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Pre-Decision Planning for Domestic Relocations-Part 2

| October 2, 2013

How to Optimize Your Company’s Pre-Decision Planning Program

by Jerry Funaro, CRP, GMS
Vice President, Global Marketing, TRC Global Mobility, Inc.

In part one of this blog, I gave some basic information on pre-decision planning programs, along with their advantages and potential drawbacks. In this follow-up, I’ll go over some of the details that can make your company’s pre-decision program a success.

The initial needs assessment

The first phase of an effective pre-decision planning program is an initial needs assessment. The initial needs assessment typically consists of a brief, pre-initiation call or interview to gather key financial and lifestyle details on the employee and his or her family. These details should include information on:

  • the family’s current home and finances
  • the spouse or partner’s current employment situation
  • expectations and requirements for the spouse or partner’s employment in the new location

Ideally, this interview is conducted by a third-party relocation consultant rather than a representative from the company. Employees might be reticent about sharing personal details with a coworker, and company representatives might not be sure which questions to ask to get a full picture of the transferee’s situation.

To prevent surprises and encourage complete and candid responses, potential transferees should know that the call is coming, as well as the purpose of the call. The consultant should emphasize that the initial needs assessment is not an initiation call, an offer of the position, or a commitment to offer any specific benefits.

Real estate considerations and home valuation

For most employees, their real estate situation will be pivotal in the decision-making process. Given this, it is critical to determine the market value of the home (and the state of the market, including the projected sale timeframe) before relocation is offered. (Many companies incorporate a mortgage pre-approval process at this stage, to confirm the employee would qualify for a mortgage and to determine the amount he or she would have available to spend at the destination.)

In the needs assessment conversation, the consultant will begin to determine three key real estate factors:

  • what the employee paid for his or her home
  • the current mortgage balance
  • whether the employee plans to purchase a home at the destination

Not surprisingly, home value information from the employee is seldom accurate or useful in making a business decision. Many people overestimate their home’s value, creating unrealistic expectations of the sale price and the length of time needed for a sale. A true assessment of the employee’s financial position requires a more detailed analysis of the departure home and its value — an analysis which the relocation management company should be able to provide to the employer in a summary report. This analysis can be accomplished in at least three ways, listed below in increasing order of accuracy, complexity and cost:

  1. Online services such as Zillow and Trulia (preferably more than one, since results tend to vary).
  2. A broker market analysis (BMA) by a capable agent. This data invariably provides a more complete picture that can make the potential transferee’s position much clearer and alerts the employer if supplemental services (and costs) might be required to complete the relocation. BMAs do add time to the process — perhaps a week — and the employee response deadline must be long enough to allow this analysis to be completed and for both sides to assess the results.
  3. An appraisal. An appraisal will accomplish the same objective as a BMA, with even more objective and detailed data to support the established value. However, appraisals cost more and take longer than BMAs, and the additional information gleaned might be overkill for a pre-decision program. Some companies generally use BMAs but reserve appraisals for more difficult property valuations.

Summary report and follow-up

With all of this information captured, the relocation company will prepare and present a summary analysis of the employee’s situation to the company.  This report should be customized to reflect the company’s specific requirements.  For relatively straightforward and less costly relocations, this report might be sufficient, though the consultant should always be available to clarify or discuss the information in more detail.

If the relocation looks like it will be complex and costly; if the employee has unusual needs; or if the employee expresses reservations about relocating, a company representative likely will want to discuss the move in detail. At this point, the company might cancel or postpone the relocation or the employee might opt out. These canceled relocations may transition into commuter or hybrid assignments, either permanently or until a formal relocation becomes practical.

If the employer and employee decide the relocation makes sense, the relocation process proceeds and a look-see trip can be scheduled. The consultant or a relocation specialist schedules an initiation call to formally begin the relocation process. He or she re-introduces the program and explains the benefits for which the employee is eligible.

If the employee agrees to the move and the company is using a classic tiered policy model (based on job level, salary or other factors), it will be simple to identify the applicable policy and the estimated costs of these standard policy components and any exceptions. Companies that use the increasingly popular core/flex model or that have a permissive exception culture will need to tailor the package to meet the employee’s identified needs. Then they can estimate the total cost of the package required to complete the relocation. Some items might be negotiable among the hiring manager, HR or relocation managers and the candidate.

