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Expat Focus Financial Update February 2018

Global HNWIs Leave UK For Australia And US

The UK may be losing its traditional position as a leading destination for High Net-Worth Individuals (HNWIs), with more ultra-wealthy people heading to the US and Australia, says a new report.

Research from New World Wealth reports that last year, the UK saw more HNWIs leaving the country than arriving for the first time.The firm’s annual Global Wealth Migration Review tracks ultra-wealthy people around the world. Head of research Andrew Amolis said: “New taxes on foreigners and non-doms with homes in the UK makes it more expensive and complicated for high net worth individuals migrating to buy a home in the UK. The UK’s high inheritance taxes traditionally make the likes of Australia and the US more appealing and will do post-Brexit for those migrating HNWIs.”

The figures reveal that around 1,000 HNWIs moved to the UK last year, while more than 5,000 left.

Among the reasons cited for the HNWIs leaving the country are growing concerns about terrorism and safety, as well as laws that are now less favourable than other countries towards the ultra-wealthy.

The report also states that these HNWIs are now heading to countries that have laws more favourable to the ultra-wealthy with Australia, for the third year running, topping the list for inflow. In second place is the US, followed by the United Arab Emirates, Israel and then Switzerland.

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The research also highlights the world’s top 10 wealthiest countries, with the United States well in front, followed by China and Japan, then the UK and Germany. The top 10 also includes India and France, followed by Canada and Australia, with Italy in 10th spot.

US Is Expat Tax Haven

A new report has revealed that after Switzerland, the world’s second largest tax haven is the US. The findings from the Tax Justice Network show that the US is just ahead of the Cayman Islands.

One reason for the growing popularity of the US as a haven is the government’s refusal to join the OECD’s Common Reporting Standards, meaning money held in US institutions and banks do not need to be reported automatically to the tax authority of the account holder.

The list also sees Hong Kong in fourth place, followed by Singapore and Luxembourg, with Germany in seventh position. Taiwan is in eighth place, followed by the UAE, while Guernsey is in 10th spot.

Expat Cost Of Living In Mexico

According to a survey of expats, their cost of living after they moved to Mexico was halved. Many say they are now enjoying an impressive lifestyle that they would be unable to afford elsewhere. American expats in particular say expenses have been halved, and just five percent of expats say they are paying more for goods when shopping in the country than they would back home.

One European expat told researchers that living in Mexico is expensive for those expats paid in Mexican pesos, but for those who are being paid salaries in US dollars or Euros, then life is much cheaper. The survey was carried out by Best Places in the World to Retire.

Pension Worries

British expat retirees may be facing pension worries following news that two out of three of the UK’s pension schemes are in the red. The revelation from the Pension Protection Fund (PPF) reveals that the amount totals £210 billion for the 3,710 schemes that are affected. The pensions watchdog says there is now a serious question mark being placed on the retirement plans of millions of workers.

The PPF monitors nearly 5,600 pension pots, with some of the biggest blue-chip firms on the FTSE 100 running a pension scheme that has a major financial shortfall. If an expat worker’s pension scheme runs into trouble, the PPF will pay members 90 percent of their pension pot’s value when they have to intervene.

Angry British Retirees

Meanwhile, one group of angry British expat retirees has urged the Prime Minister to raise the issue of the falling value of their pension with the government. The retirees, who are part of British Pensions in Australia, say they need the Australian government to raise the issue of their pensions being frozen. They highlight the case of a 98-year-old British expat who moved to Australia more than 40 years ago and is receiving a pension of just £17 a week.

The Australian government has calculated that there are 194,000 UK pensioners living in the country, and that 113,700 of them are drawing an old-age British pension which needs an Australian pension top-up. The pensioners say this is a ‘grossly unfair’ situation and that they need their pensions to be up-rated so they are not affected by inflation.

UAE Government Workers’ Compensation

Expats working for the government in the United Arab Emirates are entitled
to an end of service compensation benefit – even if their contract stipulates they are not, the Federal Supreme Court says. The court was passing judgement on a test case and says that regardless of what is stated in the contract, it must not negate an expat employee’s legal rights.

Riyadh Rents Set To Fall

The supply of new homes for expats to rent in Riyadh, Saudi Arabia continues to grow, according to real estate firm JLL. Nearly 20,000 units were completed in the city last year, bringing expat residential stock to 1.2 million units. Rents in the city are falling as a consequence of the Saudis introducing a levy on expat dependents last year, which saw some families moving to smaller homes in a bid to save money.

Meanwhile, the Jeddah Chamber of Commerce and Industry is calling for the expats’ dependents levy to be cancelled for those employers who have equal numbers of expats and Saudi workers.

