Expat Focus Financial Update November 2018

Expats head to the US for career and money

A boost to income and a better quality of life continues to drive expats to take up career opportunities in the US, a survey reveals.

The new Expat Explorer survey published by HSBC found that more than half of those questioned said they had lived in the US for more than five years and have enjoyed career development.Despite having reservations about the stress levels and their work-life balance, 92% of expats say they’ve developed new skills and 57% are more confident at work. Of the expats living in America, 67% say their earning prospects are better than they enjoy at home with the average salary being $185,000 (£144,152).

A third of expats are using the extra income to invest in property and 49% are saving more for their retirement. Despite raising concerns over safety, 49% of expats say their quality of life is better than they enjoy at home and that moving to the US has made them closer to their children.

However, 34% are working longer hours than they did in their home country, leaving less time for health and well-being and improving their social life.

The bank’s regional head, Paul Mullins, said:

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"When moving to a new country, there's a lot to consider, regardless of whether you are a seasoned traveller or it’s your first time abroad."

He added that expats and international customers face bigger challenges when living overseas and need to juggle their finances and plan financially when moving money and dealing with complex tax situations.

Petition for expat pension justice gains 220,000 signatures

A call to end the rule that prevents around 550,000 British expat pensioners living overseas receiving an annual cost of living increase has attracted 220,000 signatures.

The rules affect where a UK expat decides to settle and whether their pension will be indexed to keep pace with the rising cost of living. For example, expat pensioners living in Europe and the US will see their pensions being indexed.

However, should a British expat retire to Australia, New Zealand, Canada and South Africa, among other countries, then their pensions will not see an annual increase. Essentially, this means that an expat who retired in 2000 when the basic pension rate was £67.50 a week will still be receiving that figure, rather than the current £164.35p.

The petition’s expat organiser, Anne Puckeridge flew from her home in Canada to London to hand over the 220,000 strong petition in Downing Street. The 93-year-old World War II veteran retired to Canada 17 years ago when she received £72.50 a week and it’s remained that ever since.

The International Consortium of British Pensioners says that some expat retirees are surviving on just £30 per week and some are receiving less than when they began receiving their pension.

A spokesman for the organisation said: “Hundreds of thousands of British pensioners around the world are being discriminated against because they have retired to the wrong country.”

Meanwhile, it’s been revealed that expat pensioners with a full state pension will receive a £220 boost in 2019, thanks to the UK government’s ‘triple lock protection’.
The increase is more than the cost of living and will see the full state pension rising to £168.60p per week.

Women looking to retire overseas need to save more

The UK’s Chartered Insurance Institute says that women looking to retire overseas are generally falling short of saving the sums they need to set aside.

They highlight that a 65 old woman will have, on average, a pension pot worth £35,800 – that’s just a fifth of the average pension pot a man of the same age will manage to save.

In a report, the Institute says that women need to save more to fund a comfortable retirement and they have created a task force to help improve the finances and pensions of women working in the personal finance sector to do so.

China's new income tax will hit expats

Expats working in China are being warned that the country’s new individual income tax will affect their income. The income tax also affects Chinese citizens but for expats who remain in the country for at least 183 accumulated days every year or more, then they will be considered to be a tax resident.

This means they will then have to pay Chinese tax on their worldwide income. Previously, there was a five-year rule that stated expats were only liable for paying taxes in China on their worldwide income after being resident for more than five years. The new tax will be calculated annually rather than on a monthly basis, as was the case previously.

Personal tax exemptions are also being increased to 5,000 yuan (£562/$721) per month from 3,500 yuan or 60,000 yuan every year. However, expats will be able to deduct special expenses, including children’s education, rent, housing loan interest and treatment for serious diseases.

The new rules also cover expats’ bonuses, with the new rules coming into force from 1 January 2019.

IRS plans to revoke 260,000 US passports

The Internal Revenue Service (IRS) has revealed plans to revoke the residency rights or citizenship of around 260,000 US citizens because of their ‘significant tax debts’. The news comes from law firm Dickinson Wright, who say that the IRS and the State Department have now begun to enforce the law that enables them to deny a passport application or revoke a current passport because of outstanding tax claims. The plan is to use their powers to target US citizens owing more than $51,000 in taxes and penalties.

As a part of this, the State Department will deny a passport application using information from the IRS on outstanding debts. According to the IRS, almost 362,000 Americans could be affected by these rules by the end of the year.

