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Mobility Matters

Russia-Ukraine war: Individual tax issues for global mobility June 2022 | By Yoori Sohn and Robert Rothery, KPMG LLP, United States

Global Mobility Services (GMS) Publications

On February 24, 2022, the Russian government launched a full military invasion of Ukraine that caused mass destruction, civilian death, and left millions of people displaced. The invasion of Ukraine is the largest military attack by one state against another on the European continent since World War II. In response, the United States (U.S.) and the European Union imposed sweeping economic sanctions against Russia.1

The U.S. government also issued travel advisories for U.S. citizens in Ukraine and Russia, urging Americans to depart the two countries immediately. Movement of the Ukrainians, as well as foreign nationals, is largely limited due to closure of Ukrainian airspace and disruptions in and around land routes. 

As the Russia-Ukraine war continues to escalate, many multinational companies2 have evacuated their employees from affected areas, and have scaled back operations or severed business ties with Russia.3 In addition to the practical, safety, and security concerns, companies with U.S. assignees4 in the affected areas are likely to face global mobility-related tax issues and increases in program costs. While the tax issues may not be at the forefront of employers’ minds in dangerous situations like the Russia-Ukraine wasr, with evacuations and cross-border moves there are tax consequences. 

This article examines selected U.S. tax issues that may impact employers with U.S. assignees evacuated from the areas of conflict and does not address labor and immigration laws.

Evacuation expenses

While many companies have been focused on the health and safety of their employees, evacuations can be costly and a challenge to manage from an employer’s perspective. As the Russian military invaded Ukraine, companies evacuated their employees from Ukraine and Russia, and temporarily relocated them to safe locations. During such dangerous times, the decisions whether to do so were made for reasons other than taxation. Yet, evacuations can have U.S. tax implications and an impact on international assignment costs. 

Generally, employer-provided benefits are included in gross income, except for certain fringe benefits specifically exempted under the U.S. Internal Revenue Code.5 An employer’s cost of evacuating employees from the affected areas may be deductible to the employer and excludible from the employees’ gross income as a “working condition fringe benefit” if the employer can demonstrate that circumstances necessitated such security measures, and that the evacuation plan is part of an overall security program.6 If such security concern exists with respect to an employee, then this concern is generally deemed to exist with respect to that employee’s family (spouse and dependents).7 

Requirement 1: Specific, direct threat

To exclude evacuation expenses or special transportation as a working condition fringe benefit, two requirements – or conditions – must be met. First, a bona fide business-oriented security concern must exist, meaning the facts and circumstances show that a “specific basis for concern regarding the safety of the employee” exists.8 A generalized concern is not sufficient.9 Examples of such security concerns are:

  • a threat of death, kidnapping, or serious bodily harm to the employee or other similarly situated employees because of the employee’s status as an employee of the employer;10 or
  • a recent history of terrorist activity in the geographic area in which the evacuation transportation is provided, unless that activity is focused on a group of individuals which does not include the employee, or occurs to a significant degree only in a location within the geographic area where the employee does not travel.11

Requirement 2: Overall security program

The second condition requires the employer to show that it has an overall security program in place, which protects the employee continuously on a 24-hour basis, including at the employee’s residence, workplace, and while commuting and engaging in travel, whether for personal or business purposes.12 This means that the program must provide protection for the employee at all times, and must include a specially-equipped vehicle operated by a bodyguard/driver trained in evasive driving techniques.13 However, where such a comprehensive security program is not in place, the employer may still be deemed to have an overall security program if:

  • a security study is conducted by an independent security consultant;14
  • the security study is based on an objective assessment of all facts and circumstances;15
  • the study recommends that an overall security program is not necessary for the employer’s specific circumstance;16 and
  • the employer applies the study’s recommendations consistently to the employee.17

In a rapidly evolving situation such as the Russia-Ukraine war, an employer may not have the time to commission an independent study prior to, or during, the evacuation to determine whether the security program in place is sufficient to satisfy the overall security program requirements. However, the rules related to working condition fringe benefits seem silent as to the timing of the study and do not specifically prohibit an employer from commissioning the study after evacuations have taken place. Employers prioritizing the safety and security of their employees may commission an independent security study as soon as possible after the evacuation is complete.

