The principle of ‘Tax Equalization’ ensures that employees do not suffer any financial loss or gain as a result of their overseas assignment. This means that the Assignee should not pay more or less personal income tax on his income from employer as if the assignment had not taken place.

However, they still bear an economic burden due to the taxes hypothetically due in their country of origin.

This concept is practically applied by making a notional tax withholding (Hypotax) equal to the ordinary tax liability that the employee would have incurred if they had stayed in their home country.

When taxes are settled in the foreign state, the company will use the amount withheld from the employee for this purpose. Any differences between the amounts actually paid and the amounts withheld will be at the expense or benefit of the company.

The principle of ‘Tax Equalization’ ensures that employees do not suffer any financial loss or gain as a result of their overseas assignment. This means that the Assignee should not pay more or less personal income tax on his income from employer as if the assignment had not taken place.

However, they still bear an economic burden due to the taxes hypothetically due in their country of origin.

This concept is practically applied by making a notional tax withholding (Hypotax) equal to the ordinary tax liability that the employee would have incurred if they had stayed in their home country.

When taxes are settled in the foreign state, the company will use the amount withheld from the employee for this purpose. Any differences between the amounts actually paid and the amounts withheld will be at the expense or benefit of the company.