Expat Focus Financial Update August 2019

More money lures young expats overseas

Young expats heading overseas on a work assignment could see a 35% salary boost, a survey reveals. According to the HSBC report, their salary rises from $40,358 to $54,484 (£33,204 to £44,826), on average.Older expats also see a bump in salary, with an average rise of 24%, while those over 55 see a 9% increase. The best destinations for salary raises for young expats are Indonesia and Turkey with other locations such as Singapore and the US also offering better-paid opportunities.

HSBC’s expat’s unit head, John Goddard, said:

"Expats are looking increasingly at more than just the financial returns from moving to a new country. They are looking at their work-life balance and the environment in which they want to bring up their children safely."

Expats move overseas to boost their career

The survey also reveals that 35% of expats moved overseas to boost their career, 28% were looking for a new challenge and 12% were asked to move by an employer.
The best country for those expats wanting a better career is Germany, the survey highlights.

The next most popular country for career choices is Bahrain, followed by the United Kingdom with the US in eighth place. The survey also reveals that the average expat income from 163 worldwide locations is $75,966 (£62,498).

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Tax campaign may catch unwary British expats

A new tax crackdown has been launched by HM Revenue and Customs aimed at contractors and some expats who use, or have used, IR35 status and who may not be aware that they have been targeted. According to UHY Hacker Young, HMRC is taking a closer look at the employment status of all contractors, particularly those who reduce their tax liabilities using a tax planning scheme.

The legislation covering contractors is being extended to the private sector from 2020 which will see the IR35 status of some expats coming under closer scrutiny. The firm of accountants says one of the big issues will be British expats who take on an overseas contracting assignment but work through their own UK-based company. They also point out that the sectors attracting the most attention from HMRC will be engineering, IT and also the oil and gas sectors.

Expats who believe they may come under scrutiny should seek professional tax advice to ensure they comply with the new rules, the accountants warn.

Tax take grows from offshore investigations

HMRC has revealed that it collected more than £560 million in the last tax year from offshore tax investigations. Since the new Common Reporting Standard was introduced, the tax take from offshore sources has risen by 72%. More than 100 countries now share financial information automatically on taxpayers’ wealth.

Expats are being warned by financial advisors Blevins Franks’ director Jason Porter that if they are tax resident in one country with assets or income in another country then they need to ‘take extreme care and follow local tax rules as well as UK tax rules’.

Canada Life stops selling annuities to British expats

Canada Life has revealed that it will stop selling annuities to British expats who are living in European Union countries. The pension provider says the decision was made earlier this year when the March 29 Brexit deadline was approaching.

They say that the European Insurance and Occupational Pensions Authority has issued guidelines stating that those insurance and pension firms wanting to carry out business with residents in the EU after Brexit will need permission from each member state that they want to operate in.

A spokesman for Canada Life said this was not something the insurer was prepared to do and added: “We felt it is fairer and clearer to state we would not sell to a non-resident, which is in line with our competitors.” However, annuities that are already being paid to British expats already living in the EU will not be affected.

Wealthy SA expats move money offshore

Growing numbers of wealthy South Africans are looking to move their money offshore in a bid to beat the expat tax being introduced by the government.
One tax consultancy says they have seen a big rise in expats looking to expatriate their funds and are looking to invest offshore.

A spokesman for tax consultancy Jonty Leon said:

"There are various reasons why people are moving money abroad and some are emigrating financially because they are moving overseas. Other reasons include political instability and better investment opportunities."

Expats warned over leaving debt in UAE

Expats in the UAE are being warned not to leave the country and leave behind debts because they could be jailed. That’s because a creditor in the country can apply to the court to have a debtor imprisoned until their debt is repaid.

And for those expats who do flee the country before authorities catch-up with them may find that their bank or creditor informs international policing organisation Interpol that they have committed fraud.

This means police forces around the world can then detain the expat for extradition back to the United Arab Emirates. The warning comes as growing numbers of expats are losing their jobs in the country, particularly in the public sector.

IRS targets US expats

American expats are being warned that the Internal Revenue Service is widening its activities to find so-called ‘Accidental Americans’. According to one expat organisation, the IRS is using the Foreign Account Tax Compliance Act (FATCA) to find those who may not be aware that they are liable under US nationality laws for paying taxes in the US.

For example, an ‘accidental American’ may be born after their parents moved from the US or they were born in the country while their parents lived there temporarily. Since FACTA was introduced in 2014, the IRS says that nearly 70,000 US taxpayers came forward to make a tax filing.

Many of these will have had a tenuous connection to the country and may have never filed a tax return previously because they were unaware that they had to do so.

For those accidental Americans who may be worried, the organisation warns they should speak to a tax professional about how to reduce their risk of receiving a tax bill.