Exclusion of certain evacuation expenses as a working condition fringe benefit

The exclusion of evacuation expenses as working condition fringe benefits applies specifically to transportation costs and related expenses meant to ensure the safety of the employees while at their assigned work locations. No specific evacuation expenses are identified as a working condition fringe benefit, but it may be reasonable to treat expenses such as travel, temporary housing, food, and other necessary expenses as working condition fringe benefits. Thus, temporary housing and expenses incurred en route to the final destination may be considered working condition fringe benefits, depending on the duration of the stay at the interim location. However, if the employee will not be returning to the location from where the employee was evacuated, temporary housing and living expenses at the final destination are not likely to be excludible as working condition fringe benefits. 

As indicated above, the U.S. government urged U.S. citizens in Ukraine to depart immediately and issued “Do Not Travel” advisories for Ukraine and Russia. The Ukraine advisory urges U.S. citizens to depart using any commercially or privately available ground transportation and it strongly advises U.S. citizens to monitor government notices for information about changing security conditions.18 In addition to urging immediate departure from Russia, the U.S. advisory related to Russia warns of the potential for harassment of U.S. citizens by Russian government officials and detainment without just cause.19

Given the gravity of the situation in Ukraine and Russia, U.S. assignees evacuated from the affected areas are unlikely to return to their original assignment location for the foreseeable future. In those circumstances, the temporary housing and expenses at the final destination are not likely to be excludible from gross income unless a special relief provision is enacted by Congress or provided by the Internal Revenue Service (IRS).

Temporarily-away-from-home expenses and moving expenses

The standard for determining whether an assignment is temporary is the employee’s “realistic expectation” regarding the assignment’s duration, both at its commencement and upon the occurrence of a change in circumstances, as well as the actual assignment length.22 An assignment is considered to be indefinite if it is expected to last for more than one year, regardless of the actual length of the assignment.23 There must also be an expectation that the employee will return to the original work location. If not, then the employee is not considered to be “away from home” because the employee will not be returning to that home. 

As mentioned above, it may not be feasible for evacuated employees to return to their former assignment locations in Ukraine and Russia. In those situations, employees who were relocated to a third country are not likely to satisfy the necessary standard to treat their expenses as temporarily-away-from-home expenses. 

Moving expenses

The deduction for qualified moving expenses, as well as the exclusion for moving expense reimbursements, is suspended for tax years from 2018 to 2025.24 As a result, there is presently no U.S. tax relief for an evacuated employee who relocates to another country for the cost associated with moving, or who received reimbursements meant to assist with the costs of relocating to a third country.


Loss of property associated with evacuation

Due to the urgency and destruction created by the Russia-Ukraine war, employees may have left many of their possessions behind without expectation of recovery. Generally, individuals are entitled to claim an itemized deduction for a casualty loss arising from fire, storm, car accident, or other casualty.25 For tax years from 2018 to 2025, the deduction for personal casualty losses is limited only to losses attributable to federally declared disasters.26 However, if an individual has personal casualty gains (e.g., insurance payout exceeds damaged/destroyed property’s basis), an exception to the rule limiting the deduction to federal disasters applies.27 This means that the individual with personal casualty gains may deduct personal casualty and theft losses that are not attributable to a federally declared disaster to the extent they do not exceed the gains. Unless the deduction is attributable to a federally declared disaster, the deduction for personal casualty losses is claimed in the year which the casualty occurred.28 

The Russia-Ukraine war is not a federally declared disaster, which means that U.S. assignees who incurred casualty or theft losses of property would not qualify for this deduction. 

Foreign earned income exclusion and failure to meet time requirements

A U.S. person is taxed on his or her worldwide income without regard to where the income was earned.29 If certain requirements are met, a qualifying individual may elect to claim a foreign earned income exclusion (FEIE) to mitigate double taxation by excluding income earned and taxed in another country.30 A U.S. assignee on a long-term assignment meeting the requirements of FEIE in Ukraine or Russia, may elect to claim the FEIE up to the annual maximum limit ($112,000 for 2022).31 

Minimum time requirement

To qualify for the FEIE, a U.S. taxpayer must be a “bona fide” resident for an entire calendar year or physically present for at least 330 days during any 12 consecutive months in a foreign country or countries.32 However, a special exception allows the minimum time requirement to be waived if the taxpayer can establish that he or she could have been expected to have met such requirements but for war, civil unrest, or similar adverse conditions in the foreign country.33 The exception to the minimum time requirement only applies to countries and time periods specified by the IRS.34 Each year, usually in the first few months of the following year, the IRS publishes an “Internal Revenue Bulletin” specifying the countries and time period for which the time waiver can be applied. A U.S. taxpayer claiming this exception will be treated as a qualified individual only for the actual period of residence, resulting in an allowable exclusion that is a pro rata portion of the annual maximum limit amount. 

