Home » Expat Focus Financial Update August 2017

Expat Focus Financial Update August 2017

British expat retirees rush to Europe

A firm of financial advisers that helps British expat retirees settle in European Union countries says demand for its services is rocketing.

Blevins Franks says that the number of enquiries every month to its website has doubled in the past year, while business has grown by 25%. The financial experts say that British expat retirees will find it more difficult to move to other European Union countries after Brexit. The most popular countries that the expats are heading to currently are Spain, Portugal and France.A spokesman for the financial advisers says that EU countries benefit from British expat retirees who buy property and also spend money in restaurants and shops. They believe that a deal that will enable expats to continue moving to the European Union for their retirement will be agreed. The spokesman added that many clients believe it is better to be in their chosen country before Brexit occurs, rather than looking to retire there afterwards.

Researchers found that the among the biggest concerns for British expats are residency, access to healthcare, and the UK’s pension triple lock continuing to help support them.

However, British expats looking to sell up their retirement dream home in the EU and return to the UK are in for a financial shock, according to research. Retirement Advantage Equity Release says that since 2010, rising house prices in the UK and falling prices across the EU means these expats could face a substantial financial shortfall should they return to the UK after Brexit.

The research reveals that house prices in the UK have risen by an average of 12% since 2010, while in France they rose by 3.8%. For expats in Portugal prices have fallen 6% and in Italy by 20% over the last seven years. In Spain, one of the most popular destinations for British expats, prices have fallen by 26%.

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Top private banks revealed

The world’s number one private bank is Swiss-based UBS followed by the Bank of America, according to a new report.

UBS has more than US$2 trillion (£1.56 trn) of assets under management, says wealth management research firm Scorpio Partnership. The top ten includes Morgan Stanley, Wells Fargo and the Royal Bank of Canada.

The survey is notable for the fact that Deutsche Bank has dropped out of the top 15 for the first time and is now rated as the 16th largest private bank – a fall of five places – in the world for assets under management.

Meanwhile, Credit Suisse has revealed it is recruiting experienced private bankers for a major push for new business, particularly with high earning expats, in Saudi Arabia. The bank is working towards acquiring a full banking licence and is looking to develop its wealth management business in the kingdom.

Campaign for Swiss expat bank accounts

The Organisation of the Swiss Abroad (OSA) has unveiled a campaign for Swiss expats to enjoy discrimination-free access to the country’s banks and financial services. The organisation says problems have plagued the country’s expat community for nearly 10 years.

The move follows a proposal being rejected by the government in May for a legal amendment that would guarantee the right for a Swiss expat to open a bank account with a leading Swiss bank when they are living overseas.

The OSA says that Swiss expats need a bank account in their home country to pay into the country’s pension scheme, take out health insurance and cover expenses when visiting Switzerland.

AIG unveils family income benefit

British expats looking for insurance protection for their financial liabilities in the UK can now consider AIG’s family income benefit, which has been added to its product range. The aim is to meet demand from expats who live overseas and have regular UK financial commitments, including the paying of university and school fees.

The move follows an announcement in April when AIG revealed plans for protection insurance for British and foreign nationals living overseas with a UK financial interest. The product has been created to meet the demands for inheritance tax liability on non-UK domiciles who use offshore trusts and companies for holding residential property in the UK. This is to meet a rule change which is expected in September and which could affect many expats and create billions of pounds’ worth of liability for them.

Italy grants first non-dom status

Increasing competition among countries looking to attract wealthy taxpayers has seen Italy grant non-dom status to a newly-tax resident person in the country for the first time. The individual was previously a UK resident non-dom and the application was handled by UK international law firm Withers.

A spokeswoman for the firm said: “This is an illustration of how Italy’s resident non-dom scheme can be attractive for internationally mobile individuals.”

Italy announced earlier this year a new non-dom tax regime to help boost the country’s tax take by offering those who are new tax residents an opportunity to pay a flat fee of €100,000 (£91,700/$117,600) every year on foreign sourced income, rather than being taxed on their worldwide income.

The real cost of living overseas revealed

While there are various league tables that reveal the comparative costs for living in various countries and cities around the world for expats, a new survey considers the tax-adjusted cost of a ‘top earner’ buying a beer in their new country.

The findings from global corporate services firm Sovereign reveal that other rankings convert locally bought items into US dollars at the prevailing exchange rate to give an idea of costs for expats and their employers.

However, the researchers from Sovereign highlight that expats working and living in a particular city will be spending and earning in the local currency, so converting costs may not be relevant. They point out too that most countries have different rates of tax on citizens and residents, with the US taxing their citizens globally, for instance.

A spokesman for Sovereign explained: “With the exception of US citizens, a more relevant measure is to calculate how much an individual earning a living in the city would need to earn to afford services and goods when paying local taxes.”

