What Triggers a Global Mobility Audit — And How Employers Invite One

Audit triggers are usually more common than many organisations and inviduals think. Yet, many are surprised when a global mobility audits occur in cross-border secondments. Often, it’s not about bad intent — it’s about patterns that invite scrutiny.

For Heads of Tax, understanding why audits happen and how they arise is essential to prevent unexpected costs and compliance headaches.

1. The Assumption Employers Make

• Payroll, immigration, and HR are “aligned.”
• Minor data mismatches are irrelevant.
• Short-term assignments are low-risk.
• Once they set-up is clear to the employee, no need for sanity checks throughout the assignment

Why They Feel Secure

• Local offices submit reports sporadically but assume compliance.
• Assignments are assumed safe if a clear assignment letter and tax equalization policy has been issued.
• Audit likelihood is perceived as low unless a major issue occurs.

2. Why It’s Risky

Data Inconsistencies

• Payroll vs immigration dates mismatch
• Split payroll between home and host entity
• Missing tax residency updates

Red Flags for Authorities

• Frequent short-term extensions
• Inconsistent documentation of allowances
• Repeated mistakes across multiple assignments
• Claiming special reliefs or tax concessions

Case Scenario – Classic Audit Triggers

A US-headquartered firm, with a subsidiary in Spain, wanted to second 1 employee to the UK (where they had no business presence) for 12–24 months.

Several factors triggered the audit:

• Employee had claimed in Spain a so called 7.p exemption on the basis he was going to be non-Spanish tax resident with no Spanish work days whilst on assignment
• Subsequently, the employee had also claimed Overseas Workday Relief (OWR) in the UK via the tax return so he would not be taxed in the UK, for days he had unilaterally decided to work from Spain (i.e. by extending duration of visits in Spain for personal reasons), whilst on assignment in the UK.
• UK and Spain, following the introduction of the Common Reporting Standards (CRS), had exchanged information about the employee. At some point the authorities realised that the employee was effectively claiming he had zero Spanish work days to claim the 7.p exemption to the Spanish tax authorities and, at the same time, for the same period, he was asking the UK tax authorities, to reduce his UK tax liability by excluding days he claimed he had worked from Spain instead of from the UK.
• Employer was completely unaware of this as they thought, per the terms of the assignment letter, they had agreed from the outset with the employee that he would only work from the UK for the duration of the assignment.
• Company assumed there was no need to sanity check at regular intervals the travel patterns of the employee’s workdays. In any case: “how could a few days a year working from his own home country cause problems”.
• Classic case of special tax concession / relief inconsistently applied across borders.

Outcome: The employee (and by extension his employer who had allowed this to happen) faced retroactive tax adjustments + interest and penalties in Spain and a lengthy audit with associated professional fees.

In fact, once an audit is underway, tax authorities often move beyond payroll accuracy and begin reconstructing an individual’s tax residence based on historical facts.

This is where many organisations are caught off guard, as residence is reassessed years after the relevant period, creating exposure that could not have been corrected in real time — a risk that becomes particularly acute when expat tax residence is examined retrospectively.

3. How an Audit Typically Get Triggered

• Year-end payroll and HR reconciliations
• Local tax authority exchange of information / enquiries
• Internal audit or corporate compliance reviews
• Certain claims made for tax relief, rebates or special concessions are an audit magnet because of their very nature

Once an audit is triggered, authorities often request assignment letters early in the process to establish intent and working arrangements.

Early Warning Signals

• Discrepancies in payroll submissions between home and host country.
• Conflicting internal communications about assignment start/end dates or workdays outside of assignment host location
• Recurrent manual corrections

In decentralised mobility models, local decisions on travel and assignments can unintentionally leave employers exposed to accidental expat scenarios.

4. What Earlier Intervention Looks Like

• Implement consistent HR-Payroll-Tax integration
• Document all extensions and deviations clearly
• Centralise review for all international moves

The IRS publishes detailed guidance on cross-border assignments that can be used as a reference point for compliance expectations: IRS Guidance on International Assignments.

Once scrutiny increases, organisations often reassess whether their existing advisory support is sufficient to address both immediate compliance and broader exposure.

In many cases, relying solely on cross border tax and accounting professionals addresses reporting obligations but leaves structural risks unchallenged, highlighting the importance of aligning accounting support with wider cross-border tax and accounting advice.

Not many companies or individuals have the prior experience or know-how needed to look at a cross-border situation from a 360° angle.  

P.S. is your setup optimal for ALL cross-border requirements? Check if YOU might be exposed to unnecessary risks