OECD Model Article 15 Economic Employer Apportionment under Cross Border Assignments
Treaty relief under Article 15 collapses when the host entity directs daily work or absorbs compensation costs through recharged payroll.
Cross-Border Assignment
Meaning
A temporary relocation of an employee to a different country occurs under the direction of an employer for a specified period. During a cross-border assignment, the employee remains contracted to the home entity but performs daily duties in the host country.
Policy Framework
Global mobility policies establish the guidelines for relocation allowances, housing assistance, and family support. A structured cross-border assignment requires a detailed letter of intent that specifies the duration of the transfer and the conditions of eventual repatriation.
Tax Consequence
Income tax liabilities arise in both the home and host jurisdictions when an employee works internationally. To address this complexity, a cross-border assignment typically incorporates tax equalization policies to ensure the employee is neither advantaged nor disadvantaged financially.
Cost Allocation
Determining which corporate affiliate carries the financial burden of a relocated worker requires careful contractual planning. Expenses associated with a cross-border assignment are frequently shared between the parent company and the subsidiary using intercompany charging mechanisms. This ensures that the entity receiving the economic benefit of the work pays for the salary and overhead, satisfying local transfer pricing rules.
It also prevents the host country from claiming that the parent company is operating an unregistered branch office.