Home » Expat Focus Financial Update July 2020

Expat Focus Financial Update July 2020

In our update last month, we mentioned that there has been a growing trend for some countries, particularly in the Gulf, to limit jobs for expats. The COVID-19 pandemic has lent fuel to this fire, with most nations facing significant economic downturns.In early July, the national assembly in Kuwait approved a draft bill calling for an expatriate quota system in the country. Last month, the Kuwaiti Prime Minister, Sheikh Sabah Al-Khaled Al-Sabah, reportedly said that the Gulf state would like to reduce expat numbers from 70% to 30% of the national population.

Realistically, this could only be achieved by placing a cap on expat numbers, meaning that large numbers of expats would have to leave. The Indian press, for example, have reported that it could result in the departure of up to 800,000 Indian workers.

In June, Kuwait said that it will ban the employment of expats in the state-owned Kuwait Petroleum Corporation (KPC) and its subsidiaries for the year 2020-21, and limit, and then essentially ban, overseas workers from employment in the Kuwaiti government.

Elsewhere in the Gulf, Saudi Arabia has denied freezing expat bank accounts. This is following reports that the country froze accounts of expats whose financial dealings exceeded their wages. The Saudi Arabian Monetary Authority (SAMA), says that

"There is no truth in reports circulating in some media and social networking sites that banks operating in the Kingdom are directed to freeze accounts of expatriate workers whose transactions exceed the prevalent wages of their jobs."

However, the country has been streamlining areas of its dealings with expats and other financial concerns, applying a hike in value-added tax (VAT), which now triples the tax to 15%.

In late June, it was reported that thousands of expats are leaving the UAE, as a result of the job losses caused by the pandemic. The Telegraph has reported that thousands of British expats, who have no option but to return home now that they have been made redundant, have been selling everything from gym memberships to cars. Some hope to remain and are looking for work in the region, but with a large number of people still losing their jobs, the situation looks bleak.

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American expats have reported that many of them are still waiting for their stimulus checks, with some saying that there have been difficulties in logging on to the system, which does not, for example, recognise postal codes other than American ones.

Not all of the estimated nine million US citizens who live abroad are eligible for the stimulus payments, but tax experts say that those who are entitled to receive government funding are, on average, having to wait a month for their money. This is particularly the case for those who are in Europe or South America, where mail has been disrupted by the coronavirus crisis.

Eligibility will depend on your income level – individuals must earn less than $75,000, and married couples who file their taxes jointly must earn less than $150,000. If you are eligible, you will need to fill out either a Form 1040 or Form-1040-SR, and you must also be in possession of a valid social security number.

Stimulus is supposed to be cut off if you earn above a threshold of US$99K (individuals) or US$198K (for married couples who joint file). However, some American expats may find that it is worth checking whether they are eligible, as a result of federal earned income exclusion – this excludes money earned and taxed in a foreign country from U.S. taxable income. Speak to your accountant or do some research, as you may find that you are entitled to stimulus, even if you earn above the threshold amount.

Expats returning to the UK from abroad have reported bureaucratic difficulties in cancelling contracts for things like personal health insurance and pet insurance. Also, it is worth talking to your accountant or pensions adviser to check how much of your pension you are entitled to withdraw once you leave your host country. For example, if you are in Switzerland, your occupational pension will be moved to a holding account when you exit the nation.

Financial experts generally advise you to have savings of three to six months’ salary, but this is not always possible, particularly if you have suddenly lost your job due to the pandemic. If you are coming back into the UK, make sure you speak to HMRC as soon as possible, and alert them to your new tax status in the UK. Be aware that they have also experienced significant disruption as a result of the coronavirus. Communication with HMRC is proving difficult at present, and queries may go unanswered.

If you are an expat and are planning to return home, it is obviously critical to find out what the state of affairs is in your home nation. Lebanon, for example, has been trying to lure its diaspora back home, but Lebanese expats do not seem keen. Many have stopped sending funds home due to the government holding dollar payments essentially hostage; banks have clamped down on the transfer of US$, both incoming and outgoing. Expats say that they are deeply underwhelmed by the government’s response to COVID-19, and the country’s economy is now in free fall.

So, assuming that you have a choice, it is worth doing some research into what has actually been happening back home, before you decide whether to move back there.

Financial experts in Hong Kong have been looking at the impact of the new security law on the city-state’s financial and banking sector. They say that firms are not looking at an immediate exodus, but are quietly exploring possibilities in London, Singapore and Switzerland. A spokesperson from consulting firm Boyden has been quoted as saying:

"There will not be an immediate reaction, but slowly, over time — if this plays out that Hong Kong will indeed see dilution of its sovereignty over its tax, financial system, law and currency — then we will most definitely see reduced activity in financial services."

They also warn that US/Chinese tensions could have an impact on the role of Hong Kong as a financial hub.

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