Does the U.S. employer have to pay the salary for an L-1 employee?

The L-1 visa allows a company outside the United States to transfer an employee to a related U.S. company. The U.S. company must have a qualifying relationship with the company abroad and the employee must have worked for the company abroad for at least one continuous year out the past three years in a managerial, executive or specialized knowledge role. The employee must also be coming to the U.S. to hold a managerial, executive or specialized knowledge role.

A common question we receive is whether the company abroad can continue to pay the salary for the L-1 employee. There are many reasons that the company and/or employee may prefer this situation. For example, if the employee is being transferred from a country with a different pension or benefits scheme, they may want to preserve those benefits in their home country for when they return.

Although the most straight forward situation would be for the U.S. company to pay the L-1 employee, there is case law that supports that the L-1 employee’s salary may be paid by the foreign company and that the source of the L-1 employee’s wages is not relevant to determining whether the employee qualifies for the L-1 visa classification.

It is important to note that the U.S. company and L-1 employee must still comply with all U.S. tax laws and should seek professional tax advice to ensure they are doing so.