Home » Expat Focus Financial Update October 2018

Expat Focus Financial Update October 2018

Expats boost income by £16,000 by moving overseas

The annual HSBC Expat Explorer survey has revealed that when expats head overseas they add an extra £15,967 ($21,000) on average to their annual pay.

The best paid expats are in Switzerland, the US and Hong Kong, the bank says. Of those who replied, 45% of expats said they earned more money by moving abroad to do the same job, while 28% said they were handed a promotion for moving.The survey also looks at the best countries to live and work in as an expat and takes into account a range of criteria, including family, experience and economics.

For the fourth year running, Singapore has topped the rankings for being the best place overall for expats to live and work in. In second place is New Zealand, also for the fourth straight year, followed by Germany, Canada and Bahrain.

Top 10 best places for expats

The top 10 of best places for expats includes Australia, Sweden, Switzerland, Taiwan, and the UAE. When it comes to earnings, expats in Switzerland have the largest average annual pay with £154,237 ($202,865), in the US it is £140,742 ($185,119), while in Hong Kong expats are earning £135,330 ($178,000).

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Next on the best paid list is China, followed by Singapore, the UAE, India, Indonesia, Japan and Australia, where the average expat pay is £95,033 ($125,000). However, expats in Hong Kong say they have to work longer hours despite earning a much higher salary and this helps explain why many expats prefer to live in Singapore instead. The average expat income is, according to the HSBC survey, £81,150 ($106,700).

Reasons given for heading overseas

The top reasons given by expats for heading overseas are for bigger salaries, to enjoy career growth and improve their quality of life. However, the best destinations for expats to progress their career path are in US and the UK, expats say.

The head of HSBC Expat, John Goddard, said: “Living in a new location can be key to unlocking creative potential, taking a career in a new direction and finding the work-life balance the expat craves.”

Switzerland begins sharing offshore wealth details

Switzerland has announced that is sharing client data automatically with the tax authorities in scores of countries which brings an end to an era of banking secrecy there.

The first data exchange has seen details on accounts being held with 7,000 financial institutions being given to European partners, along with nine other countries, including Canada, Japan and Australia.

A spokesman for the country’s Federal Tax Administration said the details being handed over include account and financial information along with the account holder’s name and address, capital income and account balance among other details.

He added: “The information enables a local tax authority to check whether a taxpayer is correctly declaring in their tax returns their financial accounts abroad.”

The bank client sharing is part of an international agreement which was brought into force in January 2017 under an initiative called the Automatic Exchange of Information to help tax authorities cross-check information of taxpayers between countries.

Australian expats object to tax plans

Australian expats are objecting to a new government plan that will see a revamped capital gains tax being imposed on expats who work or retire overseas and their relatives.

With more than 100,000 Australians working and living abroad, they are now facing the prospect of losing their capital gains tax exemption on their main residence should they sell a property while living outside of the country – even though they are considered to be ‘non-resident’ for tax purposes.

The government says the move will boost housing affordability in the country but the move could also affect foreigners returning home after a work posting to Australia. However, tax experts say the move could see the legislation being framed to see the exemption stretching as far back as September 1985 which has now prompted expats living in Hong Kong to launch a worldwide campaign for the proposal to be overturned.

Asia’s financial sector salaries lag

Expats working in Asia’s financial sector will have seen their salaries rise by 5.7% across the Asia Pacific region this year – but that’s just an overall increase of 0.1% on last year’s pay, a survey has revealed.

The advisory firm Willis Towers Watson has unveiled its latest salary budget planning survey that reveals that one-fifth of the budget for salary increases is being targeted at the top performers in firms – or nearly 13% of employees. The survey also highlights that pay in the region’s financial sector is lagging behind many regional markets with the landscape being disrupted by various fintech start-ups.

The advisors say that growing competition means employers are increasingly cautious about their spending plans, including salary increases.

UK introduces penalties for tax dodging

UK taxpayers must now notify HMRC of any foreign assets affecting their income tax, inheritance tax or capital gains tax obligations. This follows the introduction on 30 September of the Requirement to Correct (RTC) legislation and those taxpayers who had contacted HMRC before the deadline were given 90 days extra to disclose their offshore assets and then pay any tax that is due.

A raft of countries have signed up to an international agreement to share tax information, including Switzerland, Australia and Singapore. Essentially, those individuals who have not paid the correct amount of tax on their overseas income in recent years must correct their tax returns by the deadline or face a potential fine. This fine could double to 200% of any tax owed.

There’s also the potential of a penalty of up to 10% of their assets value being levied if the amount of tax owed is more than £25,000 in any tax year and the individual had knowingly broken the rules.

The new rules cover a number of scenarios affecting expats, including the renting out of UK property while living overseas and renting out a property abroad as well as transferring assets and income between countries.