U.S. assignees evacuated from Ukraine and Russia before meeting the time requirements are not qualifying individuals for purposes of the FEIE unless the IRS issues a waiver of the minimum time requirement for these two countries. Therefore, unless and until the IRS issues the waiver, such U.S. assignees cannot elect to claim the FEIE. In addition, those who left a listed country on or before the IRS’s listed date do not qualify for the special time waiver. For example, if the IRS were to waive the time requirement for Ukraine and specifies the date to be February 24, 2022, then an U.S. assignee who left Ukraine before February 24, 2022, would not qualify for the waiver. Any such waiver for Ukraine for 2022 would likely be announced in the early months of 2023. The most recent IRS-announced waiver was issued on March 25, 2022, in Revenue Procedure 2022-18 (see GMS Flash Alert 2022-070, March 29, 2022).

U.S. travel restrictions

A U.S. taxpayer who is physically present in a foreign country where the U.S. has issued travel restrictions is in violation of the U.S. law and the U.S. taxpayer will not be able to claim the FEIE for the period in which the restrictions are in effect.  Presently, the U.S. government has not issued formal travel restrictions for Russia and as long as a U.S. taxpayer evacuated from Russia meets the minimum time requirement or qualifies for a waiver that may be issued by the IRS, the U.S. assignee could claim the FEIE, provided that all other requirements under the FEIE rules are met. 

Other tax and mobility considerations

The Russia-Ukraine was will pose many tax questions even after the employees have been safely evacuated from Ukraine and Russia. Aside from the impact on U.S. income tax for U.S. assignees affected by the conflict, relocation of the workforce due to evacuations may result in additional tax considerations for the employer. The other tax and mobility considerations are briefly addressed, but are not discussed in detail because these topics are beyond the scope of this article.

Workforce relocation

Employers should consider whether evacuated employees will:

  • be shifted to a remote/telework arrangement,
  • remain in the host location,
  • relocate to a third country,
  • return to Ukraine/Russia, or
  • repatriate back to the United States.

Employers may need to consider whether they are subject to the relevant withholding and reporting rules in a new jurisdiction. Other local requirements may also need to be considered, including, for example, participation in local retirement arrangements. 

Permanent establishment 

Relocating an employee’s primary work location to a country where the employer is not registered to do business can result in additional corporate tax consequences. Employers should consider whether the relocation of an evacuated employee might create a permanent establishment, often referred to as a “PE”, which can create a taxable nexus with another jurisdiction.

Income tax treaty considerations

The U.S. has income tax treaties with Ukraine and Russia that could provide tax advantages for workers who move between the U.S. and those countries.37 Employers should consider whether a treaty is applicable for workers who have resettled in other countries. 

Totalization agreements

Social security totalization agreements help to prevent double social security tax when a worker is sent from one country to work in another. The U.S. does not have a totalization agreement with either Ukraine or Russia, but does have such agreements with 30 other countries. Currently, there are no special accommodations by the U.S. with respect to U.S. social security taxes that may be applicable to displaced Ukrainian workers in the U.S., but U.S. assignees who are reassigned from Ukraine or Russia to a country that has a totalization agreement with the U.S. may be able to benefit from that agreement.


In the aftermath of a sudden relocation, countless questions arise, insights are gained, and lessons are learnt. Generally, evacuation plans are not written with tax issues in mind, but understanding the potential fiscal ramifications may allow evacuees and international assignment program managers to focus their attention on more important matters, such as safety. The list of tax and mobility considerations discussed in this article is not an exhaustive one, but an example of some key tax issues that are likely to arise at a later time. 

The Russia-Ukraine war spotlights whether international assignment programs are adequately equipped to respond to sudden and unexpected contingencies. This can be an opportunity for program managers to ‘dust off’ existing evacuation policies and plans, or to create them if such policies are not yet in existence. In any case, where evacuation and emergency policies are part of the assignment program, these should be communicated to the assignees prior to the assignment and as necessary during the assignment.

