Home » Expat Focus International Finance Update 14 March 2017

Expat Focus International Finance Update 14 March 2017

British expats face 25% tax charge

The latest budget from the UK’s Chancellor Philip Hammond will have surprised many in the financial services world after revealing that expats are facing a 25% tax charge on their offshore pension fund.

The measure will hit retirement fund centres in Malta and Gibraltar, among others.The new tax charge will be imposed on an expat who moves their pension out of the UK to an offshore centre or another country unless the move meets strict criteria for doing so.

The new rule also applies to foreign nationals who are based in the UK making a similar move with their pension pot.

The rules have already come into effect and are the latest in a series of moves by the government to crackdown on the use of offshore pension schemes in a bid to avoid tax.

The move could be costly for thousands of expats who live outside of the European Economic Area as well as mobile UK employees who use a third country for their retirement fund, such as Gibraltar or Malta.

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Tax experts say that British expats looking to move their Qualifying Recognised Overseas Pension Scheme (Qrops) are among those running the biggest risk of incurring the charge.

Growing numbers of British expats and retirement fund savers have found themselves in this predicament which has led to HM Revenue & Customs delisting several countries from its list of approved countries – including the US and Canada.

Tax experts say expats should seek specialist financial advice before moving their pension savings from the UK to another country.

Expats reveal corruption in Asia Pacific

A survey of people and expats living in the Asia Pacific region has revealed the countries with the worst levels of corruption.

Transparency International has published the latest in its Global Corruption Barometer series after speaking with 22,000 people about their experiences of corruption in 16 countries.

The organisation found that just over one in four people questioned admitted to paying a bribe for accessing public services.

They say that based on each country’s population of adults, this equates to more than 900 million people having to pay bribes in the 16 countries surveyed.

The findings revealed that expats and people under the age of 35 are more likely to pay a bribe for accessing a public service and, overall, a similar proportion of men and women have to pay bribes.

When asked whether corruption had increased recently, 73% of respondents in China said it had, followed by Indonesia on 65% and Malaysia with 59%.

Transparency International now says that governments in the region should integrate their anti-corruption targets into all of their sustainable development aims including for education, poverty and hunger.

A spokesman said: “Without proper law enforcement, corruption will thrive. Bribery isn’t a small crime and millions are forced to pay and it’s the poor who are vulnerable.”

Brexit could lead to expat doctor exodus

Fears have been raised that the Brexit process may lead to a mass exodus from the UK’s NHS of EU expat doctors.

Surveys from the BMA and GMC reveal that large numbers of medical professionals who originally come from European Union countries are planning to leave the country.

The doctors say the lack of information about their rights after Brexit is leading to growing insecurity.

One survey reveals that 60% of doctors are planning to leave – and of these 91% said that Brexit was the main reason.

Another poll for Channel 4 has also revealed that 25,000 doctors and nurses in the NHS are thinking of leaving over the next five years which could, they say, lead to a crisis in the country’s health service.

Meanwhile, a coalition of groups representing British expats living in the European Union says the UK government is not communicating well enough to explain the post-Brexit rights of expats living in the EU.

The group, Expat Citizen Rights in EU, consists of 12 campaign groups representing expats around Europe and say they represent 32,000 people.

They told one national newspaper that despite repeated requests, the group has not been contacted by the government about what British expats can expect during negotiations.

In addition, a coalition of MPs in the UK’s Parliament is also calling for the rights of EU expats living in the UK to be guaranteed on a unilateral basis without the rights of British expats in the EU being guaranteed under a reciprocal arrangement.

British expats increasingly invest in UK property

Skipton International says it has seen a 47% rise in enquiries from British expats around the world wanting a buy to let mortgage.

The building society says record numbers are now applying for a mortgage and February was its busiest ever month with enquiries from more than 50 countries.

The firm launched their buy to let mortgage range in 2014 in response to the difficulties that many British expats were facing when wanting to buy a buy to let investment property.

A spokesman for Skipton International said: “Activity levels vary in different countries but there has been a lot of interest from the Gulf region with a 70% increase in enquiries from British expats who are living in the United Arab Emirates.”

The news has been echoed by Enness Private Clients which says it has seen a big rise in the number of British expats seeking to leave the US and return to the UK. Expats in Bahrain and Australia are also looking for property in a bid to move back.

A spokesman for the firm said expats ‘fleeing’ the US was part of a wider trend, particularly for bankers who are looking to move back to the UK with their employer.

