An international work assignment can be a fast track to a promotion. But it takes planning to help make the reality match the dream.
In an increasingly global economy, many U.S. citizens are using international work experiences to bolster their résumés or launch entrepreneurial ventures. While the notion of expatriate life can be appealing, the practicalities of an overseas move merit careful consideration.
"When people go out on these assignments, they often take on positions of increased importance," says David Kolb, president of Global Tax Network, a Minneapolis-based company providing expatriate tax consulting services. "But from a cultural perspective, there can be some huge differences between the U.S. and other parts of the world. And when people repatriate, there are many occasions where they leave a company shortly thereafter because their expectations weren't met."
Kolb's view is supported by a 2010 relocation trends survey conducted by Brookfield Global Relocation. In the study of 120 multinational companies, only 17 percent required cross-cultural training for employees preparing for global assignment. Additionally, 38 percent of workers returning from foreign posts left their companies during the first year of repatriation, well above the survey's 15-year average of 22 percent.
How can employees or entrepreneurs maximize their odds of success with an international move? Consider the following:
Do the homework. Even if an employer provides relocation assistance, it's wise to supplement any training with self-study on the language, culture and customs of a new home base. Several websites, such as expatexchange.com and transitionsabroad.com provide useful forums where expatriates share their real-world experiences from hundreds of global locations.
Run the numbers. All U.S. citizens living and working abroad are required to report worldwide income for domestic tax purposes. Depending on the foreign country of residence, that creates potential double-taxation and dual tax reporting headaches. With that in mind, Kolb says U.S. residents planning an international career move should review the worldwide tax implications with a qualified adviser. This discussion should include whether the employer is providing "tax equalization," which would keep a worker's tax responsibility similar to what they would have incurred by remaining in their U.S.-based role.
Home, sweet home. For long-term international assignments, employees or entrepreneurs may face tax issues on the sale of their primary residence. For example, if a U.S. expatriate decides to sell a home after an absence of several years, that person may owe a stiff capital gains tax bill. Proper tax planning can minimize or eliminate the issue.
Show the value. While very large multinational firms often have procedures to leverage the knowledge gained in foreign assignments, smaller companies may not. Under those circumstances, the returning worker may bear the burden of showing where - and how - their new experiences can be deployed. "While most companies recognize the value of international assignments, many do not have systems to capitalize on the knowledge these people bring home," says Kolb.
