How does tax equalization work for expatriates?

The company calculates what an employee would owe in their home country, then covers any extra taxes owed in the host country. If the host country has lower tax rates, the employee usually pays back the difference to the employer. This helps avoid double taxation and ensures consistent take-home pay regardless of location. The policy makes global mobility opportunities easier to accept without adding financial strain.

What are the differences between tax equalization and tax protection?

Tax equalization helps maintain an employee's total tax burden regardless of where they work. It limits potential tax savings, unlike tax protection. When a company offers tax protection, it also covers the costs when host country taxes exceed U.S. rates. The difference is that the employee can keep the savings when they work on an assignment in a lower-tax location.

Who is eligible for tax equalization benefits?

Organizations determine eligibility based on assignment length and employee level. These often apply to roles lasting a year or more, especially for senior leaders. Some companies may extend coverage to employees in high-tax countries where managing international payroll and compliance gets more complex.