Case Study
Synopsis
A South African listed company, with outbounds assignees, expressed concern about the impact of the foreign remuneration exemption on their assignees’ net pay and the overall costs of assignments.
Tax Connect supported by analysing the cost impact and preparing simulated tax calculation for a selected sample, categorised by location and income band.
During the process, we found that the company only had a light mobility policy and no clear strategy of how to approach the tax question (to tax equalised or not!). The analysis was extended to evaluate the impact of various tax models (from laisse faire to full tax equalisation).
As a result, not only was the company able to calm assignees’ fears but also realised the clear business need to formulate their mobility tax strategy and policy.
Background
The Company has a number of South African nationals seconded to work in various African locations on assignment.
While all assignees were comfortable with their taxes matters in their host locations, there was a lot of noise in the system with as regards to the changes to the South Africa tax legislation relating to the exemption for foreign services.
Assignees are responsible for their own home tax matters. However due to the turmoil caused by the change in SA tax legislation, the company had decided to support these employees. However they needed an overview of the financial impact of the tax changes to make an informed decision on the level of support to offer.
A phased approach was recommended to address their immediate need but also to assist the company formulate a consistent approach to tax as they expand their business across Africa.
Tax Connect’ Approach
Tax Connect took a pragmatic approach - you cannot solve a problem if you cannot quantify and qualify the problem!
Phase One:
Finding of analysis formed the foundation of future policy decisions
Phase Two:
Outcome from Phase One, provided valuable data for the Company to make informed management decisions.
Tax Connect brought a unique combination of mobility best practice knowledge and deep tax specialisation to offer a comprehensive end- to- end service. Collaboration is critical in effecting change and Tax Connect acted as an extension of the company’s team to ensure the overall success of the project.
Value Delivered
Tax Connect experience and pragmatic approach ensured that the company’s was successfully able to:
o Address assignee concerns and remove noise in the system.
o Understand how tax impacts the cost of assignments.
o Make informed management decision.
o Articulate the need for a clear mobility tax framework.
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