A US company decides to send an engineer to Europe for two years. The business case is signed, the start date is set, and the employee has booked a flight. Then the questions arrive in the wrong order: can she legally work there from day one, which country's payroll pays her, does US Social Security still apply, and who is her employer in a country where the company has no entity?
Most assignments that go wrong were not badly managed. They were sequenced badly. The decisions that carry legal and cost consequences were made after the commercial ones, when changing them was expensive. This article sets out what HR needs to settle before the offer letter or assignment letter goes out.
Five decisions that come before the flight
1. The right to work in the destination
A US passport gives visa-free travel to many countries for short visits. It does not give the right to work. The destination's permit route depends on the role, the salary, the length of stay and, in many countries, whether the employer is a local entity or a recognised sponsor. Salary thresholds are often reset every January, so a package that clears the bar in December can fall short if filing slips into the new year.
2. US income tax: what the exclusion covers
The IRS has set the 2027 foreign earned income exclusion at $137,300, up from $132,900 for 2026 (IR-2026-133, 5 November 2026). To claim it, the employee needs a tax home abroad and has to meet either the bona fide residence test or the physical presence test of at least 330 full days in a foreign country during any 12 consecutive months. Two limits matter for planning. The IRS says a person does not have a foreign tax home while their abode remains in the United States, and it describes a foreign tax home in terms of employment expected to last for an indefinite rather than temporary period. Short assignments and frequent trips home can therefore fail the test even when the employee assumed they qualified. And the exclusion is a US income tax rule. It does nothing to reduce the tax and payroll obligations in the host country.
3. Social security: one country or two
The US has totalization agreements with 31 countries, most recently Romania, where the agreement entered into force on 1 September 2026. Under the detached-worker rule, a US employee on a temporary assignment to an agreement country, generally expected to last five years or less, can stay in the US system. The certificate of coverage, issued by the Social Security Administration on the employer's request, is the document that proves the exemption from host-country contributions. Without it, contributions are often due in both countries. Outside the agreement countries there is no such relief, and the cost of dual contributions belongs in the assignment budget from the start.
4. Who pays, and through which payroll
Host-country income tax is usually triggered by working there, not by where the salary is paid. Many countries expect local withholding or registration even when the employee stays on a US payroll. Shadow payroll, split payroll and tax equalisation are all workable, but each needs to be chosen before the first pay date, not reconstructed at year end.
5. Who is the employer
If the company has no entity in the destination, three questions follow: who sponsors the work permit, who runs local payroll, and whether the employee's activity could create a taxable presence for the US company. The OECD updated its Model Tax Convention commentary in November 2025 on when a home office abroad can count as a place of business, using a test based on the employee spending at least 50% of working time there over a 12-month period, followed by an assessment of whether there is a commercial reason for the activity in that country. Whether a given country follows that commentary depends on its own rules and treaties, so the risk needs a country-level check.
The pre-departure checklist
| Area | What to confirm | Typical owner |
|---|---|---|
| Immigration | Permit route, salary threshold, sponsor requirement, processing time, family permits | Immigration provider |
| US tax | FEIE eligibility (tax home, 330-day or residence test), housing exclusion, equalisation policy | Tax adviser |
| Social security | Totalization agreement in place? Certificate of coverage requested with start and end dates | HR / payroll |
| Host payroll | Local registration, withholding, shadow payroll setup | Payroll / EOR |
| Employer | Local entity, sponsor or Employer of Record; corporate tax exposure reviewed | Legal / finance |
| Relocation | Housing, school places, bank account, registrations on arrival | Relocation provider |
| Return | End date, repatriation terms, exit filings | HR |
The table looks simple. The difficulty is that each row usually sits with a different provider, and the answers depend on each other. The permit route can depend on who the employer is. The employer choice changes the payroll setup. The assignment length changes both the tax home question and the certificate of coverage.
What this means operationally
For a US HR team running a handful of outbound moves a year, the expensive failures are rarely dramatic. They are an employee who cannot start on the planned date because the permit was filed late, a year-end bill for host-country tax nobody withheld, or social security paid twice because no certificate was requested. Each is avoidable if the five decisions above are made in order, by people who can see all of them at once.
That points to a design choice. Either HR coordinates separate immigration, tax, payroll and relocation providers and carries the sequencing risk internally, or one partner owns the case from assessment to arrival. Where there is no local entity, an Employer of Record removes the most common blocker: the employee is hired and paid locally on a compliant contract, while the US company directs the work.
How xpath.global supports US outbound assignments
xpath.global handles immigration, tax, Employer of Record and relocation for US companies moving people abroad, with one case owner and one platform tracking each assignee's permit, filings and key dates. We assess the route before the offer goes out, so the start date in the business case is one the destination will actually accept. If you are planning 2027 moves out of the US, speak to our team about your next assignment.
- Speak to our team about your next assignment ↗
- Related: How US Companies Can Hire Abroad Without Opening a Foreign Entity
Sources
IRS, IR-2026-133, 5 November 2026 (Rev. Proc. 2026-35); IRS, Foreign Earned Income Exclusion (page reviewed 12 June 2026); US Social Security Administration, International Programs: Totalization Agreements overview; OECD Model Tax Convention update, adopted November 2025.
Editorial note: This article provides general information, not individual tax, legal or immigration advice. Country coverage, exemptions and EOR eligibility require specialist confirmation for the specific assignment.