Closing the loop

Pre-decision programs provide more and better data to estimate costs, but it’s important for the employer to remember that the cost projections are still estimates. In addition, some costs, such as possible loss-on-sale benefits, are difficult or impossible to estimate until the relocation process is underway. Still, the pre-decision process can reduce the likelihood of unpleasant surprises and pave the way for smoother, more successful transitions. Given the cost and complexity of a typical relocation, pre-decision programs represent a valuable talent management tool.

About TRC

Since 1987, TRC has delivered creative, cost-effective relocation and international assignment services across the United States and in more than 150 other countries around the world. TRC partners with its clients to develop competitive, best-practice relocation programs, drawing from a comprehensive range of relocation services, including U.S. home selling, home finding and consulting services and complete international relocation services. TRC’s client base represents a wide variety of products and services and ranges from startup firms to Global 1000 companies.

 

Foreign Account Tax Compliance Act (FATCA) Drives Record Numbers of Americans to Renounce Their Citizenship

| August 13, 2013

By Josh Barro

A record number of Americans are giving up their U.S. citizenship. The Wall Street Journal reports that 1,130 Americans renounced their citizenship in the second quarter of 2013, more than did so in all of 2012. To my surprise, the list of new ex-Americans is publicly available; I didn’t recognize any of the names on a quick scan. According to the Journal, the surge in expatriations seems to be driven by the upcoming implementation of the Foreign Account Tax Compliance Act (FATCA), a 2010 law that forces foreign financial institutions to disclose more information to the IRS about Americans’ accounts and investments. Starting in 2014, foreign financial institutions will have to tell the IRS about income accruing to American clients (or businesses owned by Americans), and they’ll have to withhold American income tax as appropriate. In other words, it’s going to become a lot harder to hide your income with a Swiss bank account.

The IRS can’t directly tell foreign banks what data to turn over. But it has a pretty big stick—it can impose a 30 percent withholding tax on payments from the U.S. to foreign financial institutions unless they cooperate. As a result, many foreign banks and foreign countries have been entering into agreements with the IRS to comply with FATCA. If you’re an American living in the U.S. and your strategy for hiding income abroad isn’t working anymore, you may have few options but to pay up. But if you live abroad, you have another choice available: Renounce your U.S. citizenship so you’re not liable for American income tax. That’s one driver of the surge in renunciations. Another likely factor is the increase in capital gains and income tax rates in 2013, meaning that wealthy American expatriates can get a bigger tax saving by renouncing citizenship than they used to. But a third factor is that FATCA creates compliance headaches apart from the actual tax bills it leads to. As the WSJ describes:

  • Some U.S. citizens say they are exasperated by a growing raft of paperwork that forces U.S. citizens living abroad to declare the minutiae of their financial holdings and other assets. That has increased the attraction of becoming a citizen in places such as Hong Kong, where the individual tax rate is capped at 15%.
  • “My decision was less about the actual amount of taxes I had to pay, and more about the system,” said one investment banker, who renounced his U.S. citizenship and is now a Hong Kong citizen. “I’m not an ultrawealthy dude. It was the hassle with all the paperwork.”

A few months ago, I attended a dinner where I sat between two Americans living abroad who complained that FATCA has made foreign banks less willing to provide American expatriates with checking accounts, credit cards and mortgages. This has been a major point of complaint for organizations representing American expatriates. FATCA also complicates matters for foreign businesses with American investors (and for Americans who want to invest in foreign businesses) since American ownership makes a business subject to FATCA reporting.

If you intend to move back to the U.S., you’re probably not going to renounce your citizenship because it was hard to get a checking account, or even because you had to forego an investment opportunity. But if you’re a dual citizen with weak ties to the U.S. and the law is materially interfering with your financial dealings, it might be a reason to go ahead and quit being an American. Marie Sapirie, the legal editor at Tax Notes, even says the IRS proposed renouncing citizenship as an option for an American with a complicated tax situation who had long resided abroad. Last fall, I attended an American Swiss Foundation trip to Switzerland and FATCA was the number one hobby horse for the Swiss participants. The difficulty in evaluating the Swiss complaints is that the Swiss have a combination of good and bad reasons for hating FATCA. The law creates compliance burdens for Americans living in Switzerland and Swiss who do legitimate business with Americans. But it also undermines tax evasion strategies that are the key reason that some Americans were interested in banking in Switzerland in the first place.

