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Expat Focus Financial Update July 2018

The world's most expensive city for expats

Expats who are sent overseas by their employers on assignment will find that Hong Kong is the most expensive destination for them to live in, research reveals.
In Mercer’s’= annual Global Cost of Living survey they found that the landscape for global business is undergoing change – as are the types of jobs that will be critical in the future.This means that multinationals are transforming by looking at their mobile talent but also looking closely at the cost of doing business in cities around the world. Hong Kong has replaced Luanda as the world’s most expensive destination, with Tokyo now in second place followed by Zurich, Singapore and Seoul. This means that now, four of the world’s five most expensive cities are in Asia.

The president of career business with Mercer, Ilya Bonic, said:

“With globally connected workforces and technological advances, deploying talent is a key component for business strategy.

A mobile workforce enables organisations to achieve greater efficiencies and utilise their top talent and be cost-effective on international projects. With slowing economic growth and with markets in many parts of the world requiring workers, multinational employers need to assess expat remuneration packages carefully.”

The survey looked at 209 cities for the costs of transport, housing, clothing, food, entertainment and household goods.

With the European economy picking up, most cities in the US have fallen in the survey’s ranks as the US dollar declined against major currencies around the world.
As a result, New York is in 13th place, San Francisco is 28th and Los Angeles is 35th.

Mercer says the most expensive Eurozone city for expats to rent a home is Dublin.
Industry experts in Ireland say that the cost of renting there has risen by 12% in the first three months of 2018 and in Dublin rents have risen by 13% to reach nearly €1,900 (£1,678/$2,226) a month over the past year.

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However, while Mercer places Hong Kong in top spot, a survey from UBS says that the Swiss city of Geneva is the most expensive for food in the world.

Their Prices and Earnings report for the year also highlights that the city has the highest earning levels for expat workers among the 77 locations they surveyed.

The second most expensive city is Zurich, followed by Oslo, Copenhagen, New York, Tokyo and Milan. The top 10 is made up of London, Chicago and Helsinki.

Saudi Arabia's expat population plunges

Hundreds of thousands of expats have left Saudi Arabia as the kingdom’s economy struggles with volatile oil prices and labour reforms.

Official figures show that more than 700,000 expat workers, mostly low-paid construction workers, have left over the last 12 months.

Research by HSBC has revealed that not enough Saudi citizens have taken up the jobs vacated by expats, with numbers rising in the private sector by just 112,000 people. In the year leading up to March, the private sector lost 604,000 jobs, which equates to 5% of the total number.

The figures highlight that 234,000 expat workers lost their jobs in the first three months of this year in both the public and private sectors in the kingdom.

Another impact on expat numbers is the levy introduced last year, which sees employers paying SR 200 (£40.20/$53.33) every month for each dependent while every employee pays between SR 300 to 400 every month. Employers also face an additional levy if they employ more expats than locals.

Kuwait rejects bid to tax expat remittances

A demand by Parliament to tax expat remittances has been formally rejected by the Kuwaiti government, which says that the tax would not just damage the country’s economy, but also scare foreign investors away.

Remittances by expats in Kuwait fell by 13% in the first quarter of this year, and the government is due to debate a VAT bill later this year.

HMRC cracks down on expat tax evasion

British expats are being targeted by HM Revenue and Customs to find serious tax evasion cases. The number has been increased by 20% as part of a wider crackdown on avoidance to reduce the amount of tax being lost.

HMRC says that in 2012, the Treasury lost £4 billion and last year this figure fell to £1.7 billion.

Now expats living and working overseas will be the focus of HMRC’s attention and it has already made more than 1,000 requests to foreign tax authorities for information about British expats in their countries. Last year, £5.7 million was recovered in tax revenue.

HMRC says it is currently dealing with more than 3,800 cases of unpaid tax allegations worth more than £50,000 each and now the government wants the number of cases to reach at least 5,000.

The move means British expats will need to ensure that they get their tax affairs in order as soon as possible as they may not appreciate that they have a tax liability in the UK and risk being fined.

Changing employment trends mean employers need to adapt

Employers need to adapt to changing employment trends around the world and comply with legislation to ensure their expat staff get the support they need.

This advice comes from the Health Insurance Group, who say that employers who want to exploit opportunities in fast-growing regions need to be aware that regulations change frequently and staff need to have the right insurance in place.

The firm’s head of international, Sarah Dennis, said:

“There are myriad options in how to do this and the costs vary, so it's important to talk with specialists who understand the requirements for different regions and how staff are looked after to protect the employees and the company.”

