What the New American Tax Law Means for Expats, Global Mobility

When the current administration signed the new tax law in December of 2017, it also unleashed mixed sentiments among individual and corporate taxpayers. Struggling what to make of it, they asked, Will the new tax law increase their paycheck or revenues, or hinder them? To date, one survey of one business magazine says that 45% of the respondents approve of it, while another 35% don’t. A simple search engine search will show that various industries and their professionals, from manufacturers to divorce lawyers, are grappling with the implications.

Global mobility managers and their assignees are also on the fence about this. Apparently, a cursory look shows that the benefits are promising. Because the tax cuts present in the bill will allow the corporations — where the global mobility managers work — some room to breathe. The amount of reduction is significant, which no leader can overlook:  from 14% to 21%. However, a new study by Plus Relocation suggests taking a closer look at the fine print. It looks like the disadvantages might outweigh the advantages.

One item to take note of is the repeal of the reduction of moving expenses. This means that the following, which were not taxable before, are now subject to taxes:

  • Any act of relocation of goods, motor vehicles, and pets, from packing to shipping to delivery;
  • Storage covering the first 30 days, as well as the transfer of goods in and out of the storage areas;
  • The final move

Compensation packages do not necessarily cover all of the items mentioned above, and the assignee would have to carry some of them. Once they check how much it will further reduce from his income, they will find that their lifestyle and perhaps their morale could be impacted. In a worst case basis, some of them might reconsider their contract and renegotiate it; any concession from the global mobility manager then might mean more expenses for the employer.

Global mobility managers who feel like wringing their hands or throwing in the towel are advised to take a step back and breathe. It is not the first time that a new policy by the GOP has seemingly thrown things out of kilter. The administration’s recent decisions on immigration laws have also created challenges that global mobility managers had to surmount — but surmount they did. This new tax law is no different.

So before succumbing to panic mode or rushing to ask management for intervention, do the following:

  • Get a copy of the tax law. Download and print it out. Read it very carefully. Then consult with your lawyers, accountants, and friends at the embassy how it really affects you, your assignee, and your company.
  • Once you have gotten the facts straight, especially as far as employee or assignee concerns are affected, consult with one or two of your current assignees. These are the people who are already working for you — and at the same time, these are the ones who have  a greater stake in the company, and who you trust the most. Ask them about the impact of the tax law and its implications (as analyzed by your accountants and lawyers) on them and their fellow assignees. Then also ask them how it might impact the assignees you are still about to hire.
  • Measure and analyze their feedback. See how it will translate into assignee hiring and retention; performance and motivation; and salaries and benefits weighed against any tax costs and other assignee-related expenses that the company might be willing to absorb.
  • Create a strategy that is a win-win situation for both the assignee and the employer. See where all parties can meet halfway in order to cushion the burdens of this new tax. Maybe assignees can take a shorter contract than a long one? Or health benefits can be exchanged for travel perks? Maybe the items of goods that will be shipped and packaged do not have to be numerous or bulky?
  • Finally, have employers and other shareholders buy in into the strategy. Global mobility managers cannot do this alone. You have partners who also have a stake in this issue and would be more than willing to help, like relocation companies and corporate housing companies like California Corporate Housing.

Above all, be prepared to shift gears should any changes happen to the tax bill. The GOP’s immigration laws were revised after public outcry turned against them. Should a considerable number of the American corporate sectors and their employees challenge the bill, then some of its more onerous requirements might be removed — which will certainly come as good news to all global mobility managers everywhere in the U.S.