Of course, every law has compliance costs, and it’s not even clear that it’s such a big problem if more Americans, presumably dual citizens living abroad with relatively weak ties to the U.S., are renouncing citizenship. But the benefits of FATCA may also be relatively modest: It’s expected to raise $7.6 billion in added taxes over 10 years. In 1999, the State Department estimated that there are between 3 and 6 million Americans living abroad; if those numbers are similar today, that means FATCA will generate about $170 in extra annual taxes per expatriate. The revenue estimate for FATCA may prove incorrect in either direction; it’s based on a guess about how much unreported foreign income will be discovered when the new reporting and withholding requirements come into effect. As the law is implemented next year, we’ll start to see how much revenue actually rolls in—and whether the law is worth the compliance costs and expatriations that it causes.

This post originally appeared in Business Insider.

United States: USCIS to Begin Reviewing Same-Sex Petitions Immediately, DHS Confirms

| July 3, 2013

U.S. citizens and lawful permanent residents can begin to file cases on behalf of their foreign same-sex spouses without delay. Same-sex cases are to be reviewed in the same manner as those filed on behalf of opposite-sex spouses.

 

United States: USCIS to Begin Reviewing Same Sex Petitions Immediately, DHS Confirms

U.S. Citizenship and Immigration Services will immediately begin to review family-based green card cases filed on behalf of same-sex spouses, the Department of Homeland Security has confirmed. In the wake of the Supreme Court’s decision to strike down Section 3 of the Defense of Marriage Act(DOMA), U.S. citizens and lawful permanent residents can begin to file petitions for their same-sex spouses without delay.

USCIS will also reopen same-sex marriage cases denied since February 2011, according to an announcement last week from USCIS Director Alejandro Mayorkas. Petitioners whose filings were denied before that time can move to have their cases reopened.

The agency is to review same-sex marriage cases in the same way that petitions filed on behalf of opposite-sex spouses are treated, though further agency guidance is expected. It has long been DHS policy to recognize marriages as long as they are valid at their place of inception, though DOMA and earlier decisions restricted that recognition to opposite-sex marriages. In the past, the agency has sometimes considered whether a marriage is recognized in the state where a couple resides, but this is very rare and limited to specific factual circumstances. Section 2 of DOMA – which was not affected by the Supreme Court’s decision – permits a U.S. state to decline to recognize same-sex marriages solemnized in other states.

Media reports indicate that USCIS has already approved at least one same-sex marriage petition for a couple married in New York but residing in Florida, where same-sex marriage is not recognized.

Source: Fragomen

Join TRC at the SHRM 2013 Annual Conference & Exposition, June 16-19

| June 4, 2013

With an impressive keynote lineup, hundreds of sessions, the world’s largest HR marketplace, and the iconic Chicago skyline as a backdrop, the SHRM 2013 Annual Conference & Exposition will give you everything you need to be more focused, energized and successful. Make your plans now to join TRC Global Mobility and ensure that you are faster, stronger, and bolder.

Visit TRC at Booth 2408 at the Exposition and learn how we’ll exceed your expectations of a relocation management company.  Register to win a Tiffany gift card to use any way you like!

Learn more

 

 

Join TRC at the Worldwide ERC® National Relocation Conference in San Diego

| April 10, 2013

Talent Mobility: Catch the Wave!

Join TRC at the Worldwide ERC® National Relocation Conference in San Diego, May 15-17, 2013

What’s the best kind of meeting experience you can imagine? We think it’s one where you spend some concentrated time with your smartest peers, comparing notes and discovering some amazing solutions to your biggest challenges. That’s what you’ll find at Worldwide ERC’s National Relocation Conference! The Conference will help you manage your business and your career for optimal success, in a fast-paced, lively learning environment that draws the best and brightest professionals and speakers.

