Expat Focus Financial Update June 2019

UK is the most expensive country to send expats

The UK has overtaken Japan as the most expensive destination to send expat employees, a survey reveals. The findings from ECA International reveal that while salaries have remained static, costs have increased with higher tax and housing costs.In addition, school fees and their tax liability now accounts for 82% of the expat’s overall UK pay package.

The global mobility experts say that the average pay for a mid-level expat worker who has moved to the UK is now £311,240, a rise of 17% or £44,688 over the past year.

The firm’s remuneration manager, Oliver Browne, said:

"The average expat pay package in the UK saw a big increase in 2018 which was down to a jump in benefit costs that employers provide for overseas workers such as international school fees and rental costs. As the cost of expat standard housing and rents grew through the UK, the value of benefits being provided by an employee to cover these grew by £23,881 on average."

The second most expensive country for expats in Europe is Switzerland, where pay packages are an average of £178,260. However, a large part of this sum consists of Switzerland offering the highest average cash salary at £66,940 in Europe, which compares with the UK’s figure of £55,948.

Overall, the top 10 destinations to send expats are the UK, Japan, China, India and France. Hong Kong is in sixth place, followed by South Korea, Australia, Argentina and Turkey. The USA is in 11th place.

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ECA has also revealed the most expensive cities for expats, with the surprising number one spot being taken by Ashgabat in Turkmenistan. In second place is Zurich and then Geneva, followed by Hong Kong.

For expats wanting to head overseas for the best pay, then Saudi Arabia and the United Arab Emirates offer the best destinations with salaries at £71,125 and £69,280 respectively for mid-level expats.

British expat pension incomes hit

British expats who have moved to Europe have seen their spending power reduced considerably compared to pensioners who remained in the UK as the cost of living is twice the UK inflation rate.

The findings come from Equiniti, a payment specialist, who say that inflation has increased in Europe by 14% since May 2015’s general election, compared with 7% in Britain. For expats in the US, they’ve also seen a similar fall in income.

The firm manages the pension payments for 60,000 expats but they say 200,000 pensioners may have seen a reduction in their spending power.

The issue also affects British expat pensioners who moved elsewhere in the world and have seen currency fluctuations, inflation and other economic factors also damaging their spending power.

However, the only country where British expat retirees have seen their finances improve is in South Africa where, thanks to currency movements, their income has increased by 3%.

The firm’s director of payment services, Andy Brown, said:

"Expat pensioners are at the mercy of currency exchanges and after a period of uncertainty they are facing a significant increase in the cost of living. Our advice to those thinking about retiring overseas is to understand the implications of currency exchange rate movements and look at ways in which to receive international payments."

Saudi Arabia warns expats over ID cards

Expats in Saudi Arabia are being warned that a failure to renew their resident ID or muqeem cards, before they expire will result in a number of punishments, including deportation. Failure to renew the residency for the first time will lead to a SR500 fine, which increases to SR1,000 (£213/$267) for the second occasion. Failing to renew for a third time will lead to deportation from the kingdom, the Directorate General of Passports has warned.

Expats are being told to renew their resident ID cards at least three days before they expire using the Interior Ministry’s electronic service or the Muqeem e-gate.

Most expensive cities for expats revealed

A survey from Deutsche Bank reveals the most expensive cities in the world for expats. The eighth annual survey of Global Living Standards and Prices reveals that Zurich has returned to the top spot, followed by Wellington and Copenhagen.

The survey also reveals that San Francisco offers the best salary and disposable income after rent has been paid. Zurich is the second best destination for salaries, followed by New York, Boston and Chicago.

A spokesman for the bank said: “The rapid growth of the tech sector in the US is helping San Francisco beat traditional capital cities for income.” However, the best city for the quality-of-life is Zurich for the cost of services and goods, but it is also, the bank says, the most expensive city to go on a date.

In the quality of life index, Wellington is in second place, followed by Copenhagen, Edinburgh and Vienna. The most expensive places for having a beer in a neighbourhood pub are Dubai, followed by Oslo, Copenhagen, Hong Kong and Singapore. London is in 12th place.

Expats in BVI warned about tax avoidance

Expats in the British Virgin Islands (BVI) are being warned to expect harsh penalties for avoiding the paying of taxes. The incoming Prime Minister Andrew Fahie has announced a crackdown as part of upcoming government reforms to the labour and immigration policies covering the territory.

He said:

"We are aware of work permits being renewed but their national health insurance, Social Security taxes are not being paid. We are moving to ensure this is discontinued and the violators will face heavy penalties."

In the same speech, the Prime Minister also warned that a review of immigration and work permit requirements for expats will begin to tighten for immigrants and expats already working in the BVI.

South African expats cut their ties

Growing numbers of South African expats are, apparently, being advised by professional financial advisers to cut their ties with their home country in a bid to beat the new tax law.

By becoming non-resident, they will avoid having to pay 45% tax on overseas earnings of more than R1 million (£53,815/$67,483).

