Home » Expat Focus Financial Update July 2017

Expat Focus Financial Update July 2017

Falling pound leads to falling cost of living

The cost of sending expats to live in the UK has fallen dramatically because of the falling value of the pound, according to a survey.

ECA International says that the UK’s cities have now fallen below Bangkok, Dublin and Rio De Janeiro in its Global Cost of Living Rankings.Central London, for years one of the world’s most expensive cities to live in, has dropped to 132nd place which is the lowest ever position recorded. Last year, London was the 65th most expensive city.

The top spot this year has been taken by the Angolan city of Luanda, while Swiss cities dominate the world’s top 10 most expensive destinations for expats.

The index monitors the cost of living on a like-for-like basis for consumer services and goods that are purchased by expats in more than 460 locations around the world. The aim is to ensure that the spending power of the expat is maintained when they are sent by an employer on an international assignment.

A spokesman for ECA said: “Because of the weakening pound, UK businesses are now paying more to send their staff to work overseas but it’s now cheaper to bring staff to the UK. Locations in the UK have seen a dramatic fall this year and are now behind cities in Sierra Leone, Egypt and Nigeria.”

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Luanda is expensive because its currency is overvalued and the country has poor infrastructure. A booming oil industry is fuelling demand for expat talent and this has led to imported goods becoming expensive.

However, Switzerland sees it cities dominate the top 10 with Zurich in third place, followed by Geneva, Basel and Bern.

The rest of the top 10 is made up of Hong Kong in second place, Tokyo in seventh, Seoul in eighth, Caracus in ninth, and the Sudanese city of Khartoum in 10th place.

Cost-of-living survey published by Mercer

Meanwhile, the annual cost of living survey published by Mercer has revealed that African, Asian and European cities continue to dominate the world’s most expensive locations for expats. They say that expat workers are looking for competitive pay as well as promotion opportunities from their overseas assignments.

The Mercer survey also reveals that Luanda is the costliest city for expats to live in, followed by Hong Kong, Tokyo and Zurich and Singapore.

Saudi levy will be a 'burden' for expats

Financial experts say the expat levy that has been introduced by Saudi Arabia will be a financial burden for expats and businesses alike.

The kingdom has unveiled a new monthly fee of 100 riyals (£20.80/$26.67) for every expat with a minor or unemployed family member in the country, with the levy increasing each year until it reaches a cap set at £998/$1,280 annually per dependent.

The new levy is in addition to the current monthly tax that many employers are paying for their expat workers. However, there are fears that many employers will pass the new fees on to their staff through their monthly wage packets.

Saudi Arabia insists that those employers with more expats than Saudis on their payroll must pay 200 riyals every month for each expat.

The government says there are 11 million expats working in the kingdom’s private sector with a total of 2.3 million dependents, and those expats looking to renew their exit and re-entry visas will need to pay the fees first.

One of those highlighting the potential issues for expat employers is the vice president of Kuwait’s Financial Centre, M Raghu. He says that the new expat levies will put a financial strain on those firms with large numbers of expat workers which will push up the cost of doing business.

In addition, expats in the kingdom are facing higher living expenses with the introduction of VAT and higher costs for utilities and fuel.

Best destinations for British expat retirees

While there are still questions to be answered over Brexit, research from International Currency Exchange has revealed that there is still strong interest for Brits to retire overseas and they claim to have found the best value for money locations for potential expat retirees.

The firm reveals that 76% of people are looking for better weather, followed by cheaper living expenses. Also, the cost of property was a big attraction for 68% of potential expats. The top five answers also saw British expats looking forward to enjoying a slower pace of life and improved health.

The study reveals that the best destination is Santa Cruz in Tenerife with its excellent year-round weather, cheap housing and large expat community. Next on the list is Lanzarote and then Lisbon in Portugal.

Call to end expats’ tax break

Critics in Ireland are calling for an end to a generous expat tax break which costs the country €9.5 million (£8.49m/$10.88m) every year.

The Department of Finance says 586 expats benefit from the Special Assignee Relief Programme, also known as Sarp, and most of these are foreign executives who can disregard 30% of their earnings over €75,000 for tax purposes.

The programme was started to attract foreign talent to the country, when otherwise they may have been deterred by Ireland’s high personal taxation levels. Around 60% of those claiming the relief work in financial services or IT. And while 92 of those earned more than €375,000, two thirds earned less than €225,000.

For expats earning €150,000 in 2016, the relief was worth €9,000.

Some critics say the programme is not generous enough and point to Sweden and the Netherlands offering expats higher rates of tax relief.

However, in the same week that the Irish government revealed its figures, critics in the Netherlands responded to a report from its finance ministry revealing how much expats are enjoying in tax relief there.

Critics say that with 60,000 people claiming the tax break so they don’t pay tax on the first 30% of their salary, the country is losing out to the tune of €902 million (£806m/$1,032m) this year.

