Treatment of Expatriate Tax: A Look at U.S.,U.K. and Canadian Practices

Abstract

The difficulties inherent in international assignments—whether short term or long term—are exacerbated by home and host tax regulations, as well as company policy. In an effort to better understand how employers treat expatriate income tax, Organization Resources Counselors, Inc. recently conducted a series of surveys polling multinational employers based in the United States, Canada and the United Kingdom. Mindful of the similarities and differences among individual tax policies, tax equalization still leads the list of employer approaches to taxation of company-source income. With the ongoing popularity of the balance sheet approach to international pay, the predominance of tax equalization is no surprise. Many employers continue to believe that in most typical assignee situations, protecting the expatriate's purchasing power and lifestyle—and tax liability—while abroad is still the approach that works best for all.