Application Area

Definition

In this section, business processes which related to Non-resident Payroll Accounting are explained.

 

Use

Selection of Overseas Employees

Selection of employees to be sent to work abroad.

Although in HR this is a Personnel Planing related activity, it is outside of the scope of this function specifications.

Determining Assignment of Overseas Employees

Determination of the overseas location, organizational assignment, assignment period, departure date and so on.

These information is saved in the Personnel Administration infotypes and notified to the employee in a suitable form.

After being notified, the selected employee has to go through various proceedings, like submission of the transference agreement statement in case of SYUKKO, insurance application, handling of family related matters, etc..

Who (the employee or the Personnel Department) is responsible for performing which proceedings varies from company to company.

Based on the results of these proceedings, several other applications (for example, if the employee wishes to take his or her family abroad) need to be performed.

Determination of the Domestic Salary Portion

Based on the employee’s application and company’s policy, the basic overseas salary, any additional payments, and other types of allowances are determined.

The method of determining these items is different from company to company, and although there are parts of the determination process that are probably common to several companies, it is presently undefined in the current function.

The Last Domestic Payroll Accounting

For employees whose residence status will be changed to non-resident (because they will stay abroad for more than one year), the next payroll account may be the last one which contain domestic income for the year in question. Because of that, it is necessary to perform the Year End Adjustment and produce the income tax statement as well as other official statements.

As these activities are the same as those of the present Year End Adjustment process, it is possible to support them with the current functionality.

However, if irregular cases like changing the employee’s departure date after performing payroll accounting (and with Year End Adjustment), it becomes necessary to perform a Year End Adjustment correction run.

Performing Non-Resident Payroll Accounting

The salary paid to employees with overseas residence status is, in principle, not subject to taxation. However, as payments relative to work done domestically are subject to a uniform 20% income tax.

However, payments relative to work performed domestically which lasted for less than one payroll accounting period are exempted from taxation.

This special income tax calculation function for regular payroll is realized in the Non-resident Payroll Accounting.

Overseas SYOYO Payroll Accounting

In the SYOYO payroll, like in the regular payroll accounting, overseas payments are exempted from taxation. However, payments relative to work done domestically (while the employee still had the domestic residence status) are subject to a uniform 20% income tax.

This special income tax calculation function for SYOYO is realized in the Non-resident Payroll Accounting. And a new table to store SYOYO payroll period must be set correctly to perform this tax calculation. To set up SYOYO payroll period table, please see the section "Define SYOYO payroll period" of Implementation Guide.

Overseas Retirement Accounting

If an employees retiring while overseas assignment, retirement liquidation and retirement allowance calculation must be performed like for resident employee.

Retirement liquidation follows the regular calculation pattern. However, income tax calculation regarding the retirement allowance is different depending on if the employee returns to Japan or not after retiring.

Employees returning to Japan after retiring have their residence status restored to domestic resident, and therefore income tax calculation relative to the retirement allowance is performed in the normal way.

On the other hand, for employees not returning to Japan, portion of payments which relative to the non-resident status period is exempted from taxation, whereas payments relative to the domestic resident period is subject to a uniform 20% income tax.

Because of that, it is necessary to keep track of the period of work which the employee had domestic residence status, as well as the period of work which the employee had non-resident status.

Selection of Returning Employees

Selection of employees to be returned from overseas assignment must be done. This is triggered at the end of the assignment period decided when the employee was initially selected to be sent abroad.

Although in HR this is a Personnel Planing related activity, it is outside of the scope of current functionality.

Determining Assignment of Returning Employees

Determination of the returning position and organizational assignment, the arrival date and other related topics must be done.

This information is saved in the Personnel Administration infotypes and notified to the employee in a suitable form.

Determination of the Domestic Basic Salary

Determination of the domestic basic salary amount after returning from overseas assignment must be done.

For the basic salary determination and also to manage promotions that may have occurred during overseas assignment, it is better to keep track of the estimated domestic basic salary during overseas assignment.

Payroll Accounting after Returning to Japan

Payroll accounting after the employee has returned to Japan is performed in the same way as normal domestic payroll accounting. This is true even if an employee returning in the middle of the payroll accounting period. Therefore regular payroll accounting can be performed.

First Year End Adjustment after Returning to Japan

The first Year End Adjustment to be performed after returning, must takes into account only the payments effected after the employee has returned to Japan till the end of the year in question.