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Expat Briefing Editorial Team, 30 December, 2013
In this week’s briefing, we take a look back at some of the most interesting news stories affecting expats in 2013.
Interest in Expat Affairs Remains High
Thanks to the Internet and other revolutions in communications technology, expats now find it very easy to stay in touch with their loved ones and share their experiences with other expats in the growing number of online communities dedicated to expatriate issues the world over. And there is certainly no shortage of information on what life is like for the peripatetic professional, entrepreneur, or expat pensioner, as evidenced by the number and size of surveys designed to canvass the views of expats.
In August, a group of businesses announced the launch of what they describe as "the largest global research program into those living outside their country of origin," with a total of three questionnaires on migration and lifestyle, retail and finance, and travel and heath.
The organizers believe that the project, entitled Expat Survey 2013, will give a clear picture of migratory trends and the reasons for them; provide a more detailed understanding of lifestyle and consumer behavior among expatriate communities, including which media they respond to; and raise awareness of the "expatriate market" and the products, services and media that service it. The project aims to provide intelligence on expatriates of all nationalities and in all territories, and to reach an audience of more than 10m expats around the world.
For the past six years though, HSBC’s Expat Explorer survey has been the most comprehensive study of expat life in all corners of the world, and the 2013 findings, published in October, brought together data from more than 7,000 respondents on aspects of life abroad ranging from earning hotspots through to quality of life. According to the study's league tables, Thailand remains the top country for expat experience, while Switzerland tops the economic league table.
Brits At Home Down Under, But Finances A Worry In Europe
There has always been a certain amount of needle between Brits and Aussies, antagonisms which are usually played out most vocally on the cricket field. However, in August, a survey of British expatriate opinions and attitudes on lifestyle, employment and financial status showed that “the poms,” whinge though they might, are at their happiest when living Down Under, while UK expats in Europe are increasingly looking to return home.
According to the NatWest International Personal Banking Quality of Life Report, 80 percent of respondents overall say they are enjoying a better quality of life abroad, and out of those who have moved abroad permanently, 71 percent feel their work/life balance is good to excellent and 86 percent believe their standard of living is excellent. However, 63 percent of respondents in Europe are currently considering returning to the UK, due to falling property prices, austerity, and job insecurity.
Indeed, in September, research by the Post Office painted a gloomy financial picture for British expats in Europe, with increasing living expenses and falling property prices, and large amounts of money wasted in avoidable bank transfer fees.
It has been widely reported over the last few years how a weak sterling has made life difficult for British expats, especially those living in the eurozone. However, another issue that is a frequent source of expat anxiety is pensions. Britain has special arrangements in place with a number of countries which allow expats to continue to receive state pension payments at the same rate that they would receive them in the UK. In many countries, however, the amount paid is frozen at the rate applicable when the expat left the UK, and they therefore miss out on inflation-linked increases. But in August, a group that campaigns on state pensions payable to British expats said that enough was enough, and called for Britain to be suspended from the Commonwealth on the grounds that its arrangements for index-linking pensions for British residents in some countries but not others amounts to discrimination. It sounds something of a long shot, but if nothing else it draws yet more attention to this often complained about issue.
Death And Taxes A Certainty For US Expats
In December, the United States Internal Revenue Service (IRS) released the 2013 update to Publication 54, the guide that discusses the special tax rules for United States citizens and resident aliens who work abroad or who have income earned in foreign countries.
However, when it comes to tax, US expats tend to have a pretty bad time of it. Although the rules exclude a certain amount of their income from US tax, Americans are generally liable for tax at home no matter where on earth they reside. And if anything the tax compliance burden on US expats is getting heavier, as the US Treasury pushes through the Foreign Account Tax Compliance Act, which was the subject of our Expatriate Briefing on November 21, 2013.
In August, it was reported that the number of American citizens living abroad who gave up their United States passports in the second quarter of this year had increased six-fold compared to the same three months in 2012, as the Administration gets more strident in its search for undeclared foreign assets.
Some in Congress though are determined to make life as difficult as possible for those Americans who have handed back their passports, and in June two Senators filed an amendment to the Immigration Reform Bill, that would automatically bar former citizens eligible to pay the exit tax from re-entering the USA unless they can show the Department of Homeland Security that they did not renounce US citizenship for tax purposes.