Mortgage range expanded to expat landlords

A buy to let mortgage specialist has expanded its range of mortgages to include those for expat landlords wanting a rental property in the UK. The offering from Paragon also extends to expats wanting to buy UK holiday lets.

The mortgages are available with a loan to value (LTV) ratio of up to 70% for a loan worth up to £750,000. For a loan with an LTV of up to 65%, expats could borrow up to £1 million. The offer is for individuals and landlords with a limited company for self-contained and single units. Paragon’s mortgages are available for landlords who are living in more than 30 countries for financing UK property.

To do so, the expat applicant must have a valid UK passport and have had a UK bank account for at least three years and use a managing agent for the property.

Paragon’s managing director, John Heron, said: “We’ve looked at the journey for expat landlords and have identified areas we think can be improved and simplified.” Meanwhile, Marsden building society has also revealed that it is launching two new expat buy to let products and a residential product.

A spokeswoman for the firm said: “We’re innovating continually our expat ranges to support intermediaries and our improved and new expat portfolio looks to support those intermediaries with expat clients.”

Brexit pushes up Paris property prices

Expats heading to Paris may find that the cost of property, both to buy and rent, has become more expensive recently because many of the leading financial institutions in London are looking to relocate some staff to Paris. As a result, estate agents say there has been a ‘Brexit bounce’ as employers look to move 2,000 jobs to the city.

One international estate agency says that enquiries have doubled in the first half of this year from UK customers to 342. Alongside this is news that several European government governments are offering tax breaks in a bid to attract high paid professionals and banking personnel from London.

The findings from PWC points to the best tax breaks being offered by France and Italy. PWC says that someone earning €1 million in the UK will take home €542,869 without any expat concessions, but with these concessions in place, such as a 30% expenses limit, means they could take home €677,064 as an expat.

In France, expats can enjoy an income tax break for the first eight years’ worth up to 50% and Italy also runs a similar scheme.

Japan targets overseas bank accounts

Japan’s national tax agency has revealed that it has gathered information on more than 400,000 bank accounts held overseas by Japanese nationals in 50 countries. The agency says it is fighting tax avoidance since just 9,000 Japanese citizens declared an offshore account in 2016.

The country demands that anyone who is keeping more than $446,000 (£347,527) in foreign assets should declare them.

British expat retirees priced out of property

British expat retirees who are looking to leave the European Union and return to the UK because they want to return home or avoid post-Brexit fears may find that they’ve been priced out of the property market. That’s the belief of one firm that says it has seen a jump in the number of retirees looking to rent when they return to the UK.

The chief executive of Girling’s, Gillian Girling, says she believes this trend will continue as the impact of Brexit is felt over the coming years. She said:

"Many expats moving overseas will sell their home to buy a property while abroad, but those wanting to return may find they are priced out of the UK's housing market because prices have risen over the last 10 years. Some may also find it difficult to sell their property overseas, or will get less than they paid originally since popular expat areas in Greece, Portugal and Spain are seeing a downturn since the financial crash."

In other news …

Business payments firm Caxton FX says that international business travel could be costing British companies an extra 10% on travel costs because of currency fluctuations. The firm says this could equate to £300 on average for each trip with the Ukrainian Hryvnia being the most volatile and the Singapore dollar is the most stable.

The General Federation of Oman’s trade unions says that the most common complaint received by them from expats is for not receiving their salaries. The federation says more than 400 complaints were lodged from workers in the private sector over the last year.

Growing numbers of expats in the UAE say they want to own their own home, a new survey reveals. The findings from Property Finder revealed that more than half of expats who have bought recently say the move is better than renting and one in three expats says now is the right time to buy in the UAE.

Expats and business travellers looking to dine out while overseas should take note of a Deutsche Bank survey which compares 50 cities around the world for how much it will cost to dine out for two. The research reveals that a basic pub meal will cost more than $72 in Zurich, while the cheapest dinner can be found in Manila.

More than half of expats working and living in India have expressed confidence about their building personal wealth while in the country. The findings from HSBC revealed that 54% of expats say they have more disposable income than in their home country, which gives the ability to save more.

Expats in the UAE are saving less than they did a year ago, but it is mainly down to a summer spending splurge. One confidence tracker says that 65% are saving less with 62% of those questioned saying they are expecting a salary increase over the coming year.

Banks in Korea have announced plans for improving services for expats there in a bid to boost customer numbers. The banks say they are responding to a growing expat population in the country, which has trebled in 10 years to more than 2.3 million expats. Now they will offer multiple foreign-language services and some branches will have desks exclusively for use by expats.


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