Tax Equalization

Tax equalization is a process used by multinational companies to ensure employees working abroad pay roughly the same amount of taxes as they would if they were working in their home country. The company calculates the expected local taxes and compares them to what the employee would pay at home, then adjusts the employee’s paycheck or provides a reimbursement so that their tax burden remains consistent. This helps employees avoid financial disadvantages or windfalls due to differing international tax laws, providing stability and fairness during international assignments.