Home » Expat Focus Financial Update July 2019

Expat Focus Financial Update July 2019

Offshore account crackdown by HMRC

A crackdown by HM Revenue and Customs on money hidden offshore by British expats has delivered £560 million to its coffers. HMRC’s ‘Offshore, Corporate and Wealth Unit’ generated the tax take from its investigations into British taxpayers with offshore assets and income. That’s a 14% rise on the year before.Accountancy firms are also reporting an increase in the number of enquiries regarding offshore assets, which follows a campaign to encourage UK taxpayers to declare foreign profits or income.

The chief executive of Access Financial, Kevin Austin, told the Financial Times that the information came from a Freedom of Information request. He said:

"The new offshore unit is becoming better at focusing on the biggest tax threats. The days when taxpayers who worked or owned assets in different countries and were able to slip between the cracks are gone."

British taxpayers can still declare any offshore income or assets, despite the recent deadline passing.

Overseas landlords warned HMRC will catch them

Meanwhile, landlords who live overseas may find that HMRC will catch up with them for non-payment of tax on the rent they receive on properties in the UK. Since the campaign intensified to find offshore landlords who are failing to declare their earnings, HMRC says there have been 397 overseas-based buy to let landlords disclosing their unpaid tax in the past year. That is a 61% increase on the number of landlords who came forward in the year previously.

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The move is part of their Let Property Campaign and British expats may have received a letter asking if they are declaring the full tax owed. The campaign provides an opportunity for a landlord to pay their tax on the best possible terms and many overseas landlords have responded.

8,000 offshore bank accounts frozen

Lloyds Bank has frozen 8,000 offshore bank accounts after trying to contact the holders for three years to prove their identity. The bank’s international business is based in Jersey and it has been forced into taking action to meet regulatory requirements.

The bank says that those customers who have failed to respond to their communications may find their account has now been frozen. In a statement, the bank said:

"We began contacting expatriate banking customers in January 2016 to ensure we were provided with up-to-date information. Unfortunately, we've had to freeze the account when a customer has not provided us with this information."

Other banks that have reportedly cracked down on identity checks include Barclays, HSBC and Royal Bank of Scotland.

Italy encourages expats with low tax deal

Expats heading to Italy can now enjoy tax relief of up to 90% on their income tax after a bill became law. The aim is to offer generous tax incentives for expats to relocate to the country and is known as the ‘decree of growth’.

The offer is for any type of worker, regardless of their skill or qualification level and previously the law covered executives, entrepreneurs and managers. Now, the income tax payable is limited to the first 30% of the expat’s employment income in the first five years of living in the country, which effectively means that 70% of their income is not taxed.

However, for expats heading to Sicily, Sardinia, or parts of southern Italy, then the offer is to have 10% of their income taxed with 90% being untaxed. This time limit can be extended up to five years.

And should the expat buy a home or have a dependent child, then the income tax will be paid on the first 50% of income. Should the expat have three or more dependent children, the exemption will remain at 90% for a further five years.

The most expensive destinations for expats

A survey has revealed that Asia is home to eight of the world’s 10 most expensive destinations for expats.

The findings from Mercer's Annual Cost of Living survey revealed that Hong Kong is the world’s most expensive city.

The top 10 sees Tokyo in second place, followed by Singapore, Seoul and Zurich.
Next on the table is Shanghai, Ashgabat in Turkmenistan and Beijing with New York and Shenzen in China completing the list.

The least expensive destinations are Karachi, Tashkent in Uzbekistan and Tunis.
The most expensive city in the Middle East for expats is Tel Aviv in 15th place and Dubai, which is 21st. London is the 23rd most expensive destination for expats.

The global mobility leader for Mercer, Mario Ferraro, said:

"Despite the relative high cost of living, employers see a strong business reason for moving talent into and within Asia. Cost considerations are an issue and we are seeing greater focus on a clear business case for an assignment and for the return on investment."

UHNWI’s see wealth decline

Research has revealed that the world’s richest people are seeing their wealth decline with $2 trillion (£1.6tr) being lost worldwide in 2018.

The findings from Capgemini highlight that the slump was down to slowing economies and the drop in equity markets, particularly in the Asia-Pacific region. In their 2019 world wealth report, the Paris-based consultancy says that ultra-high net worth (UHNW) populations fell by 4% and their wealth dropped by 6% last year.

The number of millionaires – considered to be someone with at least $1 million in investment assets, excluding their primary residence, consumables and collectables – also fell by 0.3% to $18 million. The firm’s vice president, Bill Sullivan, said: “Asia-Pacific accounted for half of the wealth decline and 50% of that was from China.”

Their report also highlights that next-generation technologies will be crucial to boost the wealth management experience for high net worth clients with artificial intelligence becoming an important ‘game-changer’.

Global personal wealth stalls

The increases in global personal wealth came to a near halt last year, according to an analysis from Boston Consulting Group. The firm says that the weakest growth for five years was experienced with wealth increasing by just 1.6%.

In 2017, the rate was 7.5% with the world’s wealth now standing at $205.9 trillion (£165.8tr).

