What is Tax Equalization?

Tax Equalization (EQ or TEQ) is a tax reimbursement approach utilized by employers to neutralize the impact of an international assignment on an employee’s tax liability. A tax equalization policy is designed to ensure that the total income and social security taxes borne by the assignee with respect to company provided income will approximate that which would have been borne had the assignee remained in the home country. An effective tax equalization policy will mean that taxes do not create a disincentive to accept an assignment to a high tax country, nor add a tax incentive for assignments to low tax countries.