Tax equalization

When one is a taxpayer in one country, but works in another, one may be subject to different taxation from if one had worked in one's home country, or even to double taxation, even taking account of tax treaties between countries. Tax equalization (or tax equalisation) is the offsetting of any such difference so that working abroad is tax neutral for the worker. It is also known as hypo tax, from "hypothetical" – the worker pays taxes as if they were still resident in their home country. Tax equalization most often arises in international assignments of workers in multinational corporations.

Tax equalization can cut both ways, depending on whether the effective tax rate is higher or lower when working abroad; if the policy only benefits the employee (reducing taxes if working abroad results in higher taxes, but not raising them if working abroad results in lower taxes), then it is referred to as a tax protection policy.

The term "tax equalization" is also used by some American states, such as Nebraska and North Dakota to refer to property appraisal in the context of property tax.