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Published by Ritesh Ranjan

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Published by: Ritesh Ranjan on Nov 09, 2011
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A parent-country national is a person working in a country other than their country of origin.Such a person is also referred to as an expatriate. Long periods of assignment (perhaps 4
5 years
or more) may run the risk of “de facto” employee status in
the host country, so that labor laws orthe host country apply.A U.S. parent-country national residing abroad still owes U.S. taxes each year on his or herworldwide income. The US has income tax treaties with over 35 other countries. The IRS and theforeign taxing authorities can exchange information on their citizens living in the other country.Qualifying U.S. citizens and residents working outside the United States are permitted to elect toexclude a portion of their foreign earned income under the Internal Revenue Code (IRC). Thissection provides a general exclusion limited to a specified amount, another exclusion measuredby foreign housing costs, and, for self-employed persons, a foreign housing cost deduction.To qualify for the foreign earned income and housing cost exclusions, the individual must haveforeign earned income, his or her tax home must be in a foreign country, and he or she must meeteither of two tests:1.
The bona fide residence test, which requires the taxpayer to be a bona fide resident of aforeign country or countries for an uninterrupted period that includes a full tax year, or2.
The physical presence test, which requires the individual to be present in a foreigncountry or countries at least 330 full days during a period of 12 consecutive months.A U.S. citizen may qualify under either the bona fide residence or physical presence test. A U.S.resident alien working abroad can qualify under the physical presence test, and in certain limitedcases, tax treaty nondiscrimination rules may permit qualification under the bona fide residenceruleA host-country national (HCN) is an employee who is a citizen of a country in which anorganization's branch or plant is located, but the organization is headquartered in anothercountry. An impediment to hiring HCNs is that such employees may not understand the parent
company‟s culture. To deal with this issue, companies may base hiring decisions on certain
criteria that serve to increase identification with the company and its values.Many countries have national localization policies that require firms to hire locals rather thaninternational employees when at all feasible. Some of the legal issues that arise in connectionwith employment of HCNs include determining which country's labor laws and tax laws areapplicable
The term „third country‟ is used in the Treaties, where it means a country that is not a member of the Union. This meaning is derived from „third country‟ in the sense of one not party to an
agreement between two other countries. Even more generally, the term is used to denote acountry other than two specific countries referred to, e.g. in the context of trade relations. This

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