step by step - impatriation
The meeting with the impatriate is one of the essential moments of the expatriation process. This meeting must take place as quickly as possible following the assignee's arrival to France.
This will not be the first meeting with the employee since the future impatriate will have already met with the home firm's HR.. Indeed, the home firm's HR will need to have to identify the assignee and explain to him the details of his future position.
This meeting with the impatriate is necessary in order to discuss all the other aspects of the assignment : discuss his status in term of the labor laws applicable, his social status, his package, immigration aspects, his relocation, his tax status in France and abroad and all the administrative obligations while in France.
Therefore, the goal of this meeting is to reduce the assignee's questions regarding his mission in France. Indeed, do not forget that an assignment abroad is an important moment in the life of an employee from a career perspective but also from a personal point of view. For this reason, it is normal for the employee to be nervous about the assignment and he will have plenty of questions. The role of the human resources is to reduce these grey areas in the employee‘s mind.
Explaining the package is really important during this meeting even if it has already been discussed between the home HR and the employee. Indeed, since the home HR is no specialist of French payroll, tax or social security rules, it will be necessary to discuss this again with the employee and their impact on his compensation. If you have chosen to apply an “evolving” package with a tax equalization, foreign premiums, cost of living adjustment, etc, it is necessary to clearly explain to the employee how each of these elements will be calculated.
Therefore, it is important to start by making a clear difference between the home local salary and the premiums / benefit-in-kinds. This is important because it will help the employee understand what is extra compensation and what is for his regular performances. This will also help when the employee comes back to his home country because if the employee clearly understands what he gets as a regular salary during his assignment, he will understand the home package he is coming back to. However, it is important to try to make his base salary increase as it would have if he had remained in his home country.
If the premiums, cost of living adjustments and other benefit-in-kinds evolved from one year to another, it is very important to explain to the employee the possible evolutions of those (as well as discuss with him any evolution of his package during his assignment).
Discussing the tax questions is a part that is a little more technical and the human resources are not always comfortable discussing this with the expatriate. For this reason, it is often advised to call on a specialized firm to discuss this point with the expatriate, avoiding errors in handling complex tax issues.
Two main aspects need to be addressed regarding income taxes: French income taxes and foreign income taxes.
The impatriate has one main question on this matter : where will I be paying my taxes?
Tax residency is not something that can be chosen by either the expatriate or the employer, it is decided by international tax treaties and local tax rules. In that aspect, determination of where income taxes need to be paid has already been determined by tax authorities.
For example, let's consider a German employee coming to France for a period of three years with his family. You have decided to tax equalize the employee and maintain him on German payroll. The first mistake will be to believe that he must pay his taxes in Germany because he is paid by a German company. Indeed, it is not the “nationality” of the employer that determines tax obligations but the place where the employee usually resides with his family, where his vital interests reside or where the employee usually works. Therefore, the employee who is located for a period of three years in France will owe income taxes in France because this is where he lives most of his time. In Germany, where the employee gets paid, unless he has German source income (i.e. rental income for example), no German income tax return will have to be filed.
The human resource people will therefore have to understand the general rules of international tax obligations. If this is not properly addressed, it is very likely that the employee will not bother with his tax filing obligations while in France. For example, he might continue filing a German income tax return and pay his taxes in Germany even though he does not owe anything and filing late will generate penalties and late interests in France. Upon a tax audit from the French tax authorities, the employee will then request his employer ' s assistance to resolve his personal tax obligations, forcing the employer to spend lots of time, maybe money, for a situation that could have been avoided right from the beginning of the assignment.
Therefore, we highly recommend that a specialized firm in international tax matters be consulted at the time of departure of the employee to inform the employee of his tax obligations in each country and also to assist the employee in filing his tax returns within the proper time limits in each country.
Once all the technical aspects of the impatriation have been discussed, it is always good for the employee to receive practical advice upon his arrival in France to avoid any difficulty.
You can discuss internal practical aspects to the firm, vacation days, reimbursement of professional expenses, benefits he can receive (i.e. profit sharing, restaurant tickets, etc). Do not forget that the employee comes from another country, that the rules within or outside the firm are different and that, therefore, what seems common knowledge to you may be unknown to your employee.
Also discuss aspects relating to his arrival, his housing, immigration, school enrollment, etc.