Join TRC’s Jerry Funaro for the interactive corporate session, “Tiered Policies…or Tired Policies”, and learn how your peers have updated their programs to meet today’s recruiting and retention objectives. Enjoy a complimentary chair massage at the TRC Relaxation Station and visit us at Booth 500!

Corporate first-time attendees are eligible for FREE registration (up to a $1695 value)! Contact Jerry Funaro, Vice President, Global Marketing at jfunaro@trcgm.com or +1.203.925.2001 for more information.

Media Contact

Jerry Funaro, CRP, GMS
Vice President, Global Marketing
jerryf@trcgm.com
+1.203.925.2001

The EPA’s RPP Rule and Risk Management: TRC Relocation Sponsored Webinar

| March 18, 2013

Join us for an informative webinar sponsored by TRC Global Mobility covering the obligations and liabilities of relocation management companies  for complying with the EPA’s Lead Renovation, Repair and Painting Rule (RRP Rule).   This regulation requires that firms performing renovation, repair, and painting projects that disturb lead-based paint in homes built before 1978 be certified by EPA and use certified renovators who are trained by EPA-approved training providers to follow lead-safe work practices.

Information and Registration >

Date: April 16, 2013

Time: 2:00 PM (ET)

Cost: FREE

Focus: U.S. Domestic

CE Credit: CRP

Research Reveals Vast Majority of Gen Y Employees Expect to Work Abroad in Future

| February 18, 2013

Students and young professionals in the US and UK expect to live and work abroad at some point in their career. This expectation was uncovered in a survey, conducted by international relocation specialist MOVE Guides, as part of a wider report into Gen Y and global mobility.

The report highlights a growing recognition of international relocation as a rite of passage amongst Gen Y workers, for whom cross-cultural experience and career development are a priority. Indeed, 93 per cent of professionals surveyed in the UK and abroad expect to live and work overseas at some point in their career and 85 per cent of those surveyed would consider moving to a new country for a job opportunity without having previously visited it.

According to Brynne Herbert, MOVE Guides CEO and founder, the desire for overseas experience will become more pronounced as companies continue to expand into emerging markets:

“Cross-border business opportunities are increasingly important for younger staff at multinational firms. Ambitious Gen Y employees want to experience these new markets and gaining global experience is becoming more important than financial reward. Those companies not meeting the needs of this generation will find themselves struggling to recruit the brightest and best that the global talent pool has to offer.”

The report highlights the growing expectation to live and work overseas as part of a wider trend of employees progressively viewing themselves as ‘consumers’ who seek autonomy, transparency and choice in their career paths. Members of Gen Y, who are predicted to make up 75 per cent of the global workforce by 2025, are the first to have grown up with international travel, mobile technology and internet connectivity as the norm, and increasingly expect employers to offer them the experiences and technologies that they are accustomed to in their personal lives.

“Gen Y’ers are becoming increasingly savvy, both in terms of the technology they use and what they expect from their employers. The internet has altered the way they find information, make purchase decisions and communicate with others”, comments Herbert. “This is a generation used to shopping around for the best deal – and this extends to the employment world. If companies want to attract the right talent, they must adapt quickly.”

In global relocation terms, this means HR departments will see an increasing need to innovate to support international assignments and relocation. According to Herbert, as the gap closes between enterprise and consumer technology, employees will expect the same sleek technology and convenience when, for instance, they book a holiday or other service online, from their employers.

Herbert concludes: “Organisations that offer Gen Y new technologies for international relocation will position themselves as progressive and innovative, and ultimately win the fight to obtain and retain the best global talent.”

Source: www.moveguides.com

United Kingdom: Changes Floated to Short-Term Business Visitors Agreement

| February 13, 2013

Her Majesty’s Revenue & Customs (HMRC) is proposing to amend the U.K.’s Short-Term Business Visitors (Appendix 4) agreement. Many companies use Appendix 4 agreements to reduce the burdens of payroll withholding and reporting requirements in respect of short-term business travellers to the U.K. who benefit from relief under double taxation agreements.

