Employer Tax Obligations for Employees Working Abroad

If you have employees working overseas for your US organization, your company may be required to comply with foreign country tax laws in addition to US federal, state and local tax laws.

Your company may be required to:

- Report US W-2 wages for global remuneration, not dependent on where it is paid from, what country it is delivered to, or what entity is providing the benefit, including cash or non-cash benefits.

- Report some or all US employee wages on the foreign country payroll.

- Remit foreign country individual income taxes and social security taxes on behalf of the employee.

- File an exemption from foreign country social security taxes for those countries that have a Totalization Agreement with the US.

- For employees on short-term business travel, review rules in the foreign country as the rules can vary from the US rules. They may be taxable on their travel reimbursements even though they maybe non-taxable in the US.

- Review income tax treaty and foreign country economic employer requirements  for employees traveling to foreign countries for less than 183 days.

These are just several examples of tax obligations a company can encounter when sending their US employees to a location outside of their home country.  It applies to both short-term business travelers and those who are on an international assignment.  These obligations are generally overlooked when sending an employee outside of their home country to work in a foreign jurisdiction.  Again, there can be serious tax and non-tax ramifications if these issues are not addressed in a timely manner. 

US Employer Tax Obligations for Foreign Individuals Working in the US

If you have foreign nationals working permanently or temporarily in the US (for example, an employee of an overseas affiliate), your company may be required to:

-Add these individuals to a US payroll in order to remit US federal, state, local and social security taxes.

-In certain cases, remit unemployment insurance for these individuals.

-Report W-2 wages for global remuneration, not dependent on where it is paid from, what country it is delivered to, or what entity is providing the benefit, including cash or non-cash benefits.

-In most cases, file an exemption from US social security taxes for those countries that have a Totalization Agreement with the US.

-Review the visa type which dictates the individual income tax status for income and social taxes.

US Social Security Taxes

Generally, foreign nationals will be subject to US Social Security taxes if they work while in the US. Blanket exemptions from social security tax are generally available only to those on F, J, M or Q student or faculty visas, and only if the work relates to their teaching or learning program. The exemption extends only to the primary visa holder; children and spouses of the primary visa holder are NOT exempt from social security taxes. Also, persons with E, H and L visas are generally subject to US Social Security taxes. All of these rules are subject to modification under the treaty (if one exists) between the US and the foreign national's country of citizenship.