They say that if a pint of beer will cost an expat $10 in Los Angeles with a local tax rate of 50%, an expat will need to earn $20 to buy beer from their income. But for expats buying beer in Georgetown in the Cayman Islands, the $15 cost would be cheaper, since there is no personal income tax payable in Cayman.

Using this criterion, the most expensive places for top earning expats to buy beer are in Copenhagen, New York, Tokyo, Osaka and Paris. The top 10 also includes Reykjavik, Seoul, London, Brisbane and Geneva.

British expat landlords face tax shock

British expats who own property in the UK may be facing a tax shock if they haven’t declared their rent profits to HM Revenue and Customs.

Thousands of landlords have been targeted by HMRC after Newham Council in East London handed over details of 27,000 landlords registered under its licensing scheme. Of these, HMRC discovered that 13,000 had failed to register their rental properties and register for self-assessment – a requirement for landlords earning more than £2,500 in rent – or declaring property sales for capital gains. So far, these landlords have paid more than £113 million in tax owed and penalties. However, not all of the landlords being targeted are expats.

Expat landlords need to be wary that several councils now run registration schemes, including the mandatory scheme for those owning rental properties in Wales. Among the councils preparing data for HMRC are Croydon, Dagenham, Liverpool and Barking.

Expat mortgage enquiries boom

Skipton International has revealed that it has seen a 130% increase in the number of mortgage enquiries from expats. They say expats have made enquiries worth more than £500 million for buy-to-let properties in the UK in the first seven months of 2017.

The lender says that 24% of all enquiries came from expats in the United Arab Emirates. The top five countries also feature the US with 12.5%, Hong Kong with 9%, Singapore with 7.5% and Switzerland with 6%.

A spokesman for Skipton said: “Enquiries have at least doubled from all of the top five countries. Buy to let investment is proving popular with British expats wanting to secure a long-term investment in the UK.”

Skipton International has also published a guide for expats to help explain the latest tax changes for overseas investors wanting to buy UK property. The guide explains the changes taking place, including how the phasing out of mortgage interest tax relief will impact landlords who are higher rate taxpayers living overseas.

British expats will pay for struggling pound

One investment fund is predicting that the pound will remain low for several years to come, which will reduce British expats’ spending power and make their lives overseas more expensive. For expats in the US and Europe currencies are predicted to be stronger than the pound, which will make staying in these countries more expensive for British expats. However, a weak pound will boost British exports.

Researchers at Northern Trust Asset Management have put together a forecast for the UK’s economy covering the next five years, predicting that retired British expats living overseas may find themselves struggling financially.

Despite the gloom, the researchers say that Brexit will create a blip for the UK’s economy over the long term and they predict strong performance; they also recommend owning UK stocks, particularly in firms with export-driven growth.

In other financial news…

South African expats are expressing their displeasure at moves by the country’s tax authorities to tax expats on their earnings when they are not tax resident elsewhere. South Africa is set to repeal the Foreign Employment Income Tax Exemption rules for expats who live overseas for fewer than 183 days in a year.

The E-house China R&D Institute in Shanghai has revealed that the average rental income ratio being paid by expats living in Beijing is up to 58% of their salary, for those in Shenzhen it’s 54% and in Sanya it is 48%. Expats living in Shanghai pay on average 48% of their monthly income on rent.

Oman’s Central Bank says that expats are sending nearly OMR 1bn rials (£2bn/$2.6bn) more to their home countries than they were five years ago. That’s a rise of 30%, the bank says, despite Oman struggling economically.

Cyprus has clarified its new tax residency rules which came into force from 1 January – though they were only approved by parliament in July. For those who cannot meet the country’s 183-day rule to prove residency, there is another path known as the ’60 days rule test’ to be deemed as a Cyprus tax resident.

The number of QROPS – Qualifying Recognised Overseas Pension Schemes – being transferred from the UK overseas fell by 29% in the year to 5 April, according to HM Revenue & Customs. The transfer value of them also dropped by 20%. The numbers being transferred this year are likely to fall further since a 25% charge on third country transfers was brought in from March.

British expats are being urged to spend their old £1 coins before they are taken out of circulation and become obsolete. The new £1 coins have a unique shape to beat counterfeiters and from 15 October, the old coins will be withdrawn and they can be refused by shops. Only Post Offices and banks will accept old coins after this date.

Fears are rising that expats on low incomes in Kuwait will struggle with the new electricity tariff which makes paying for energy there more expensive. This follows the rise in health service fees that expats must also pay – one news outlet says many expat families are now looking to leave Kuwait, particularly those with a family on a limited income.

Expats in Saudi Arabia who began work on public sector projects before December last year will not need to pay the expat workers’ tax, says the Kingdom’s Council of Ministers. The move follows fears over disrupted workflows and project budgets.

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