What is tax protection and how is it different from equalisation?
Tax protection leaves you where the real tax lands and then repairs the damage if the assignment cost you money. You file and bear the actual home and host tax; the employer compares your position with what you would have paid had you not moved, and reimburses the shortfall if you are worse off. If the host country is cheaper, you keep the difference. Equalisation removes both outcomes by deducting a notional home tax and taking the real bills off your hands entirely.
If my assignment leaves me better off, do I keep the money?
Under a protection policy, yes, and that is the feature which distinguishes it. The comparison runs in one direction only: it asks whether the assignment left you worse off than staying, and pays if it did. A favourable host regime, a lower band, or a relief you could not have used at home produces a windfall the policy does not claw back. Confirm it in the wording rather than by inference, because some documents describe themselves as protection and then operate a two-way settlement.
How does my employer work out whether I am worse off on assignment?
By building a comparison that is never filed: what your tax would have been on home-country income alone, under home-country rules, had the assignment not happened, against the actual home and host tax you bore because it did. The assumptions matter more than the arithmetic — which compensation counts as assignment income, whether personal income is included, whether social contributions are in scope. Ask for the assumptions in writing at the start, because they decide the answer long before the returns are filed.
When is a tax protection payment made and is it taxable itself?
It is calculated once the real liabilities are known, so it follows the later of the two countries' filings. The reimbursement is normally compensation in the employee's hands, which means it can attract tax of its own and needs a gross-up to leave the employee whole. That second-round effect is the part most often left out of a protection policy, and where it is not addressed the reimbursement under-compensates by whatever the tax charged on it comes to.
Which is cheaper for the employer, tax protection or tax equalisation?
Protection is cheaper where the host country taxes lightly, because the employer funds nothing, although it also loses the saving it would have captured under equalisation. Protection costs more where it matters least predictably: heavily taxed hosts, where every assignee claims, each claim needs its own comparison calculation, and outcomes differ across a population doing the same job. Equalisation buys uniformity and administrative routine. Protection buys a lower bill in the easy years and an argument in the hard ones.
My employer says I am tax protected but has paid nothing?
Then the comparison probably concluded you were not worse off, and the first thing to establish is the basis on which it was run. Common reasons a genuine shortfall disappears: personal income excluded on one side and included on the other, social contributions ignored, the home comparison built on the assignment salary rather than the salary before you moved, or a refund treated as received when it is still outstanding. Ask for the calculation, not the conclusion.
Is double taxation legal?
Yes. Nothing prevents two countries from taxing the same income under their own domestic law — each is exercising its own jurisdiction. What treaties and credit systems do is relieve the outcome rather than prohibit the charge, and relief is generally something you must claim on a return or a form, not something applied automatically. Miss the claim and the double charge stands. Double taxation explains the mechanism.
Which countries have a tax treaty with the United States?
Around sixty, including Canada, the United Kingdom, India, Australia and most of western Europe — but the list matters less than the terms, because each treaty caps rates and allocates income differently. Two countries with treaties can produce opposite answers on the same pension or the same royalty. What decides your position is the specific article covering your income type. See our country guides.