One firm of financial advisors says that emigration for financial reason has rocketed by 30% over the past two years. In addition to those who are cutting financial ties with their country, there has been a 53% rise in the number of expats who are turning to second citizenship to avoid the new taxation law.

South Africans are heading to the UK and USA to do so and creating a brain drain by leaving and creating a skills shortage in the country.

In other financial news…

Saffron building society has announced that it will extend its terms and reduce rates across its range of expat mortgages. The products are aimed at landlords who are looking to buy or remortgage a buy to let property in the UK while they live overseas. The society’s head of mortgage sales, Anita Arch, said: “The continuing strength of the rental market in the UK makes rental opportunities at home an attractive investment for those British expats who are living abroad.”

Real estate experts in Dubai say that the UAE’s recently unveiled permanent residency scheme could lead to a big boost in the real estate market. Under the scheme, expats can invest in property and settle in the UAE and the move could prove to be a fillip the sector needs, they say. Expats on short-term visas cannot invest in or own real estate, but the new gold card scheme will encourage expats to enter long-term investment goals, including the owning of property.

The Bureau of Internal Revenue in the Philippines has revealed that it is targeting expat workers to pay their correct taxes while in the country. There has been an influx of expat workers and they must file an income tax return – except those expats who are covered by substitution agreement so their employer withholds any necessary tax so they do not have to file a tax return.

British expats in Dubai are being warned about making unnecessary pension transfers with growing numbers being duped into putting their money into risky investments. A non-profit organisation in the UAE is warning that self-appointed pension specialists are looking to trap expats, particularly those who have no plans to return to the UK and want to transfer their pension pot and invest elsewhere.

The UK and Singapore have announced a plan to improve cybersecurity in their financial sectors, including a bid to improve cross-border processes. The move will also see an improvement in sharing information.

The UAE has announced that it is planning to introduce a savings retirement fund for expats that will run alongside the end of service gratuity system. Consultation on the proposal has been announced by the Federal Authority for Government Human Resources to deliver the best pension fund management solutions. A spokesman said: “Setting up an investment fund for retirement benefits of expats will help officials and employees to plan properly for the future and use their financial resources in retirement.”

TML (The Mortgage Lender) is targeting experienced expat landlords living overseas with its first tailor-made buy to let products. TML says they are available to those expats with at least £40,000 to invest, if they are employed and £60,000 if they are self-employed. The products are available for purchase and remortgage applications with rates starting at 3.95% for a two-year fixed rate at 70% LTV (Loan to value).

One Saudi newspaper says that a new long term residency permit, or iqama, will operate in a similar way to the green card scheme but expats will need SAR800,000 (£170,000/$213,000) to apply. Interested expats do not need a Saudi sponsor and can freely enter and exit the country and use designated airport queues.

Regulated financial firms in Cyprus are warning British expats there to be wary of rogue financial advisers who may put the expat’s life savings at risk. The firms say that the advisers are promising high returns if they invest in risky investments and many are operating without a licence. For expats who need to be reassured, then the local financial authority is the Cyprus Insurance Company Control Service, which will reveal whether the adviser has a licence to give advice.

Expats who have buy to let investment properties in the UK and use a letting agent to run them, need to be aware that the Tenant Fee ban is now in place. Expat landlords will face a fine of up to £5,000 if they breach this ban, which covers agents in England. Essentially, the law moves the responsibility from tenants for the costs of setting up and renewing as well as ending tenancies to the landlord. Since the measure is property based, a landlord who is living overseas must comply with the regulations if they are renting out a home in England.

After criticism from the Caribbean Financial Action Task Force, the Cayman Islands has announced that it will introduce a supervisory and regulatory framework for ‘excluded persons’ – that is those who are exempt from requiring a licence for conducting securities investment business or be overseen by the regulator. The new regime is aimed at helping financial service providers who serve sophisticated or HNWI’s because the investors are able to carry out due diligence in addition to that undertaken for licensed entities by the Cayman Islands Monetary Authority. Samuel Bulgin, the attorney general, said there was a misconception about the Islands’ excluded persons regime. He explained that some believed they were not subject to regulatory oversight which ‘could not be further from the truth’.

A report from the OECD has revealed that the automatic exchange of information on financial accounts has led to a 25% drop in bank deposits in 46 key international financial centres since 2008. The report highlights that of the 90 jurisdictions taking part in the global transparency initiative has led to them exchanging information on 47 million offshore accounts worth around £4.3 trillion.

The Tax Justice Network has revealed what it calls the 10 Most Corrosive Tax Havens with British territories and dependencies accounting for four on the list. The tax campaigners say that around $500 billion in corporate tax is being dodged every year by multinational firms. The top 10 consists of the British Virgin Islands, Bermuda, the Cayman Islands, Netherlands and Switzerland. In sixth place is Luxembourg, followed by Jersey, Singapore and Bahama is in 10th place.


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