International pension tax issues are coming into focus for many employers, administrators and trustees. Changing tax rules combined with increased scrutiny from tax and regulatory authorities plus media interest in executive pay, pensions and cross-border arrangements are driving the tax governance agenda.
Managing employer tax withholding risk for cross-border pensions can be complex, tax positions can become out-of-date or not delivered to timescales needed or in easily accessible and automatically updated formats. KPMG’s technology, Pensions Tax Analyser (“PTA”), will provide a technology solution to assessing the tax risk for contributions to pension plans in cross-border scenarios, including local compliance and member tax positions. It can also provide tax treatment for distributions from international pension plans. With fast results and workflow solutions, the technology can fill a gap and is potentially capable of linking with other technology platforms and payroll applications.
What are the challenges?
International Pension Plans provide a solution for executives who are global nomads or for whom there is no suitable local pension provision. Compliance considerations and withholding tax requirements are key areas of focus.
Keeping tax positions up to date and accessing information quickly based on multiple scenarios can be a challenge for which technology can offer a solution.
Significant funds are under management in legacy International Pension plans established over the last 20+ years. Generation of executives retiring with multiple legacy pension arrangements at a time with increased need for tax governance and member communications.
Determining the tax withholding and reporting obligations based on where executives have worked and where they are retiring can be a challenge – technology can improve process management and reduce management time on these matters.
KPMG’s IPP Services
Our market leading technology (PTA) ensures the tax and withholding treatment is checked before a distribution or transfer is made from the International Pension Plan. The technology provides speed, access and efficiency. We are seeing an established trend where employers and trustees are taking steps to update and review the tax governance of their IPPs, taking into account countries where the executives have worked and are most likely to retire. Our technology can be a significant differentiator for employers and trustees/administrators.
An effective cross-border pension policy and tax framework is key for global employers. We can help review and update existing policy. For global employers having one pension plan, regardless of where the employee works, can provide key benefits:
We provide help for employers with building a case for change within the organisation, plan provider selection and establishing tax governance for the new plan.
We provide tax advisory services for senior executives who are members of International Pension Plans and are considering their retirement options. For example, we can co-ordinate and deliver international tax advice relevant to the individual’s circumstances in a flexible manner, engaging with the individual on a private client basis or at the request of the employer.
KPMG’s IPP Technology – Pension Tax Analyser
At KPMG, we understand the complexities and challenges organisations face and have technology solutions to support compliance with cross-border pension plans.
KPMG’s Pension Tax Analyser (PTA) will provide the tax treatment across two modules built to the organization’s specifications as follows:
Pension Distribution Analyser (PDA)
- Distributions from pension plans with crossborder members can require the sourcing of payments over workdays with tax treatment depending on pension plan type and member circumstances.
- PDA will enable employers and/or trustees to manage the full end-to-end process from when a Member requests a distribution to payment and reporting.
- PDA will be capable of supporting a business in being globally tax compliant, by determining the income tax withholding, social security and payroll reporting required for a distribution or transfer request made by a Member.
Pensions Contribution Analyser
- PCA will review the tax treatment of contributions (both employer and employee) made to pension plans with international members.
- PCA can determine for different crossborder scenarios whether tax relief applies or not on contributions. This will allow the employer to appropriately manage any with holding, social security and reporting obligations.
PTA Key features and benefits
KPMG’s PTA will provide an insightful, simple and user friendly dashboard enabling both the employer and the trustee to view all pension arrangements at a glance, in one place, in real-time. The dashboard functionality simplifies complex Member information, revealing summaries and patterns across a number of metrics, including country of retirement and distribution type, allowing the trustee and employer to analyse the data with clarity, simplicity and accuracy.
KPMG’s PDA workflow is designed to enable the trustee to track a Member’s distribution case from an initial request through to payment and reporting. The workflow can be tailored to specific Service Level Agreements (SLAs) between the employer and trustee, with built-in flag functionality, enabling Member cases to move through the process accurately and swiftly.
KPMG’s PDA built-in reporting will be capable of creating bespoke reports will be based on specific requirements, for example:
- Service Level Agreements (SLAs) - e.g. initial Member request actioned by the trustee within 2 weeks.
- Member reporting - e.g. initial requests, distribution type (pension versus lump sum), country of retirement.
- Employer reporting – e.g. payroll withholding taxes.
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