FAQs About Inpat And Expat Payroll
Inpat and Expat Payroll FAQs
International employees and cross-border assignments create unique challenges for payroll professionals. Employees moving between countries may have payroll, tax, Social Security, immigration, benefits, and reporting obligations in more than one jurisdiction.
International payroll and tax rules are highly dependent on the employee's countries of residence and work, citizenship, immigration status, treaty provisions, assignment structure, and applicable laws. This page is for general educational purposes and is not tax, legal, immigration, or payroll advice.
Common FAQs About Inpat and Expat Payroll
What is an inpat employee?
An inpat is generally an employee who comes into a country from another country to perform work. For example, an employee from another country assigned to work in the United States may be considered an inpat.
What is an expatriate employee?
An expatriate, commonly called an expat, is generally an employee who is assigned to work outside their home country. For example, a U.S.-based employee assigned to work in another country may be considered an expatriate.
What is inpat payroll?
Inpat payroll involves administering compensation for an employee who comes into a country from another country to work.
How is U.S. inpat payroll different?
A foreign employee working in the United States may become subject to U.S. federal, state, and local payroll requirements depending on the circumstances. Immigration and tax residency rules may also affect the employee's payroll treatment.
Does an inpat need a U.S. Social Security number?
The requirement depends on the employee's circumstances and applicable U.S. rules. Payroll should determine whether the employee is required or eligible to obtain a Social Security number or whether another identification process applies.
Does an inpat need to complete Form I-9?
Foreign nationals working in the United States generally must satisfy applicable employment eligibility verification requirements. Payroll and HR should follow current USCIS requirements.
What is expat payroll?
Expat payroll is the process of calculating and administering compensation for employees working outside their home country. It may involve both the employee's home-country payroll and host-country payroll.
Does an expat remain on the home-country payroll?
Not necessarily. An employee may remain on home-country payroll, move to host-country payroll, or have compensation processed through multiple payroll arrangements.
What is a split payroll?
A split payroll is an arrangement in which an employee's compensation is paid through payrolls in more than one country.
Why use a split payroll?
A split payroll may be used to address local compensation requirements, currency needs, tax obligations, benefits, or assignment arrangements.
What is international payroll?
International payroll involves paying employees who work across national borders and managing the related payroll, tax, employment, benefits, and reporting requirements.
Why is international payroll more complicated than regular payroll?
International payroll can involve multiple:
- Tax jurisdictions
- Currency systems
- Payroll regulations
- Social insurance programs
- Employment laws
- Benefits systems
- Reporting requirements
- Immigration requirements
What is tax residency?
Tax residency generally determines which country or jurisdiction may tax an individual's income based on applicable domestic law. Tax residency is separate from citizenship.
Can an employee be a tax resident of more than one country?
Potentially. An employee may be considered a resident under the domestic laws of more than one country, in which case tax treaties or other rules may determine the appropriate treatment.
Does working in another country automatically make an employee a tax resident?
Not necessarily. Tax residency depends on the laws of the relevant jurisdiction and the employee's specific circumstances.
What factors can affect tax residency?
Factors can include:
- Number of days present
- Permanent home
- Center of vital interests
- Economic ties
- Family location
- Employment location
- Citizenship
- Local residency rules
- Tax treaties
Which country should withhold tax from an expat's wages?
The answer depends on where the employee works, tax residency, applicable treaties, payroll rules, and assignment structure.
Does an expat continue paying home-country income tax?
Possibly. An employee's home-country tax obligations may continue even while working abroad.
Does an expat have to pay host-country tax?
Potentially. Many countries impose tax obligations on employment income earned from work performed within the country.
Can an employee be subject to tax in two countries?
Yes. Cross-border employees can potentially have tax obligations in both their home and host countries.
How can double taxation be addressed?
The applicable mechanism depends on the countries involved and the employee's circumstances. Potential mechanisms include:
- Tax treaties
- Foreign tax credits
- Foreign earned income exclusions
- Tax equalization
- Tax protection
- Other local relief provisions
What is tax equalization?
Tax equalization is an employer policy designed to help ensure that an employee on an international assignment generally experiences a tax burden comparable to what the employee would have experienced had they remained in their home country.
Why do employers use tax equalization?
International assignments can create significant differences in tax liability. Tax equalization can help make assignments more predictable for employees and employers.
What is a Social Security totalization agreement?
A totalization agreement is an agreement between the United States and certain other countries designed, among other things, to coordinate Social Security coverage and reduce situations in which workers and employers pay Social Security taxes to both countries for the same work.
What is hypothetical tax?
Hypothetical tax is an estimated amount representing the home-country tax the employee would have paid if they had remained in their home location.
Is hypothetical tax withheld from an expat's paycheck?
It can be, depending on the employer's tax equalization policy.
Is tax equalization mandatory?
No. Tax equalization is generally an employer policy rather than a universal legal requirement.
What is tax protection?
Tax protection is an arrangement intended to protect an employee from paying more tax because of an international assignment.
How is tax protection different from tax equalization?
Under tax equalization, the employee generally pays a hypothetical home-country tax amount and the employer bears or manages assignment-related tax differences. Under tax protection, the employer may protect the employee from additional tax while allowing the employee to benefit from certain tax savings. The specific arrangements depend on the employer's policy.
What is tax protection?
Tax protection is an arrangement intended to protect an employee from paying more tax because of an international assignment.
How is tax protection different from tax equalization?
Under tax equalization, the employee generally pays a hypothetical home-country tax amount and the employer bears or manages assignment-related tax differences. Under tax protection, the employer may protect the employee from additional tax while allowing the employee to benefit from certain tax savings. The specific arrangements depend on the employer's policy.
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