She added that sending employees overseas should not be a ‘one size fits all’ approach and a lot depends on where the staff will be working rather than having a global policy of moving people to different countries.

Expat Australians struggle to get a mortgage

Expat Australians wanting to buy property in their home country can no longer do so with ING Australia, after it confirmed it is no longer lending to expats.

ING is the second major bank to stop offering credit to expat Australians, despite growing demand from wealthy Australian expats. They will no longer be considered as eligible borrowers, following in the steps of Citibank.

The reasons for not lending to expat property buyers include the complex and expensive process of verifying the borrower’s income. There is a strong demand from high net worth Australians to buy prestigious properties in Sydney and Melbourne, which is being helped by the low dollar, according to the country’s real estate experts.

British expats sign up for EU residency

The fear of rising taxes and an economic slump after Brexit means thousands of retired Brits are looking to secure their EU residency by moving to the EU.

According to financial advice firm Blevins Franks, there’s been a sharp rise in the number of Brits looking to move to other European Union countries since the referendum was held two years ago.

They say that in 2016 the number of enquiries was 2,500, but they are now dealing with more than 2,000 every month. The firm says there are several reasons for what appears to be the start of an exodus.

Some of those who are moving are bringing forward their plans in a bid to obtain a residency permit before March 29 next year, when the UK will leave the EU. Others say they are moving because of the growing tax burden while living in the UK, which could grow further under plans to boost NHS spending.

A business development manager with the firm, Jason Porter, said:

“Most clients we speak to are planning to move anyway and perhaps own a villa overseas and thought they would like to retire there. There are a lot of people telling us they want to move by October, which seems to be the optimum time so they can start the process to obtain residency and then after March next year exchange these for new ones.”

Official figures reveal that 125,000 Britons emigrated in the 12 months to September last year and there are now 785,000 British citizens living in the EU. The most popular countries are Spain and France.

In other news…

Expats heading to San Francisco may be surprised to learn that a family with a household income of $117,400 (£87,907) is considered to be on a low income, according to government figures. But taking into account housing costs means that some of those six-figure income households may be eligible for housing assistance. The figures highlight that to be considered as ‘very low income’ the family household income can be as high as $73,003 (£55,000).

Expats and citizens in China are becomingly increasingly concerned over a planned overhaul of personal income tax policy which could see bonuses being taxed. China has a progressive tax system ranging from 3% up to 45%, depending on salary plus other taxes on dividends and property transactions. Under the new rules, royalties and remunerations will be combined with salary, which will increase the country’s higher taxable income base.

Expats in Oman remitted 3.7 billion riyals (£7.2bn/$9.6bn) last year, says the Central Bank of Oman. This is slightly down from 2016’s figure of 3.95 billion riyals.

The Australian government has announced that anyone spending more than 183 days in the country in any 12-month period will be dealt with for tax purposes as an Australian resident. This will include globetrotting investors and foreign based executives. The move replaces a complicated test to determine residency.

The municipal tax increase in Abu Dhabi is set to hit 2.3 million expats. The fee for apartments and villas will be set at 5% but that’s less than the 7.5% that was predicted. Expats renting a villa for Dh200,000 year, for example, will now pay Dh833.33 (£171/$227) per month at the new 5% rate in municipal tax.

Home rental costs are now at an all-time high in the US, with the average rent being paid in June at $1,405 (£1,059). This means that rents have risen by 3% since last year, with most of the rise attributed to an economic boom.

Embassies and social workers have bene working together in Oman in a bid to have a minimum wage established for expats there, media outlets report. While Omani workers are entitled to a minimum of OMR325 (£637/$845), there’s no similar arrangement for expats. Apparently work started last year to change the law.

New World Health says the fastest-growing wealth market in Africa is the island of Mauritius. The firm says that the number of high net worth individuals moving there has risen by 20% in the last year. Mauritius has been a popular choice for wealthy expats for the last 10 years, particularly from South Africa and France, as they can invest in businesses and property in the country. The intelligence firm says that 218 millionaires from South Africa have moved to Mauritius since 2006.

The Dutch government has announced it is cutting the 30% tax break offered to expats on their earnings. Now expats will be able to claim the tax break for five years instead of the current eight years, with no transition period planned. The tax break encouraged expats to move the country and various tech firms and universities have made it clear they will struggle to recruit staff.

The French government has unveiled a package of measures to attract expats and investors to Paris as financial firms plan to leave London after Brexit. The measures include new schools for expat children and a tax cap of 30% on any investment funds being relocated to the country. The government says the rules over expats expanding or opening a clearing business will be eased in a few months.

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