Chicago Growing In Popularity

The number of British expats heading to America is growing, with many heading to Chicago, where cheap houses are helping to lure large numbers of expats. A report in one British national newspaper reveals that British expats spent $9.5 billion (£6.9 billion) in 2017 on American homes. That’s twice the figure spent in 2015.

While many British expats head to the sunshine of Florida, others are heading to Chicago, where temperatures have fallen to minus 36°C. The city is now the fourth most popular destination for investors from the UK wanting single family US homes.

A spokesman for the National Association of Realtors says that Brexit could be a cue for Brits to head the US, although the falling value of the pound has made it more difficult for them to buy property. Figures from the realtors reveal that only Canadian and Chinese people buy more property in the US than the British, who now outnumber purchases made by Indian expats. Many British expats are heading to the suburbs of Chicago and are more likely than other foreign buyers to want a detached home in a small town.

In other news…

Media outlets in Dubai are reporting that the falling number of expats is having a major effect on real estate there. They are highlighting that there could be a financial impact on citizens and investors and that current projects being planned may be delayed. There is also an issue for expats working in industry, with the ministry of social affairs and labour increasingly rejecting visa replications from potential expat recruits.

News platform Buzzfeed says that since Labour introduced fees for the indefinite leave to remain (ILR) visa, they have rocketed in cost by more than 1,300 percent; and that the fees may be illegal. The ILR visa will now cost applicants £2,297 and must be paid when the NHS surcharge of £1,000 is required. In 2003, the NHS fee was £155. The chair of the Immigration Law Practitioners’ Association, Adrian Berry, says that the fees are now so high they could be unlawful and may result in a legal challenge.

The BBC has revealed that 25 percent of properties in England and Wales are owned by overseas firms, and that many of these are in fact held by entities registered in the British Virgin Islands. Their findings reveal that the islands have a population of 30,600 but are the official home to firms that own more than 23,000 properties; more than any other country.

Expats in Australia will be among those celebrating the approval of a watchdog called the Australian Financial Complaints Authority, which will deal with complaints about banks and financial institutions, including superannuation funds. This new financial organisation will begin work later this year.

The UK’s Financial Conduct Authority (FCA) is warning expat investors to be wary of online fraud, which they say is a growing threat. The FCA states that fraudsters are targeting people on social media channels with offers of binary options, cryptocurrencies and forex. The FCA says all investors should check whether a person or company is authorised by the FCA before investing online.

The Isle of Man Financial Services Authority has revealed plans to crack down on all unlicensed financial activity on the island, with financial services professionals who are operating without a licence being struck off. The regulator says it is now looking to identify those who are conducting unregulated activity without having the relevant licence.

Media outlets in Kuwait say some banks there are looking to reduce the minimum salary requirement for expats to obtain a loan. They want to attract a new category of expat customer who receives monthly salaries that are less than the bank’s current limits. Currently, most banks have a limit of between KD500 (£1,190/$1,666) and KD600 (£1,427/$2,000). This could be reduced to KD400 (£951/$1,333).

Of all the states in America, New York gains the most economical benefit from expats and immigrants https://wallethub.com/edu/economic-impact-of-immigration-by-state/32248/. The study from personal finance website WalletHub looked at household incomes as well as the number of jobs being created and contributions to innovation. New York was followed by California and New Jersey.

Fees charged to non-EU migrants for accessing the NHS in future are set to double. The health surcharge is paid by those from outside of the European Economic Area who want to live in the UK for at least six months to work, study or join their family. The rate for students will increase to £300 from £150, while for non-students it will double to £400.

Despite tougher lending criteria, expats living in Australia are increasingly looking to invest in buy-to-let property in the UK. Cherry Mortgage and Finance says there are more than 1.1 million British expats in Australia, and that there has been a 29 percent increase in queries from expats looking to buy a UK property either as an investment or as a home to live in when they return. The firm says they receive lots of expat queries with people from all walks of life including teachers, bankers and engineers wanting to invest.

Growing numbers of Chinese expats are heading for retirement in Malaysia, drawn by real estate investment opportunities. One Chinese newspaper says more than 1,000 Chinese expats have applied for a 10-year retirement visa, which requires a minimum income of $3,365 (£2,400).

A move by Kuwaiti MPs to impose a tax on expat remittances has been rejected by the National Assembly’s legal and legislative panel which says that this would be unconstitutional. MPs wanted a five percent tax on expat remittances to help boost the country’s non-oil revenues.

Expats wanting their hard-earned money to go further should consider seven European destinations, says FinGlobal. Andorra, which only introduced income tax in 2015 after pressure from the European Union, is in first place, while Georgia is second. Other countries include Bulgaria, which has a flat tax rate of 10 percent, Gibraltar, Malta and Montenegro, which has a basic rate of income tax of just nine percent. Monaco takes seventh place.

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