Related resources

Below is a list of helpful information related to the war in Ukraine including travel advisories, KPMG websites, and updates from the U.S. Department of State.

  • Information for U.S. citizens in Ukraine from the U.S. Department of State
  • Notice from the U.S. Embassy in Ukraine
  • KPMG Insights: Russia–Ukraine War
  • The Russia-Ukraine war: Boardroom considerations
  • GMS Flash Alerts-Immigration


1. The White House Fact Sheet, Statements and Releases (February 24, 2022).

2. The terms “company” and “companies” are used interchangeably with “employer” and

“employers” throughout this article.

3. The United States and the European Union imposed sanctions against Belarus for aiding the Russian invasion of Ukraine. Thus, multinational companies conducting business in Belarus may encounter similar global mobility-related tax issues discussed in this article as companies that had business activities in Russia.

4. The term “U.S. assignee” in this article refers to an individual who is considered a U.S. person for U.S. tax purposes. A U.S. person is a U.S. citizen or resident under the Internal Revenue Code and subject to tax on their worldwide income. See I.R.C. § 7701(a)(30)(A).

5. See I.R.C. §§ 61, 132.

6. See I.R.C. § 132(a)(3); Treas. Reg. § 1.132-5(m).

7. See Treas. Reg. § 1.132-5(m)(3).

8. Treas. Reg. § 1.132-5(m)(2)(i).

9. See Treas. Reg. § 1.132-5(m)(2)(i).

10. Treas. Reg. § 1.132-5(m)(2)(i)(A).

11. See Treas. Reg. § 1.132-5(m)(2)(i)(B).

12. See Treas. Reg. § 1.132-5(m)(2)(iii).

13. See Treas. Reg. § 1.132-5(m)(2)(iii).

14. See Treas. Reg. § 1.132-5(m)(2)(iv)(A)

15. See Treas. Reg. § 1.132-5(m)(2)(iv)(B).

16. See Treas. Reg. § 1.132-5(m)(2)(iv)(C).

17. See Treas. Reg. § 1.132-5(m)(2)(iv)(D).

18. See U.S. Department of State, Bureau of Consular Affairs: (last visited March 23, 2022).

19. See U.S. Department of State, Bureau of Consular Affairs: https://travel.state.

gov/content/travel/en/traveladvisories/ea/information-for-us-citizens-in-Ukraine. html#:~:text=U.S.%20citizens%20seeking%20to%20depart,from%20overseas)%20 for%20immediate%20assistance (last visited March 23, 2022).

20. See I.R.C. § 162(a)(2). Unless a member of the U.S. Armed Forces, a deduction for moving expenses is suspended for tax years from 2018 to 2025. See I.R.C. § 217(k).

21. See I.R.C. § 162(a)(2); Rev. Rul. 93-86, 1993-2 C.B. 71.

22. See I.R.C. § 162(a)(2); Rev. Rul. 93-86, 1993-2 C.B. 71.

23. See I.R.C. § 162(a)(2); Rev. Rul. 93-86, 1993-2 C.B. 71.

24. See I.R.C. § 217(a), (k).

25. See I.R.C. § 165(h).

26. See I.R.C. § 165(h)(5)(A).

27. See I.R.C. § 165(h)(5)(B).

28. See I.R.C. § 165(a), (i). To the extent an employer provides reimbursement to employees for lost or abandoned property, careful review of the relevant facts and circumstances would be necessary to determine whether reimbursement would be considered taxable compensation income to the employee.

29. See I.R.C. § 7701(a)(30)(A). See Treas. Reg. § 1.1-1(b).

30. See I.R.C. § 911(a), (d). To claim the FEIE, a U.S. citizen or resident must have a “tax home” in a foreign country and meet the minimum time requirement. This article discusses only the minimum time requirement and assumes that U.S. assignees established a tax home in the country they were evacuated from.

31. See Rev. Proc. 2021-45.

32. See I.R.C. § 911(d)(1).

33. See I.R.C. § 911(d)(4).

34. See I.R.C. § 911(d)(4)(B)(i).

35. See I.R.C. § 911(d)(4), flush language. See Treas. Reg. § 1.911-2(f).

36. See I.R.C. § 911(d)(8).

37. Belarus is one of the former Soviet Republics which are now covered by the treaty with the Commonwealth of Independent States (CIS), formerly known as the Union of Soviet Socialist Republics (USSR).

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