The new RTC rules will also affect thousands of investors who have holdings in offshore fund hotspots such as Luxembourg and Dublin – many of whom will be expats who may hold their funds in ISAs or pension funds.

Paris in the lead for post-Brexit trading centre

According to a survey, Paris looks set to become the leading post-Brexit financial trading hub in Europe as some of the world’s largest banks and asset managers look to move to another European Union country from the UK.

The findings from EY’s Financial Services Brexit Tracker highlights that one in three UK-based financial services firms are considering or have confirmed they will roll relocate some staff for operations to Europe after Brexit.

Their findings highlight that employers are being more specific about their post-Brexit plans with 25% of firms confirming they will have at least one relocated hub within the European Union. Other popular destinations for banks include Frankfurt and Dublin though Paris is favourite for trading.

The City of London Corporation has warned that around 12,000 jobs could be lost in the short-term after Brexit with more at stake over the longer term. However, a poll by Reuters has found that just 630 financial jobs have moved from the UK to an overseas location since the Brexit referendum.

They also highlight that the number of jobs being moved from financial institutions should there be a ‘hard Brexit’ was 5,800 – though a lot depends on the UK having access to the single market.

Expat hiring spree announced by bank

HSBC Nepal has announced that it is looking to increase the hiring of expats in a bid to exploit growing opportunities from Asia’s rapidly increasing wealthy population. The bank says it is looking to double in size over the next five years and will hire more than 400 private retail banking employees as it focuses on high net worth individuals (HNWIs) from Singapore and overseas.

Meanwhile, research from Cerulli Associates has revealed that there is growing competition to attract the investment business from 1.5 million high net worth Chinese people.

Banks and asset management firms are increasingly switching their attention from the shrinking institutional business to that of attracting HNWI investment business – and looking to attract experienced bankers as a result.

In other news…

The European Union is apparently considering adding EU member states to its blacklist of jurisdictions that have ‘unfair or harmful’ tax practices. The EU is looking to screen its member states after being accused of double standards by some countries it previously added to the blacklist.

Opportunities for expats with experience in the financial sector could be boosted after Qatar announced it is setting aside $2 billion (£1.5bn) as it bids to rival Dubai’s financial centre. Qatar says it wants to attract multinational companies with tax incentives and free offices along with seed capital that will help cover five years of a firm’s operating expenses with a commitment to remain in Qatar for a least 10 years. The move follows the breaking of diplomatic and economic ties between Qatar and the UAE, Saudi Arabia, Egypt and Bahrain.

Expats looking to retire within 10 years are being offered around half their pension pot’s value by their scheme when transferring out. The research from Royal London highlights that members are being offered 57% of their pension pot value when requesting a transfer on average but for those savers who are within a year of retirement and requesting a transfer will see an average of 75% being offered.

High net worth clients in Hong Kong and Singapore who bank with Credit Suisse can now communicate with their private banker using Apple Business Chat. The bank says it is adopting the facility to make communication easier with clients able to access portfolios and account balance information.

Dubai has unveiled plans that will see the tightening of anti-money laundering rules for the Dubai International Financial Centre. The aim is to boost the free zone’s abilities when fighting and dealing with financial crime.

High net worth individuals are being targeted by Lombard International Assurance with its International Life Plan to preserve and protect key parts of their personal as well as their family and business legacy when estate planning.

US expats could benefit from a new retirement scheme being launched by TMF Group. The scheme is aimed at US expats to enjoy a tax-efficient retirement plan that is recognised by the country’s federal taxation system.
Ultra-High Net Worth Individuals in London are being targeted by Boston-based TwinFocus who have opened an office in the city. The firm says the ‘time is right’ to open its Mayfair base and already has ‘clients and capital committed in London already’.

A survey of people living in the UAE has revealed that 51% of them do not have life cover with 36% saying it is too expensive, while 30% said they were unaware of the concept of life insurance. Also, 39% said they were unfamiliar with critical illness insurance, says Friends Provident International.

Real estate firm Savills says that the number of demi-billionaires, that is someone with at least $500 million (£380mn) in net assets, will rise by more than a quarter in the Middle East. In their latest Wealth Report, the firm says numbers will rise by 28% over the next four years and highlights that the number of demi-billionaires living in Asia will outnumber those in North America for the first time. Also, by 2022, the number of demi-billionaires in India will outnumber those in France, UK or Russia.

Expats and regular executive travellers wanting to enjoy the most expensive hotels in Europe should head to Geneva where an average cost per night is €243. Paris is in second place with hotels in Zurich in third place, according to a survey carried out by PWC.

Egypt’s economy has been stabilised thanks to the remittances from expats sending US dollars home. The Central Bank of Egypt says that in the past year, remittances have risen to $26.4 billion.

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