Tax equalisation
is an assignment policy keeping the employee’s tax burden at home-country level: the employer deducts a hypothetical home tax from pay, then settles the actual home and host taxes itself. The assignee neither gains nor loses from the assignment’s tax geography — mobility decisions stay business-driven.
How equalisation works in practice
Payroll withholds hypothetical tax — the tax the employee would have paid at home on standard pay — while the employer pays real host (and residual home) taxes, often via shadow payroll. A year-end reconciliation trues everything up; tax returns are typically prepared by the employer’s advisers.
The policy needs boundaries: which income is equalised (usually company pay, not private investments), which countries, and what happens on early exit — the settlement clauses earn their keep at departure time.
FAQ
Tax equalisation or tax protection — what is the difference?
Equalisation is symmetric: the employee pays home-level tax whether the host is higher or lower, and the employer absorbs both directions. Protection is one-way: the employer tops up only if the assignment costs the employee more; windfalls from low-tax hosts stay with the employee. Equalisation dominates structured programmes for its neutrality.
Is tax equalisation worth it for one assignee?
For single moves, simpler fixes — net guarantees on specific items, or plain local pay — often suffice. Equalisation pays off across a programme, where fairness between assignees in different countries and repatriation willingness matter more than per-case simplicity.