All tax calculations performed by the tax engine utilise annual (calendar year) rates & tables. Home country tax costs are automatically pro-rated for partial years. Host country tax costs relate to move-related income only, and therefore do not require pro-ration
Example
Tax Calculation Method: Tax Equalization
Assignment Start Date: 1 July 2025
Assignment End Date: 30 June 2027
Figure 1.1 - Cost Estimate Years 1-6 Report
Home Hypothetical Taxes
Hypothetical Tax costs are pro-rated on a straight-line basis.
Figure 1.2 - Extract of Tax Costs section of Cost Estimate Years 1-6 Report
The annual hypothetical tax is multiplied by move-related months/12 to arrive at the move-related portion.
Figure 1.3 - Calculation Detail Report: Hypo Calculation Details
The annual values (purple font) and multiplied by 6/12 months to provide the pro-rated values which relate to the move (red font).
Hypothetical Income Tax: 35,832 * (6/12) = 17,916
Hypothetical Employee Social Tax: 4,570 * (6/12) = 12,285
Hypothetical Employer Social Tax: 16,409 * (6/12) = 8,204
Home Actual Taxes
Annual income is fed through the annual rates/tables.
Figure 1.4 - Extract of Tax Costs section of Cost Estimate Years 1-6 Report
The resultant annual tax liability is pro-rated using the hypothetical tax as a proxy for the non-move related tax liability.
Figure 1.5 - Calculation Detail Report: Home Calculation Details
The annual actual tax liability (purple font) is reduced by the non move-related portion of corresponding hypothetical tax.
Annual Actual Income Tax = 43,206
Annual Hypothetical Income Tax = 35,832
Non move-related portion of Annual Hypothetical Income Tax = 6/12 * 35,832 = 17,916
Annual Actual Income Tax minus Non move-related portion of Annual Hypothetical Income Tax = 43,206 - 17,916
Move-related Actual Income Tax = 25,289
The same method is applied to apportion all Home Actual taxes to reflect the move-related period.
Host Actual Taxes
Move-related income is fed through the annual rates/tables.
Figure 1.6 - Extract of Tax Costs section of Cost Estimate Years 1-6 Report
The resultant annual tax liability (purple font) therefore relates to move-related income only and does not require pro-rating.