Overview

The current Appendix 4 agreement divides business travellers into four categories for reporting purposes based upon the number of days the employees have spent in the United Kingdom. Broadly, the greater the number of days spent in the U.K., the greater the reporting requirements. The proposed changes are significant. The biggest change will be the requirement to inform HMRC of individuals who are likely to spend over 150 days in the U.K. as soon as “… it can reasonably be anticipated that the employee will be present in the U.K. for more than 150 days.”2 This is even if treaty relief will be due. The other change proposed is that dual residents will be able to be included in the agreement.

Those businesses that already have an Appendix 4 agreement will not have to sign a new agreement, but will be sent a new agreement when the Appendix 4 report for 2012/2013 is filed.

During a recent meeting of the Joint Forum on Expatriate Tax and National Insurance Contributions, HMRC expressed the view that employers that do not operate withholding on the basis that treaty relief is due without an agreement with HMRC should obtain such an agreement. This is particularly important with the introduction of Real Time Information (RTI) as HMRC will be expecting compliance with the agreements and potential penalties will apply for non-compliance. Under RTI HMRC will be able to check whether employers are being compliant on a monthly basis. (For more details on the introduction of RTI, see Flash International Executive Alert 2012-214, 30 November 2012.)

KPMG Note

We understand that the new agreements will be kept under review for two tax years to address any problems that arise in practice following the introduction of the Statutory Residence Test and RTI in April 2013.

Key Changes

With effect from 6 April 2013, the main changes are as follows:

1. Appendix 4 agreements apply to dual residents where the employee is treaty resident in the overseas state (previously the employee had to be non U.K. resident).

2. Under the new RTI payroll reporting regime, employees covered by an Appendix 4 agreement will not be included in the monthly submissions to HMRC.

3. The agreement has to be signed by the business and has to be authorized by HMRC.

4. Reporting for the 1 to 30-days, 31 to 60-days, and 61 to 90-days categories are unchanged.

5. 91 to 183-days category split into 91 to 150-days and 151 to 183-days categories with the following reporting requirements: “Visitors to the UK 91 to 150 days: For an employee in the UK for a period of 91 days but not exceeding 150 days in the tax year PAYE can be disregarded provided that (a) all of the information requested for visitors up to 90 days is provided and in addition (b) in the case of non US citizens and Green Card holders the employee provides a statement from the overseas Revenue authority confirming residence in the other state for tax purposes throughout the period in the UK. This statement should be passed to the HMRC Office by 31 May following the end of the relevant overseas tax year. This arrangement is only provisional until the relevant certificate is received. In the case of US citizens it will only be necessary for the employee to provide evidence of continuing residence in the US.”3

6. New category of 151 to 183 days. As noted in the draft agreement “Visitors to the UK 151 to 183 days: Applications will be made on a named individual basis for authority to include the employee in this arrangement. The application will be made as soon as it can reasonably be anticipated that the employee will be present in the UK for more than 150 days. The application will include (a) all of the information requested for visitors up to 90 days and confirmation that the statement from the overseas Revenue authority will follow by the relevant 31 May, and (b) a statement by the employee giving reasons why he/she considers himself/herself to be treaty resident in the treaty partner country by reference to the appropriate article in the relevant Double Taxation Treaty.

 

Helpsheet HS302 provides more information about dual residence generally and the tests to be applied to determine the country of tax residence.

HMRC will consider the circumstances and will (1) notify the employer that the individual can be included in the Appendix 4 arrangement, or (2) authorise code NT and issue a Self Assessment Tax Return, or (3) confirm that PAYE should be applied and issue a Self Assessment Tax Return.”

KPMG Note

The introduction of the statutory residence test from 6 April 2013, may mean that more individuals are considered dual residents. HMRC seems to have recognized that this may increase burdens on employers and, therefore, have now included such dual residents in the Appendix 4 agreement.

The introduction of RTI means that HMRC for the first time will be able to monitor how U.K. withholding is operated each pay-day and hence will be able to determine whether employers are following the terms of the agreement. It is, therefore, essential that employers have systems and processes in place to track and monitor their short-term business visitors.

Source: KPMG

Russia: New Reforms Create Streamlined Business Visa but Toughen Sanctions

| January 22, 2013

Representatives and employees of multinational companies making investments in Russia will be able to obtain five-year business visas without an invitation letter. Temporary residence permit holders no longer need a work permit to work in Russia. Fines have been increased for individuals or organizations that facilitate unlawful entry.

