Looming deadline for declaring offshore assets
HMRC is warning that a deadline for expats to declare their offshore assets is looming.
Those who fail to comply will face tougher penalties if they have not declared the right amount of tax. These penalties take effect from 1 October. HMRC says that anyone with overseas assets will now need to declare these quickly or risk a larger fine. They add that they will prosecute the most serious cases of tax evasion.David Richardson, HMRC’s director-general for customer strategy, said: “Everyone has to pay tax and most people and businesses do. It’s on their behalf we are cracking down on offshore tax cheats.”
The UK government has been working to ensure there are no safe havens for taxpayers wanting to evade tax bills. HMRC holds huge amounts of data on offshore assets.
However, the government says that it recognises that some people may not realise that they should declare their overseas income to HMRC, particularly if they have worked overseas or receive an income from renting property outside the UK.
Anyone with an overseas income who isn’t sure whether they have paid the correct tax is being urged to check with HMRC before the new penalties take effect.
Meanwhile, the UK government has revealed that it has made into law measures that will deal with VAT fraud and close offshore tax havens loopholes. HMRC says the new measures could see an extra £1.2 billion being paid in tax.
As part of the new legislation, online marketplaces will be held accountable for paying the unpaid VAT of sellers and it’s no longer possible to avoid paying tax on funds withdrawn from offshore trusts.
Most expensive city for expats revealed
For expats, the most expensive city in the world to live has been named as Singapore, for five years running.
This is the finding of the Worldwide Cost of Living Survey, published by the Economist Intelligence Unit for 2018, which sees the city state take top spot ahead of New York, London and Los Angeles.
A spokesperson for the EIU said: “Singapore is reflecting a regional trend and Asian hubs are now among the most dearest cities in the world.”
Most major Asian cities are now seeing their cost of living increase and 17 cities from the Asia-Pacific region are in the world’s top 50 most expensive places. The annual ranking looks at the cost for more than 150 items in 133 cities dotted around the world.
The items include wine, bread, petrol and cigarettes, with the aim of helping expat hiring managers calculate a fair salary when looking to relocate an employee overseas.
The most expensive cities for expats in the world are: Singapore, Paris, Zurich, Hong Kong and Oslo. The list is completed with Geneva and Seoul occupying joint sixth place, followed by Copenhagen, Tel Aviv and Sydney in Australia.
The world’s cheapest cities are Damascus in Syria followed by Caracas in Venezuela, Kazakhstan’s Almaty, Lagos and Bangalore.
Where do the best paid expats live?
If you’ve ever wondered where the highest paid expats are living, the HSBC bank has the answer.
Apparently Mumbai is home to the world’s highest-paid expats. The city is the centre of India’s financial, entertainment and commercial worlds. According to a survey, expats who move there have average annual earnings of $217,165 (£155,752). That’s around twice the global average of $99,903 (£71,653).
The head of HSBC Expat, Dean Blackburn, said: “Mumbai has the highest proportion of expats sent by their employer and these expats benefit from relocation packages which help explain the higher expat salaries being enjoyed in the city.”
He added that expats there are also enjoying high employment levels, with big international firms developing infrastructure projects.
After Mumbai, San Francisco is home to the highest average expat salary, followed by Zürich, Shanghai and New York City. The top 10 is completed with Los Angeles, Jakarta, Hong Kong, Paris and finally London in 10th place.
However, when it comes to creating expat job opportunities, cities in the US and UK lead the world. According to the HSBC Expat Explorer survey, the cities where expats say they enjoy fantastic job opportunities are San Francisco in first place, followed by London, New York and then Dublin and Birmingham.
Saudi rents continue to fall
Expats in Saudi Arabia are seeing the rents for residential properties continue to fall as the exodus of expatriates increases.
Expats who are on low salaries cannot afford to meet the dependents’ levy that has been introduced in the kingdom. Now real estate firms say demand is falling and several housing projects in parts of the country are in jeopardy.
Call to tax Swiss pensions at source
Swiss expats who are living overseas are facing a call for their pensions to be taxed at source. The move has been made in Parliament with the aim of preventing different treatments of Swiss pensioners depending on where they live.
The senator who raised the issue says there is unequal treatment between those who live in Switzerland and those who opt to retire overseas. Peter Hegglin told Parliament: “Some pension scheme beneficiaries are, for example, located in the Dominican Republic where they are not paying taxes. They are also receiving child benefit if they have dependent children.”
He says that the ‘simplest solution’ is for the government to look at the possibility of taxing all pensions at source.
No relief for US taxpayers
There is no relief in sight for the many US expats spread around the world from the burden they have as taxpayers, says one organisation. The US is one of only two countries that requires its citizens to pay their taxes to the US, regardless of where they are living.
