Long and Short Term Assignments

 Specifics

• Duration between 3 months and 5 years
• In case of long term assignment usually relocation to the host country

• Often intercompany assignments

Typical structure

• Assignment agreement for limited time period, in case of long term sometimes local host employment agreement
• Compensation paid by home, host or split
• Individual is normally integrated in host entity structure (particularly for long term)

Typical tax and social security scenario

• Employment income usually taxable in host country, worldwide income taxable in country of residence (either home or host)
• Continuation of home social security in case of treaty, otherwise host scheme

Examples

• Management or specialist function in host entity covered (temporary) by a resource from abroad
• Specific project in host entity requiring specialists from abroad for limited period

Common challenges

• Assignment compensation and benefits
• Tax differences impacting net income
• Handling of tax withholding and social security
• Insurance and pension coverage/benefits

Project Workers and Specialists

Specifics

• Duration can vary and not always predictable

• No relocation to the host country
• Not necessarily intercompany assignments

Typical structure

• Often no particular agreement as the home labour agreement may already consider provisions for working abroad
• Compensation paid by home entity
• Individual stays integrated in home entity structure, often host entity not existing (e.g. individual works at client premises)

Typical tax and social security scenario

• Depends on the specific circumstances. Tax and social security obligations can either be in home, host or both countries

Examples

• Technician doing maintenance job at the customer
• Sales manager visiting clients, promoting products and negotiating contracts

Common challenges

• Determining tax, social security and immigration obligations and handling of the same in host country
• Permanent establishment risk
• Economic employer risk
• Understanding of tax treaty and correct interpretation of 183 day rule

Multistate Workers and Commuters

Specifics

• Duration normally for unlimited period
• Work countries differ from residence state
• No assignment between entities

Typical structure

• Local employment agreement (or several)
• Compensation paid by (several) employers
• Individual remains fully integrated in home entity, often there is no host entity and individual works e.g. at client premises

Typical tax and social security scenario

• Taxation split between residence and employment country
• Social security in employment or residence state (especially in EU)

Examples

• Swiss CFO employed and living in Zurich but having board member functions in German and French group companies
• German CFO employed in Zurich but living in Frankfurt and commuting weekly

Common challenges

• Understanding and determining tax and social security obligations
• Handling of tax withholding and social security
• Insurance and pension coverage/benefits