The Russian government has announced several immigration reforms, including a new five-year business visa for employees of qualifying multinational companies, automatic work authorization for temporary residence permit holders, a new e-filing service for employers applying for employment or work permits, and increased sanctions for noncompliance.

New Five-Year Business Visa

The reforms create a new multi-entry business visa for representatives and employees of multinational companies making investments into the Russian economy. The visa will be valid for up to five years and will not require a government-issued invitation letter from a sponsoring entity. Russian entry visas are generally only valid for travel for up to one year, so the new visa will benefit frequent business travelers from eligible companies. Another benefit is that eligible companies will not be required to present a government-issued invitation letter from a sponsoring entity as part of their application.

The Russian government has not specified when the new five-year visa will become available, and the Federal Migration Service has yet to establish eligibility criteria or application procedures.

Automatic Work Authorization for Temporary Residence Permit Holders

Temporary residence permits are now free to work in Russia without a work permit. In addition, employers are no longer required to obtain an employment permit to hire temporary residence permit holders.

Temporary residence permits allow foreign nationals to live in Russia on a long-term basis as a step towards permanent residence, but previously they did not grant work rights. Permit holders were required to be sponsored for a work permit if they sought to take up employment.

E-Filing Service for Employment and Work Permits

Employers are now able to use online filing to submit initial applications for employment permits and individual work permits, as well as applications for permit amendments, renewals or duplicate copies. Employers using the new system are still required to submit paper versions of supporting documents after the initial online filing.

Tougher Sanctions for Immigration Violations

Foreign nationals who overstay a visa for more than 30 days after January 1, 2013 will be subject to a three-year ban on reentry from the date they exited Russia, unless they can demonstrate to the Federal Migration Service that there was a compelling reason for the overstay.

Fines for individuals or organizations that facilitate a foreign national’s unlawful entry into or transit through Russia have been increased to a maximum of 300,000 Rubles (approximately US$ 9,890). The severity of potential criminal sanctions has also been increased.

Fragomen worked closely with VISTA Foreign Business Support (Moscow) to prepare this alert. It is for informational purposes only. If you have any questions, please do not hesitate to contact the global immigration professional with whom you work at Fragomen Global or send an email to emea@fragomen.com.

Source: Fragomen

China: Rules Altered on Permanent Residency to Lure Talent, Investors

| January 3, 2013

The Human Resources and Social Security Ministry of the People’s Republic of China (PRC) along with 24 other PRC government authorities jointly issued and enacted on 25 September 2012, the Administrative Measures on Entitlements of Foreigners with Chinese Permanent Residency (PR) in China [Ren She Bu Fa [2012] No. 53 (Circular No. 53)].

Circular No. 53 was issued to clarify the benefits entitlement of foreigners who hold PRC PR permits following the issuance of the Administrative Measures and Implementation Rules governing the approval of Chinese permanent residency for foreigners (Decree No. 74 of the Ministry of Public Security and the Ministry of Foreign Affairs) which specified the criteria, procedures, and administration of foreigners’ applications for permanent residency.

Key Entitlements of Circular No. 53

Foreigners who become PRC permanent residents are entitled to the same rights and obligations as Chinese citizens. The key entitlements worth mentioning are noted below.

Living and Working in PRC

Foreigners with PRC PR can live in China indefinitely, and can leave and enter China without the need to obtain visas, with a valid passport and foreigner’s Chinese PR permits. In addition, foreigners with PRC PR who wish to obtain employment in China are not subject to work permit application requirements.

Comprehensive Chinese Social Insurance Coverage in PRC

As with Chinese citizens, foreigners with PRC PR are covered by the Chinese social insurance system regardless of their employment status in China, which includes basic medical insurance and pension. They are also allowed to contribute to the Chinese housing fund and receive relevant benefits from the fund.

Investing in PRC

Foreigners with PRC PR are allowed to invest in China in the form of foreign-invested enterprises or foreign direct investment with the local currency (the renminbi) obtained from legitimate sources. They are also entitled to the same rights as Chinese citizens with respect to transactions involving banking, insurance policy, stock, futures, and other financial-related transactions.

Source: KPMG

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