sourced based on the nexus during the vesting period. If an individual works in the UK during the vesting period, there will be a UK liability and potential payroll withholding obligation. The new rules apply to all outstanding awards, regardless of the date of grant or the individual’s residence status on the date of grant or vest. Also, they apply to both inbounds and outbounds.
For example, say an employee received an option subject to a three year vesting period in 2013 while residing in Germany. If she moved to the UK in 2014 on a two year assignment after holding the option for 18 months, under the new rules, 50% of the gain will be subject to UK tax. Under the old rules, no gain would have been subject to UK tax. Broadly, the National Insurance Contributions (NIC) treatment follows the tax provisions but is dependent on the status of the individual and whether treaty or non treaty countries are involved. Continue Reading →
If you’re sending employees on temporary domestic assignments, it’s a good idea to have a policy for those moves. Unfortunately, our Annual Mobility Survey revealed that only 37% of companies have a formal policy in place to manage short-term assignments. The danger here is that managing domestic temporary relocations on an ad-hoc basis exposes your company to increased compliance risks because you’re less likely to accurately track the employee’s time in the destination location or withhold appropriate taxes for that time period.
So a domestic temporary assignment policy is a good idea. But what benefits do you offer?
My recommendation is to include temporary living, return trips, travel expenses, tax gross-up and miscellaneous allowances. To enhance tax compliance, many policies state that employees are expected to maintain housing in the home location and it is assumed that the employee will be returning to the original location at the end of the assignment. If the employee does not maintain a home location residence, the company may regard the move as permanent from a tax perspective.
Under Canadian tax rules, non‐resident companies who send their employees to Canada are required to comply with a substantial administrative burden. This applies even if the employee is in Canada for a relatively short period of time.
This compliance burden applies even if the employee would otherwise not be subject to personal tax in
Canada on those earning (because the employee resides in a country with which Canada has a Tax Treaty).
The Canada Revenue Agency (CRA) expects non‐resident employers to register and obtain a number with them so that as employers they can remit the appropriate withholding tax. As well, the individual employee must obtain an identification number from CRA. The employee is then expected to file a Canadian personal tax return claiming a refund of payroll taxes withheld on the basis that he or she is entitled to relief under a Tax Treaty.
There is the ability for employers to obtain waivers to not withhold. However, the waiver has to be applied for in advance in respect of specific employees and is only for a specific period of time. This has proven to be inefficient and cumbersome and it is only available on an administrative basis which has often led to arbitrary results.
The following tips can help you improve the overall process to boost compliance and reduce or eliminate late filings and W-2C amendments that will inevitably cost you more time, money and sanity.
10. While it’s still fresh in your mind, make a list of the things that worked well in preparing the 2014 year-end and what needs to be addressed for next year. Even if you only had to do one W-2C, why chance that the one mistake could be for a senior level executive? Bottom line: There’s always room for improvement.