CapRelo Blog

INCOME TAX RATES BY COUNTRY - GLOBAL WAGES VS. TAKE-HOME PAY

Posted by CapRelo on Wed, Mar 28, 2018

There are precious few certainties in life but as the old saying goes, taxes are one of them. With America’s tax season in full swing, that inevitability is sure to be on the minds of many in the United States.

During this time of the year it is easy to forget that America isn’t the only country where tax considerations loom over the population, as well as how different tax rates and financial realities can vary around the globe.

With that in mind, CapRelo decided to take a look at salaries, taxes and take home pay from a number of countries all over the world, and to contextualize that information for an American audience. Here’s what we found.

global wages map

To get a baseline on how the average citizen in each country can expect to be taxed, it’s necessary to know how much the average citizen makes. CapRelo examined a report from an intergovernmental economic organization listing the average annual salary for the countries we analyzed. After converting local currencies to their equivalent in U.S. dollars, it was possible to assemble the map above, which illustrates how much the average worker can expect to make around the globe. The countries in darker red are nations where workers are compensated the most.

 

tax rates by country map


Of course, the taxman will take a cut, and we were able to find the overall percentage of salary that someone making an average wage can expect to pay in taxes in each country. This was done by taking post-tax earnings and dividing them by pre-tax earnings. We felt this was the best way to produce a consistent comparison across countries, given the occasionally complex nature of various tax codes.

 

average take home pay after taxes map

Once taxes have been paid, we get a better picture of exactly how much money the average annual wage is for workers around the globe. This chart shows post-tax take-home pay, once again converted to U.S. dollars. Countries in dark red here have the highest take home pay.

 

take home pay after tax vs average wage


Comparing maps can make it challenging to ascertain the exact scope of tax impact, so we decided to visualize the data an additional way to show how much of the average wage in each country is consumed by taxes.

 

tax rates by country vs american tax rate


Many in America comment on how much they have to pay in taxes, so we thought it would be fun to look at how that rate would change in other countries. By taking the average annual American wage and factoring in the rate it would be taxed in other nations, it is possible to see where things could be better or worse. Only ten of the surveyed countries would produce a lower tax bill than Americans already experience, with the rest taking more… at times, significantly so. Bet you never thought you’d be happy with your current taxes!

 

income tax rates vs take home pay by country  

Finally, CapRelo wanted to provide an even more detailed examination of taxes around the globe. The result features much of the same data that has already been presented, like average annual salary and post-tax take-home pay for every country (and the average American wage), as well as some new information. First is a more detailed breakdown of the specific tax rate as it applies to the average wage in each country, and second is an analysis of purchasing power.

The latter feature utilizes the Big Mac Index, a metric devised by The Economist that takes the price of a McDonald’s Big Mac in two countries to determine the relative value of money in each place. Utilizing this tool, we were able to find out how much the post-tax take home pay was actually “worth.” As a result, we see that while somewhere like Russia has an average post-tax take home pay amount equivalent to just $8,456, that money allows someone to buy the same amount of “stuff” as someone with $19,488 in America. On the flip side, Switzerland’s average take home pay of $84,006 only goes as far as $65,567 would in the United States.

While taxes may be constant, the information above demonstrates how actual cost impact definitely isn’t. Hopefully seeing how taxes compare across the globe—along with the extra two days afforded by this year’s April 17 deadline—takes a little bit of the sting out of filing this year!

Download Talent Mobility & US Taxes: What You Need to Know

 

Topics: mobility and taxes, relocation taxes, taxes

Tax Reform and Transferees: What You Need to Know

Posted by CapRelo on Tue, Feb 06, 2018

Red Ring Binder with Inscription Tax Law on Background of Working Table with Office Supplies, Laptop, Reports. Toned Illustration. Business Concept on Blurred Background. 3d Render..jpegTax reforms in 2018 will have an impact on deductions and property taxes. Here is a brief summary of the primary changes. Please note that individuals should always consult their tax advisors.

Moving Expense Deduction

As of January 1, 2018, movement of household goods, storage and final move travel are taxable to transferees. With the elimination of the moving expense deduction, the "50 mile", "39 week" and "one year" rules as well as the 18 cents per mile vehicle allowance are no longer relevant. This change should be reviewed closely with your mobility management company to fully understand the impact to your organization.

Tax Rates and Withholding

The tax rates are generally lowered, which should reduce the marginal tax rate for employees. The supplemental withholding rate that is used by most companies to withhold on taxable relocation benefits and to calculate gross-up will fall from 25% to 22%. However, with the loss of moving expenses and other deductions, companies will need to manage their gross-up programs carefully, especially with the new tax rates. 

State and Local Income, Sales and Property Taxes

State and local income, sales and property taxes remain deductible, but only up to $10,000 combined. Employees moving into high-tax areas are more likely to be affected.

Mortgage Interest Deduction

The mortgage interest deduction is retained, but the maximum loan amount to be able to deduct was reduced from $1 M to $750,000. Employees moving into high-cost areas are more likely to be impacted by this new threshold for mortgage interest deductions.

Home Sale Capital Gains Exclusion

There were no changes here. Both the House and Senate had proposed changing the required ownership and use as a principal residence to five out of eight years from the current two out of five. That would have certainly impacted relocation with many transfer­ees moving again inside of a five-year window, but fortunately there were no changes regarding Capital Gains on homes.

Tax Brackets and Rates, 2018

2018 Tax Brackets.png

 

Today's post is brought to you by our friends at Colonial National Mortgage. Click here to download a copy.

Colonial National Mortgage

 

Although this written communication may address tax issues, it is not a covered opinion as described in Circular 230.  Therefore, to ensure compliance with requirements imposed by the IRS, we inform you that any tax advice contained in this communication (including any attachments), unless expressly stated otherwise, was not intended or written to be used, and cannot be used, for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any tax-related matter(s) addressed herein.

Topics: mobility and taxes, relocation taxes, tax impact of relocation

Mobility and the 2018 U.S. Tax Reform Bill

Posted by Jim Retzer on Fri, Jan 12, 2018

CapRelo has been closely following the changes to the U.S. tax laws and advising clients on the best ways to adjust policies. The IRS is currently reviewing the changes to determine how to implement them, and we will update this information when the IRS finalizes and confirms their implementation plans.

The new U.S. tax bill passed through Congress and has been signed into law by the President. Below are some of the key impacts on mobility:

  • All van line expenses (HHG) and final move expenses will now be taxable.
    • This means there is no more 50 mile test, 39 week test or 1 year rule.
  • Supplemental rate will change, but the IRS has yet to clarify the change, and other tax brackets will change as well.
    • Gross up calculations and withholding from payments may be impacted.
  • Elimination of itemized deduction and personal exemptions phase-outs.
    • Employees receiving lump sum payments as well as other paid relocation benefits may be impacted.
  • State/local income and property tax deductions will be capped at $10,000.
    • State/local amounts in excess of $10,000 will be considered taxable and subject to gross up.

We welcome the opportunity to consult with you about the tax changes and how you can adjust your global mobility program and benefits. Give us a call at 703-260-3323 or visit www.caprelo.com

*Although this written communication may address tax issues, it is not a covered opinion as described in Circular 230.  Therefore, to ensure compliance with requirements imposed by the IRS, we inform you that any tax advice contained in this communication (including any attachments), unless expressly stated otherwise, was not intended or written to be used, and cannot be used, for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any tax-related matter(s) addressed herein.

Topics: corporate relocation company, relocation taxes, mobility and taxes

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