It has also been reported that the IRS is focusing attention on taxpayers who have used its Offshore Voluntary Disclosure Program (OVDP). The IRS believes that growing numbers of expats are not remaining compliant with the program to report assets and foreign income – and is now checking whether they owe taxes.

French and US tax authorities at loggerheads

Meanwhile, the French and US tax authorities are at loggerheads after the IRS reminded the French government that under financial reporting regulations, they will face fines and sanctions from next year if French banks withhold data.

One group of accidental Americans in France recently lost a court case believing that the FACTA Regulations discriminated against them. The French government has a period of grace before passing data to the IRS but this ends in January next year. Until the situation is resolved, bankers in the country say they may have to close up to 40,000 accounts that belong to US citizens living in France.

The banks say they are unable to provide the formation required by the IRS and will need to close the accounts to avoid significant financial sanctions, the head of the French banking Association says.

Non-doms leave the UK

As growing numbers of non-doms leave the UK, their tax contribution has fallen by £2 billion, the UK Treasury has revealed. The figures highlight that the numbers of wealthy people paying no UK tax on their offshore accounts is at its lowest ever level.

Last year, there were 78,300 non-doms in the UK, down from 2017’s figure of 98,500 when they contributed £9.5 billion in tax but that has now fallen to £7.5 billion. Most non-doms are UK resident with a permanent home outside of the country and will avoid paying UK taxes on income that comes from outside the UK.

HMRC says that of those who stopped using their non-dom status, around half moved to a domicile status to continue paying tax and the others have left the UK’s tax system.

Pinsent Masons, an international law firm, says that among the reasons for the fall in numbers include Brexit and growing nervousness over the possibility of a Labour government.

Josey Hills, a senior tax manager, said:

"Non-doms are internationally mobile and if Britain is no longer attractive for them, they can easily relocate."

Belgian expats warned over tax

Belgians who have been pretending to live in Monaco for tax purposes have been hit with a €100 million tax bill from Belgium’s tax authority. The move follows a tax avoidance crackdown which led to 147 wealthy Belgians who had been registered as living in Monaco but their address turned out to be a post box or hotel room.

Belgium says the high net worth individuals are guilty of ‘domiciliation fraud’ and must now pay tax. The tax authority is also warning that it is taking a closer interest in the tax returns of Belgians with overseas bank accounts.

Dubai’s new pension saving scheme revealed

A new pensions-style savings scheme has been launched for employees in the Dubai International Financial Centre. The scheme will replace the end of service gratuity from early next year.

The employee workplace savings scheme offers a low-cost investment platform for managing and receiving end of service contributions and is similar to pension schemes that are available in the UK.

All employers in the free zone will be required to participate in the new scheme. One benefit for the move is that employees will have secure benefits – even if their employer goes out of business – and they can add their own contributions to boost their pension planning.

US tightens expat visa rules

Expats heading to the US using the investor visa will find that the financial threshold has been increased. The government has increased the minimum investment level required for an EB-5 visa to $900,000 (£741,116) from its previous $500,000 level.

However, that figure is only for targeted areas, usually with high unemployment, while in the rest of the country the threshold has risen to $1.8 million (£1.48 million) from its previous $1 million threshold.

The new rule comes in from 21 November and is the biggest change since 1993, the Citizenship and Immigration Services declared. The increase will affect those from China, Vietnam and India the most as they are the countries offering the largest proportion of EB-5 visa applications. Every year, around 10,000 EB-5 immigration visas are issued.

Food prices in Europe rise rapidly

The most expensive countries in Europe for buying groceries have been revealed in a new report which highlights that food prices are increasing at a rapid rate. Prices in June rose by 2%, according to Trading Economics – with prices rising 3% on average since 1997.

The most expensive country for groceries is Switzerland with an average basket costing €141.06 (£128.82), Norway is second with €119.13 and Iceland is third at €110.46.

The cheapest destination in Europe for groceries is Ukraine with an average basket of €27.07 followed by Turkey, with an average of €34.24.

Meanwhile, Eurostat data has revealed that Iceland is the most expensive destination in Europe with consumer prices being, on average, 56% higher than the rest of the continent. The next most expensive country is Switzerland, where prices are 52% higher than average, followed by Norway with 48% and Denmark with 38%.

In other financial news…

Ultra-high net worth and high net worth individuals are being targeted by one travel insurance firm to provide cancellation coverage worth up to £500,000. The provision from travel insurer P J Hayman and Company is being offered as a top-up to current coverage or as a standalone offering. The firm’s director, Peter Hayman said:

"There's a huge market for specialist and expensive travel programmes and we believe there is considerable demand for the unique scheme."

The coverage is available to travel agencies, brokers and specialist tour operators for those who are organising trips on behalf of wealthy clients.


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