Home » Expat Focus Financial Update January 2023

Expat Focus Financial Update January 2023

Blevins Franks reports an increase in financial advisors moving to Europe

Following difficulties with financial passporting between the UK and Europe in the wake of Brexit, expat experts Blevins Franks reported in December that an increasing number of UK-based independent financial advisers (IFAs) are enquiring about moving to Europe. London-based representative Jason Porter says:

“UK IFAs may welcome the intellectual challenge of learning a new set of tax and estate planning rules in another country in order to serve their clients. Plus they get a new life in the sun, just like their clients!”

Describing the increase as ‘drastic,’ Blevins Franks attributes the shift directly to Brexit – the change in passporting regulations has made it too difficult for IFAs to work with their expat clients from the UK.

The Netherlands: tax changes

In the summer of 2022, we reported that the Netherlands was looking to bring in a cap on the 30% ruling, namely the tax-free allowance which permits expats to claim expenses incurred in working for a Dutch employer. Since then, the Dutch government has updated its tax regulations, with the Tax Plan 2023 aiming to introduce a cap in 2024. The cap will be set at the maximum remuneration under the Top Income Standardisation Act (WNT) – currently this is €216,000 but is likely to rise in 2024.

There are also other change being introduced. The cap on the contributable income for an employer’s social security and healthcare contributions will rise from €59,706 to €66,952. In addition, the gerichte vrijstelling (the tax-free allowance for working from home) will be increased from €2 to €2.15 per day, from 2023. If you think this is likely to affect you, consult your financial adviser and keep an eye on the next budget.

‘Accidental Americans’: the ongoing saga

The U.S. District of Columbia Circuit Court judge, facing a legal challenge by the Paris-based group of ‘accidental Americans’ (US citizens who were born in the USA but brought up elsewhere), has agreed to hear oral testimony from the group’s legal representatives this month. This will go some way to determining “whether U.S. citizens have a fundamental right to renounce their citizenship and, if so, does the exorbitant US$2,350 renunciation fee infringe on this right,” say Zell & Associates International Advocates. The plaintiffs consist of ‘accidental Americans’ living in 13 countries, who are appealing against FATCA and who object to the citizenship renunciation fee of US$2,350.

This case has been dragging on for some time – it was first brought in 2020 – and the agreement to hear oral testimony is, say Zell and Associates, an indication that the challenge is finally being taken seriously. In breaking news, the US government announced in the second week of January that they are intending to slash the renunciation fee by 4/5, bringing it down to US$450.

Get Our Best Articles Every Month!

Get our free moving abroad email course AND our top stories in your inbox every month

Unsubscribe any time. We respect your privacy - read our privacy policy.

Meanwhile, some non-accidental US expats have also been revealed to be receiving less in social security than resident Americans. This is due to a provision called the Windfall Elimination Provision (WEP), introduced in the 1980s to “prevent workers who receive non-covered pensions from receiving higher Social Security benefits, as if they were long-time, low-wage earners.”

Unfortunately, many employed US expats have been paying into a pension pot – just not an American one. Contributions in their host countries are not counted and according to a survey carried out by Democrats Abroad recently, the application of WEP means that American expats have seen their social security payment slashed, by up to 40% in one in six cases.

If you’re not yet receiving an American pension and are worried about this, the Social Security Administration says that you need to check out The Statement, which is your personalised account of your earnings if you’ve ever worked in a job which has been covered by social security. You can also request a hard copy of your statement to be mailed to you by the SSA.

Inflation damages Singapore pensions

Bloomberg reported in December on the harmful effect on pensions of galloping inflation in Singapore. A report by Prudential last June suggested that one in five Singaporean residents were facing the prospect of postponing retirement by up to six years as a result of some of the sharpest price rises in a decade.

The Lee Kuan Yew School of Public Policy has run the numbers, and in 2021 estimated that for the over-65s, a couple would need S$2,419 a month and a single person would need a minimum of S$1,421. The main expenses are food, recreation, housing and utilities, all of which can be expected to rise by a rate of inflation of between 1.2 – 2.6% per annum (for example, housing costs are estimated to rise by 2.2% pa). If you’re concerned about this and are affected, check your options (such as a broad and diverse long-term stock portfolio) with your financial adviser.

The Singaporean government has taken some measures to try to calm house prices down, fearing that young residents in particular will be unable to afford housing (two-thirds of Singaporeans in their twenties are renting rather than buying, due to house prices). Expats returning after the pandemic report a landlords’ market, with a number of expats saying that they are choosing to pay high rental prices as a default measure to avoid being outbid in this now highly competitive rental market. New builds have long waiting lists, an issue caused by pandemic-related delays. Renting in Singapore remains cheaper than other Asian hubs such as Hong Kong, with differences of up to $2500 per month between comparable rental properties in the two cities.