The report highlights that the worst stock market performance in 20 years has hit high net worth individuals and led to wealth managers struggling to deliver profits. However, the report highlights that the number of affluent people will grow over the next five years by 6.2%.

Wealthy South Africans leaving the country

Growing numbers of wealthy South Africans are looking to move overseas or gain second citizenship in the face of a difficult economic climate, one firm of immigration experts reports.

Sable International says clients there are looking to ‘hedge their bets’ by investing overseas and there has been a 70% rise in enquiries. The group’s commercial director, Andrew Rissik, said that more South African high net worth individuals are looking at ‘internationalising’ their wealth and businesses as quickly as possible.

He added:

"The reasons vary from concern about wanting to school their children overseas or travel more easily without travel visa requirements. They are looking to become global citizens."

Meanwhile, a report from the International Monetary Fund (IMF) has revealed that South Africa is one of the world’s most heavily taxed countries. In a report, the IMF says that South Africa has made its top 10 list with personal taxes rising over the past decade by 125%.

Saudi Arabia unveils residency programme

A new permanent residency programme aimed at boosting foreign investment has been unveiled by Saudi Arabia. Interested expats will need SAR800,000 (£172,000/$213,000) to sign up.

The electronic platform has now begun operations with applications being received.

There are two types of residency visas available which include a permanent offering and a one year renewable residency for SAR100,000 (£21,468/$26,665).

The new residency permits will enable expats to conduct business and buy property without needing a Saudi sponsor and to also switch jobs and enter and leave the kingdom easily. Applicants need to be at least 21, be financially solvent and without a criminal record.

IRS admits expat tax mistake

The Internal Revenue Service (IRS) has admitted to wrongly collecting millions of dollars from US expats living in France.

A seven-year legal battle has ended with the US tax authority admitting that US citizens who are resident in France can now deduct some income levies that are paid in the country against their US income tax bill.

The decision could lead to US taxpayers saving thousands of dollars every year and the potential to claim back tax worth up to $100 million (£80.5m).

CGT still on the cards for Australian expats

Australian expats are being warned that though the government’s plan to overhaul capital gains tax has fallen through it is likely to return. Expats have been able to claim capital gains tax exemption since 1985 when selling their family home but only if it was not rented out for more than six years.

A budget announcement in 2017 would deny that exemption for any Australian expats selling their home while living overseas. The rules would also be changed so the tax would be levied from the time the expat bought their home and not when they moved abroad.

However, the government says it is committed to delivering its policy to bring an end to the tax exemption.

Luxembourg the target for action

The Financial Action Task Force has said it is to undertake another anti-money laundering review of Luxembourg’s financial offerings. The global body aimed at tackling anti money-laundering had previously found non-compliance in seven cases and a negative review could deliver a serious implication for the country’s financial sector.

Meanwhile, the task force has also announced that it wants crypto-currency exchanges to share information on who is sending and receiving funds between firms. The Paris-based organisation also wants the exchanges to carry out proper due diligence to prevent illicit activity and report suspicious transactions.

UAE’s long term residency programme

The United Arab Emirates has revealed that its long-term residency programme will now include those executive directors who earn 30,000 dirhams (£6,577/8,168) per month.

However, applicants will also need at least five years of work experience in the UAE and a bachelor’s degree to gain access to the 10-year residency visa. The move follows the introduction of the ‘Gold Card’ residency visa which have been granted to 400 applicants.

The new permanent visa is aimed at boosting foreign investment and attracting top talent, including scientists and engineers. The gold card visa is automatically renewed every 10 years if the expat complies with the terms and conditions and is still employed in the same sector.

New SIPP for British expats

A new low-cost international SIPP that is tailored to British expat needs has been unveiled by Novia Global. The wealth manager says it has market leading technology that will deliver an online platform and around-the-clock access to valuations and reports.

A spokesman said:

"We are seeing a drop in Qrops demand largely due to the overseas transfer charge which was introduced in 2017. The international SIPP has been launched to meet the requirements for a transparent and tax efficient vehicle."

In other news…

A global client wealth management portal for HSBC clients has been unveiled to offer a banking platform, business logic and insights. The new platform has been rolled out in the UK and will be set up with other HSBC private banking operations.

A new wealth management service aimed at US expats has been unveiled by Saranac Partners. The London based firm offers wealth and investment advice and a tax reporting service. The new offering is aimed at US expats and those holding a green card who are living outside of the US and want to access specialist tax advisers and who may also need estate and succession planning services.

The world’s most heavily taxed country is Denmark, according to a report from the International Monetary Fund. The organisation looked at 115 countries with the world average for tax in 2017, is 15.4%. In the UK the figure is 25.7% and in the US it’s 11.9%.

Some expats working in Saudi Arabia’s private sector are earning up to 59% less than expats are earning in the public sector for doing the same job. The General Authority for Statistics says that in the first quarter of 2019, the average salary for a government employee was SAR11,405 (£2,448/$3,041). In the private sector, an employee doing the same work will earn SAR4,595 (£986/$1,225). The average salary for expats in both public and private sectors is SAR3,872 – with men earning SAR3,980 on average and women SAR2,900.

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