2Max Group expatriate payroll management offers local compliance as well as unrivalled built-in automated standard delivered expatriate functionality. The advanced features provide automated salary and tax processing.
Ensure your expat staff is compliant in home and host countries
As Kenya’s economy strengthens, the country is attracting multi-nationals from all corners of the globe looking to benefit from this growth. Expanding your business into these new territories is an exciting yet challenging endeavour. To establish new offices as quickly and efficiently as possible, most companies will send some of their existing employees out to help with the set-up.
However, expatriate payroll management requirements can be complex to get right. Your company has to make sure that all expat employees stay legislatively compliant in their home countries as well as their new country of work. While legislative compliance can be difficult to achieve, it is possible.
What’s more, time zones and borders no longer inhibit operations and any size business can expand and integrate their operations around the world with greater success. Smaller businesses are consequently facing the same challenges as large multi-nationals, inevitably requiring an expat payroll. Whether you are currently running an expat payroll or simply preparing for the possibility of an expansion in the future, 2Max Group can provide you with the correct tools to establish your Kenya payroll.
An expatriate (often shortened to expat) is a person temporarily or permanently residing, as an immigrant, in a country other than that of their citizenship. From an employee payroll perspective, there are many complexities associated with expats being tied to their home country benefits and salary in one currency and obtaining host country additional benefits and earnings in another currency. Furthermore, the employer is also exposed to obligations of appropriately applying the correct special tax conditions / statutory obligations and filing requirements in both host and home countries.
Tax equalization is a process that ensures that the tax costs incurred by an assignee on an international assignment approximates what the tax costs would have been had he remained at home. The intent of tax equalization is that the assignee neither suffers significant financial hardship nor realizes a financial windfall from the tax consequences of an international assignment. When tax equalization is utilized, the employer bears the responsibility for paying the assignee’s actual home and host country tax costs. In exchange, the assignee pays to the employer a stay-at-home hypothetical tax as determined under the company’s tax equalization policy.
It’s a term used to report compensation data that is actually paid from another country. Shadow payrolls typically exist in all host locations that require payroll tax withholding and in-home locations that tax on worldwide income. In cases where tax equalised expatriates have been in the country for longer than 183 days, it may be necessary to calculate and pay across statutory taxes to the host country authorities. In these cases, the company pays the taxes to host country authorities without necessarily exposing these calculations to the expatriate.
The process of advising a net amount in order to backwards calculate a correct inflated gross figure that takes into account relevant statutory taxes refers to a gross-up calculation. This calculation may be necessary across expatriate equalisation principles as well as in deriving an expatriate’s net assignment salary in a host country that incorporates home currency and host applicable statutory rules. A host expatriate payslip would typically include a myriad of gross-up calculations ranging from home guaranteed net pay and certain extra assignment gross up allowances and benefits.
Hypothetical tax is a reduction in salary which estimates the amount of tax that you would have to pay if you had not gone on assignment – theoretical home tax liability on home standard pay. In accordance with tax equalisation principles, the employee’s obligation extends to paying the hypothetical tax to the employer while the employer’s obligation would extend to paying home and host country taxes.