Of those expats who are claiming the relief, Indians occupy the top spot followed by Brits, Americans and then Italians.

British expats look to buy homes in UK

A leading expat mortgage lender has revealed that the number of enquiries for buy to let mortgages from British expats who want to invest in UK property has doubled over the past year.

Skipton International says that in the first five months of 2017, the number of enquiries from Asia rocketed by 141% when compared with the same period last year. The lender also says that the increase from British expats in Hong Kong looking to invest has grown by 162% and from expats in Singapore by 115%.

Skipton’s director of lending, Nigel Pascoe, said: “Since Brexit, we have seen more expats wanting to invest in property in the UK and the Pound’s devaluation means that expats could, potentially, get more for their money if they have foreign currency savings.”

EU plans pensions without borders

The European Commission has revealed that for expats working in the EU they will soon have a simple framework for moving their personal pensions across borders.

The idea is to bring more choice and competition in the retirement savings industry, with the move boosting expats who will be able to enjoy better consumer protection and a wider choice of providers.

Under the scheme, a personal European pension product (PEPP) would be sold by insurance firms, pension funds, banks and investment firms with the same standard features in each EU member state. However, the new financial products will not replace local or state pensions and are aimed at complementing the current offerings.

Expats in Qatar impacted by sanctions

Hundreds of thousands of expats living in Qatar are seeing their wealth and lives being affected by the sanctions that have been imposed on the country by other Gulf states, according to media reports.

While most of the 2.7 million people living in Qatar are expats, many of these are low status workers from countries such as Bangladesh and India. However, there are large expat communities from other countries too, including 25,000 from the UK, 9,500 from Canada and 5,500 from Australia.

But with sanctions beginning to bite, growing numbers of multinational companies and state enterprises are looking at how they can best protect their businesses.

Qatar says it regrets the move from other countries who are concerned about its alleged support of terrorist activity, which the country denies.

British expat property trends

The number one destination for British people looking to buy property overseas is Spain.

According to property platform Rightmove, Spain is the most popular country in Europe for Brits wanting to relocate or buy a second property. The platform says that every month, more than 2.5 million property searches are made for homes in Spain from the UK. The next most popular countries are France, Italy and Portugal.

Of the potential destinations in Spain, 62% of enquiries are for houses in Alicante with 38% for apartments and flats.

A spokesman for Rightmove said: “Whether it’s for the large expat community, the food or the climate, it has Brits enthralled.”

In other financial news…

Expats from Asia who are working in the UAE are sending the most money home, according to an analysis of remittances made last year. The most popular countries where money is being sent are India, China, the Philippines and Pakistan.

A loophole for expats living in South Korea may be closed after growing numbers of expats have left the country without paying their phone bills. The country’s three major telecom firms say they do not penalise expats leaving Korea without paying their bills, and some expats take advantage of this.

There is growing frustration in Malaysia about expats owing more than RM213 million (£39m/$50m) in taxes which has not been collected. The country’s tax authority says expats have either falsified their real income on their tax or declared a lower wage than they receive. The amount outstanding covers expats who have left the country since 2012.

The Cayman Islands government has been warned that reforms it is making to pension laws could see an exodus of wealthy expats. The government says its reforms will bring the island into line with pension regulations around the world, with the biggest change being the restriction of access to a pension pot until the saver reaches retirement age.

News reports in Kuwait say the government is looking to introduce a new law stating that expats wanting to sponsor siblings or parents to enter the country must earn not less than KD1,000 (£2,574/$3,298) every month to do so. Also, health insurance fees for residents look set to increase from KD200 (£515/$660) to KD300, while health insurance fees could rise to KD200 because of growing pressure on Kuwait’s health services.

Pakistani expats around the world have enjoyed a financial bonanza as the country’s rupee currency has fallen in value by 3.1% against the US dollar. The currency has now seen its largest fall for nearly two years.

British expats who feared that the UK’s pension ‘triple lock’ would be lost under the Conservative election manifesto can now breathe a sigh of relief knowing that it is, at least for now, being retained as part of the Conservative party’s tie-up with the Democratic Unionist Party (DUP). The triple lock sees a state pension increasing by at least 2.5% every year.

A controversial Australian bill has gone before Parliament aimed at restricting state benefits in retirement for elderly expats. The plan is to introduce tougher residency rules for those who may be able to claim the state pension. The government says only a few expats – they estimate around 2% – will be affected and the country will save AU$119 million (£71m/$91m). In future, expats will need 15 years of continuous residency to claim any benefits in retirement.

A new law in Switzerland will see Swiss expats enjoying unrestricted access to Swiss banking services. One issue for expats from the country is the cost of banking services, and the restrictions they face when living overseas but wanting to open a Swiss bank account. A new law will compel Swiss banks to offer expats an account.

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