Now the National Taxpayer Advocate has published a report with recommendations that the Office of Taxpayer Advocate undertake the steps to strengthen US taxpayers’ rights and help improve tax administration.
Among the recommendations from the OTA is the elimination of duplicate FATCA reporting where a taxpayer’s assets have been reported already on FBAR.
The report of foreign bank and financial account (FBAR) requires US citizens abroad, as well as permanent residents, to report their foreign accounts if they have an aggregate value of more than $10,000. Under the foreign account tax compliance act (FATCA) the same citizens and residents need to file form 8938 with their federal income tax returns which will report their foreign financial assets over a specified threshold.
US expats could be in for tax surprise
Expat Americans who have businesses outside of the US may be in for a surprise, tax experts claim. They say that one of the downsides of President Donald Trump’s tax plan is for a one-off 15.5% ‘deemed repatriation tax’.
While this has attracted much attention, it was aimed at tech giants like Google and Apple. However, tax experts say that any US citizen who has retained earnings in a private firm outside of the US will also be hit.
An American lawyer who is based in Canada, Roy Berg, is warning US taxpayers owning private corporations that this tax means they must pay 15.5% on any cash assets and a percentage on non-cash assets.
As an example, he says that a doctor who has a practice and has US dual citizenship, or a green card, and who may have accumulated wealth of $2 million in his corporation would be facing a $300,000 settlement this year.
American Citizens Abroad says that any US citizen with more than 10% of a ‘controlled foreign corporation’ will have to pay the tax within eight years.
IRS ends voluntary disclosure scheme
America’s Internal Revenue Service (IRS) has unveiled plans to bring its offshore voluntary disclosure programme to an end. Started in 2014, the programme will end this September.
The IRS says it is warning taxpayers now that anyone with foreign financial assets that haven’t been disclosed should use the programme before its formal closure.
A spokesman for the IRS said: “Taxpayers have had four years to comply with US tax laws under the programme and we have made it clear that we will close the programme when appropriate and that point has been reached.”
Since its inception, around 56,000 US taxpayers have used one of the schemes so they can comply voluntarily with declaring unpaid taxes and the IRS says these taxpayers have paid $11.1 billion (£7.96bn) in taxes, penalties and interest charges.
Cypriot passport scheme popular with Russians
The controversial scheme run by the Cypriot government that offers a passport for investment has seen more than 3,300 passports being sent to foreign investors and family members, say local news outlets.
Under the scheme, which has proved to be popular with Russian high net worth expats, a non-EU citizen is able to buy the Cypriot passport and residency permits if they invest at least €2 million in Cyprus property or €2.5 million in government bonds or companies. The government says that around half of those who have signed up to the scheme are from Russia.
HNW Brits quit the UK for offshore tax havens
A leading private wealth advisory firm says growing numbers of high net worth Britons are looking to quit the UK and move to offshore tax havens. This follows increasing taxes and changes over non-domicile status for those living in the UK, which is persuading more to leave the country.
A survey by New World Wealth reveals that last year, nearly 4,000 ultra-rich millionaires left the country.
Also, an event held in Guernsey to attract HNW individuals to move there has led many of those attending to come to the same conclusion as New World Wealth. More than 130 relocation experts attended the event to offer their personal insights behind the growing exodus. They point to high property taxes and uncertainty over the residency status of high net worth individuals topping the list.
It now appears that rich expats are heading to low tax jurisdictions that are within the existing international system that also offer a high quality-of-life and high levels of personal safety. One calculation reveals that the loss to the UK economy of just one HNW individual from the country is equal to the tax the government receives from 25 average taxpayers.
Meanwhile, it’s been revealed that second passport schemes are proving popular in the UAE with high net worth individuals. That’s because gaining residency in a first world country is becoming more difficult, so second citizenship programmes are growing in popularity in Arab countries.
Now high net worth UAE residents are turning increasingly to second passport applications to enjoy long stay visas for western countries.
The UAE is now one of the most popular second passports because the system is quick and the passport carries credibility. Those gaining a second passport do so to enjoy visa free travel, avoid double taxation and exploit business opportunities.
In other news…
The Gulf Co-operation Council (GCC) has revealed that it is looking to create a company that would enable expats living in member states to transfer money without relying on foreign currencies such as the US dollar. The new company has yet to be named but will be headquartered in Riyadh and serve all six GCC countries. The new company will begin trading later this year.
Growing demand from US-based asset managers and private equity firms has led to Jersey Finance unveiling plans to create a New York office. The managers are looking for a stable European base, with Jersey Finance chief executive Geoff Cook stating that the office will offer investors a route to invest money through Jersey and into Europe and also raise money from European investors.