EQIX » Topics » Tax Equalization Program

This excerpt taken from the EQIX 10-Q filed Aug 5, 2008.

Tax Equalization Program

The Tax Equalization Policy has two primary objectives:

 

   

To minimize any tax advantages or disadvantages to an employee on an international assignment.

 

   

To keep an employee’s tax obligation approximately the same as if he/she had remained in the home country.

The Company maintains a policy of tax equalization, i.e., the Company calculates a “hypothetical” home country income tax on your annual base salary and equity compensation based on the number of exemptions you have claimed on your actual tax return (the “Hypothetical Tax”). The Hypothetical Tax will be deducted from your salary throughout the year and becomes your tax obligation from the Company’s point of view. A hypothetical tax will also be withheld from any bonus payments. Hypothetical tax amounts will be adjusted annually. In turn, the Company then assumes financial responsibility for the tax obligation you incur in your home and host countries (with the exception of home country tax applicable to your non-Company sourced income). The Company’s tax equalization policy does not apply to any investment income, including rental income, or to any negative tax consequences that occur due to your refusal to repatriate at the Company’s request or at the conclusion of the Assignment and these remain solely your obligation.

Annually, once your home and host country tax returns are filed, the tax equalization reconciliations are prepared by BDO Seidman, LLP, comparing your actual tax liability to your hypothetical tax. This is done to ensure that your total amount of income tax paid approximates what you would have paid if you were working in your home country. The tax equalization reconciliation will determine if the Company owes you a tax equalization payment for the tax year or if you owe the Company additional hypothetical tax.

All foreign tax credits earned as a result of this Assignment belong to the Company. Any host country tax refunds must be forwarded to the Company.

In exchange for the tax equalization benefit, you hereby authorize the Company to deduct the hypothetical tax and any owed amounts from the tax reconciliation from your compensation, including any bonus compensation or any other amounts due to you from the Company.

 

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