2008 Global Assignment Policies and Practices (GAPP) Survey

1. INTERNATIONAL EXECUTIVE SERVICES 2008 Global Assignment Policies and Practices (GAPP) Survey TAX

2. ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN BY KPMG TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN. The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser. You (and your employees, representatives, or agents) may disclose to any and all persons, without limitation, the tax treatment or tax structure, or both, of any transaction described in the associated materials we provide to you, including, but not limited to, any tax opinions, memoranda, or other tax analyses contained in those materials.

3. Objectives • To explore current issues in international assignment management • Discuss and review the results from KPMG’s International Assignment Policy and Practices Survey • Consider the potential applicability of these concepts within your own organization

4. With You Today • John McLearie, Principal, KPMG • Jeannette Wistner, Senior Manager, KPMG

5. Agenda • 2008 Global Assignment Practices and Policies Survey • Background • Participants • Benchmarking and Surveys • Issues in international assignment management • Expatriate Return on Investment (ROI) • In Your opinion • Family Issues • Tax policy & tax equalization • Home leave • Housing Issues • Wills and estate planning • In Your opinion

6. KPMG Survey 2008: Background and Participants • Survey is dynamic • More than 400 multinational companies participated over the past 5 years • Results are frozen as of February 2008 • Divided into three broad categories: • Organization Profile • Program Profile • Policy • Real-time information is available at www.kpmglink.com

7. KPMG Survey 2008: Program Demographics of the Survey Participants How many assignees does your organization have?

8. KPMG Survey 2008:Benchmarking and Surveys • Appropriate comparisons: • Company location • Size • Industry • Integrity of data: • Age • Methodology • Input error • Interpretations • Multiple policies

9. KPMG Survey 2008: Expatriate Return on Investment (ROI)

10. KPMG Survey 2008: Selection & Assessment Which statement best describes your approach to assessing a potential assignee's suitability?

11. KPMG Survey 2008: Selection & Assessment • Pool of candidates • Performance review / self nominating • Data base • Assessment • “I know Jane. She’ll do a good job.” • Primary factors in the selection of most assignees by managers are: • Work experience • Technical skills

12. KPMG Survey 2008: Selection & Assessment (Con’t.) • According to advocates of selection and assessment methodologies, assignment success factors are: • Flexibility/adaptability • Cross-cultural skills (language, sensitivity, open-mindedness) • Strong family relationships • How are business managers convinced of the importance of the “soft factors?” • Risk that business managers may not ‘buy in” to validity of selection methodology or vendors and therefore may not accept the results

13. Selection and Retention • Succession planning • Train locals • Expatriate position • Repatriation / career planning • ROI versus OOSOOM* • Integration of assignments into career plan / performance management process • Collaboration with Organizational Development group *out of sight out of mind

14. KPMG Survey 2008: Repatriation Do you manage the repatriation process well?

15. KPMG Survey 2008: Assignment Success The main reason assignees terminate after repatriation

16. In Your Opinion In your opinion: • Do assignees take too much time to administer? • Are assignees over-compensated?

17. KPMG Survey 2008: In Your Opinion In Your Opinion, Assignees...

18. KPMG Survey 2008: Family Issues

19. KPMG Survey 2008: Families Does your organization include any of the following in its definition of family?

20. Defining Families • Strong social, cultural, and legal considerations • “Partners,” same- and opposite-sex • Differing definitions of marriage • Domestic partner legislation • Non-discrimination requirements • Visa/residency permit limitations • Also complex: • Dependent parents and extended families • Step-children, children from previous marriages, children-not-at-post

21. KPMG Survey 2008: Families Does your organization provide any assistance to accompanying spouses/partners?

22. Trailing Spouses • Limited menu of options available • Money can only do so much • Challenges • Visas and work permits • Transferability of licenses and certificates • Loss of place on the corporate ladder • Loss of practice (clients) that takes years to build (lawyers, doctors, accountants, etc.) • If a spouse interrupts a rewarding career, will resentment result?

23. KPMG Survey 2008: Home Leave

24. KPMG Survey 2008: Home Leave Which of the following best describes your organization’s home leave policy?

25. Home Leave • Trend toward laissez-faire and/or lump-sum administrative approach • Upside: • Less administration and tracking • Greater flexibility for assignees • Downside: • Potential resentment from host locals regarding “company-paid vacation”; confusion of purpose • Missed opportunity for repatriation planning • Missed potential opportunity for cost savings

26. KPMG Survey 2008: Taxes

27. KPMG Survey 2008: Taxes Which statement best describes your approach to tax costs related to the assignee's earnings?

28. Tax Equalization Versus Tax Protection • Tax Equalization: Assignee pays no more or no less than approximate home country burden • Tax Protection: Assignee pays no more than home country burden; might pay less • Differentiators • Assignee mobility • Equity among locations • Cost effectiveness to the organization • Fairness to the employee • Cost, effort, and complexity of the process

29. KPMG Survey 2008: Housing

30. KPMG Survey 2008: Housing Do you deduct a housing norm?

31. Home Housing Norm • Elements: • Interest on a mortgage (not principal!) • Utilities • Property taxes • Repairs (roofs, windows, boilers, pools, fences, etc.) • Maintenance • Common charges • Less common among non-US multinationals • Do you want to determine “actual costs”?

32. KPMG Survey 2008: Host Housing Purchase Which statement best describes your approach if the assignee purchases housing in the host country?

33. Host Housing Purchase • Short-term financial impact for the employer: minimal • Long-term: potential for large negative impact • Inequitable treatment of employees • Loss of mobility • Capital gains and exchange rate gain and loss issues • Financial risks to both employees and employers

34. KPMG Survey 2008: Will Preparation

35. KPMG Survey 2008: Will Preparation/Review Which statement best describes your organization’s approach to the preparation of wills?

36. Wills and Estate Planning • Assignees may be at greater risk of life and health when on assignment • Increased stress • Lower standard of health facilities in many parts of the world, and (often) inability to communicate with medical professionals in their native tongue • Terrorism and economic targeting (e.g., kidnap and ransom) • Driving on “the wrong side” of the road • Rules change when you cross borders (state and national) • Taxes • Disposition of estate • Custody of children • To whom will the grieving spouse turn to for help?

37. In Your Opinion • In your opinion • How frequently will assignees be used in five years? • Considerably less • Somewhat less • About the same • Somewhat more • Considerably more

38. KPMG Survey 2008: In Your Opinion How frequently will assignees be used in 5 years?

39. Contact Information John McLearie Principal International Executive Services KPMG LLP (714) 850-4359 jmclearie@kpmg.com Jeannette Wistner Senior Manager International Executive Services KPMG LLP (714) 850-4443 jwistner@kpmg.com