Tax Issues Key for Expat Compliance

October 4, 2010 ( – Sixty-one percent of respondents in a recent Mercer survey said the most serious global mobility compliance issue involved tax return revisions caused by expatriates’ improper reporting of worldwide income.

A news release said 25% cited fines and penalties imposed on expatriates due to inaccurate reporting of income as another trouble spot, while a comparable percentage also mentioned the challenge posed by tax audits as a result of under-reporting of income by expatriates. Employers had to address penalties due to late tax payments and uncertainty over correct withholding amounts.

“The growth in recent years of extended international business travel has only exacerbated the difficulties faced by employers in tracking income,” said Geoffrey W. Latta, Partner with Mercer, “as well as meeting both home- and host-country tax and immigration laws.”

Mercer’s survey found the majority of respondents to be without procedures or systems to handle tracking international business travelers. In fact, 45% do not track the movement of business travelers at all, and 59% do not have a policy or procedural requirements to ensure that such employees track their own travel.

Sixty-seven percent of companies that have a policy or procedure say it not only states the employees’ responsibilities for reporting travel, but also highlights potential immigration and tax implications should they fail to do so. In fact, 38% of companies will not allow individuals to book travel unless they agree to follow the rules regarding travel reporting. Fourteen percent go a step beyond that and withhold reimbursement of expenses or payment of per diems unless the employee submits a timely travel report.

These findings are from Mercer’s Global Mobility Compliance Issues Survey, conducted in August 2010 that includes responses from 240 companies throughout the U.S. and Canada.