Other expats are looking to enjoy the low interest rate environment by investing in buy to let property and, the firm says, the devaluation of Sterling has also boosted interest.

Italy's HNW expat tax incentive

Italy has unveiled a plan to attract high net worth expats and Italians back to the country with a favourable tax regime.

The Italian Revenue Agency has introduced a €100,000 (£87,223 / $106,710) tax break, or ‘flat tax’, on all foreign-earned income and gains for non-doms who would then declare Italy as their primary tax residence.

A spokesman for the agency said: “This tax regime is favourable for those who are newly resident individuals living in Italy who, regardless of their domicile or nationality, have been non-tax resident for at least nine years out of the previous 10 years before transferring to Italy.

“The regime’s incentive may also extend to the individual family members.”
Tax specialists say that those earning income in Italy will be taxed in the normal way and the move is, they point out, a way for Italian authorities to attract wealthy British expats once the UK leaves the European Union.

US living costs impact expats

Expats heading to the US will appreciate that their living costs will be lower if they are not near to city centres.

A survey by real estate firm Zillow reveals that buying a home in most major American cities carries a premium, particularly for expats with children.

They say that on average, a family will need to spend $9,000 more every year to cover their basic housing and childcare costs when living in the city rather than in a suburb.

Indeed, the survey reveals that while urban living has its benefits, these come at a cost and they vary considerably depending on where the expat may be living.

From the findings, expats living in the suburbs of New York City will save around $71,200 every year by not living in the city centre.

In Chicago, expats will save $18,470, in Dallas the figure is $14,120 while in Washington DC the savings are $12,832 and in San Francisco the expat will save $12,560.

However, there are cities where it is cheaper for expats with a family to live in rather than the suburbs, for instance by living in the centre of Philadelphia the expat will save $13,849 every year, in Baltimore it is $10,790, in Cleveland they will save $9,000 and in Milwaukee the saving will be $8,227 while in Las Vegas the expat will save $7,318.

Expats face higher fees

News outlets in Kuwait are reporting that expats should prepare for a big leap in their visa and residency permit fees.

Apparently, the government is studying a proposal for expats’ charges to be increased and along with visas, their fines for traffic violations could also increase.

Proposals include an amendment to the expat’s residency law which could see them being fined KD1,000 (£2,676/$3,273) for sheltering anyone in the country’s ‘marginal labour force’ and for those who work for a different sponsor.

Fines for residency violations could increase from KD2 to KD4 per day.

The news outlets are also reporting there could be a substantial hike in the visitor visa fees.

Meanwhile, Kuwait’s Public Authority for Housing Welfare has reportedly begun the process to lay off 36 expat employees. The programme will see engineers and consultants being replaced by Kuwaitis.

Calls for NZ expat tax

With the expat population in New Zealand soaring in recent years, one tax expert is recommending the introduction of a tax on immigrants to help pay for extra public service and infrastructure costs.

Mark Keating is a lecturer in tax law at the University of Auckland’s Business School and he says a levy should now be introduced to help pay for the population increase.

He points to an estimate from the New Zealand Treasury last year which said that the country will need to spend more than $100 billion over the next 10 years to help pay for hospitals, roads and schools and other infrastructure to cope with demand.

Mr Keating said: “New Zealand is a desirable country with excellent public services and infrastructure but immigrants get to share these benefits so why should they not contribute to them?

“The country’s existing taxpayers will have to shoulder a huge tax bill to help assimilate and settle a record number of new immigrants.”

He is now arguing for the introduction of an immigration fee of between $10,000 and $15,000 for every immigrant.

In addition, he points to an announcement from Immigration New Zealand which said that the demand from expats for visas to the country is consistently outstripping supply.

In other financial news…

The world’s most expensive city for office space is in Hong Kong, followed by New York and London, says Kit Out My Office, which based their survey on office rents. The top five also includes Beijing and Shanghai.

Iceland’s Arion Bank says it believes that the country is now one of the world’s most expensive to live in. The bank points to the strengthening Icelandic kroner and the shortage of housing and other issues with the infrastructure.

South Korea’s KB Kookmin Bank has unveiled an instalment savings account that is aimed at expats living in the country. The Seoul-based bank says it will pay expats 0.5% for making regular deposits.

Expats in Indonesia buying condos or luxury homes are facing a 20% tax on the sale price when doing so. The government has also unveiled plans for a 40% tax on other luxury goods including air balloons and aircraft.

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