The expat community is fighting back, however. In July, American Citizens Abroad (ACA), the advocacy organization representing expat interests, wrote to the US Treasury and the IRS recommending a proposal for a comprehensive program to enable tax compliance by Americans resident overseas. ACA wrote that it "has observed with increasing alarm the ever-widening gap between the reporting and compliance burden placed upon the overseas American community and the bleak statistics reflecting the very low effective compliance rate among this population."
The Middle East And The Gulf: An End To A Tax-Free Paradise?
The cultural differences between West and (the Middle) East conspire to make expatriating to the Middle East and Gulf regions a daunting experience for some. However, the almost complete absence of taxation in places like the United Arab Emirates and Saudi Arabia can make a posting in this region a very lucrative one. But with three Gulf states considering special expat taxes, doubts were raised this year as to how long the area will remain a fiscal paradise.
In March, Kuwait announced that it is mulling the introduction of a personal income tax on foreigners' earnings to diversify the Government's revenue streams. Although Kuwaiti finances are said to be strong, the Government is eager to mitigate the country's reliance on oil and corporate tax revenues, to help build up larger fiscal surpluses and fund public services.
Then, in September, it emerged that the government of the United Arab Emirates is considering whether to tax remittances. The proposed tax is seen as a response to concerns that the UAE is losing too much money through foreign workers sending a portion of their earnings abroad. The government is seeking feedback on the proposal from relevant bodies such as banks and financial institutions.
In a similar vein, in November, the economic and financial committee of Oman's Shura Council advised the government to tax the remittances sent by foreign workers to their home countries. The tax, to be levied at two percent, is intended as a measure to ease growing pressure on the state budget and would affect about 1.5m expatriate workers.
Bahrain already applies a fee on companies employing foreign workers, and while the fee was suspended in April 2011 to alleviate the effects of financial unrest, it was reintroduced in August of this year. Also, in early December, Bahrain's Shura Council rejected a parliamentary bill to exempt low-income expats from the tax.
Disenfranchised Of Australia
September’s general election resulted in a changing of the guard in Canberra, as Tony Abbot’s Liberal/National coalition supplanted Kevin Rudd’s Labor Government. Not that Australian expats had much of a say in the matter, according to expat campaign groups. Ahead of the election, the Southern Cross Group, an advocacy body for the Australian diaspora, complained that the voting rules for expats make it "difficult or impossible" for most overseas Australians to cast their votes.
The Southern Cross Group argues that these restrictions are unfair, and compare unfavourably with the situation for US expats, who retain life-long voting rights, and for Brits abroad, who can vote for 15 years after leaving the UK. Their campaign has however drawn attention to the issue of voting rights for expats, as explored in our Expat Briefing on August 20, 2013
Nevertheless, popular as Australia may be as an expat destination, the recent strength of the Australian dollar means that it is certainly not the cheapest place on earth to live. And for students, it is a particularly expensive place to study, with an analysis by HSBC in August showing that fees and living expenses amount on average to USD38,000 – six times the USD6,285 paid by foreign students living in Germany.
Threats To Health And Wealth In Spain
Spain remains as popular as ever with Northern European expats, the British in particular, looking for a life in the sun. But besides the well documented financial woes that some less affluent expats have experienced there in recent times, 2013 has seen the issue of health come to the fore.
With Spain’s public services feeling the strain of the eurozone crisis and the necessary cuts in the government spending, figures released by Spain's Ministry of Health in August show that patients seeking non-urgent operations at public hospitals during December 2012 had to wait on average 100 days, up from 76 days in the preceding June, representing the longest waiting period since records began in 2004. However, as reports emerged earlier in the year attested, some expats were being refused treatment in Spain completely - unless of course they could pay. And this despite the fact that these patients were entitled to free treatment with their European Health Insurance Card (EHIC). Then again, there has always been some confusion among travellers and expats in the EU about what exactly the EHIC does and does not cover, and this was a topic discussed in our Expat Briefing published on June 13. The European Commission has nevertheless, requested information from the Spanish Government about complaints that Spanish hospitals providing public healthcare are refusing to recognise the EHIC, which is normally the first stage in a full-blown investigation by Brussels into alleged breaches of EU law, and which could eventually lead to changes in the provision of healthcare in Spain.
Property has always been a hot expat topic in Spain. Once upon a time, before the credit crunch spoiled the party, hesitate for a moment and the price of that dream villa in the Costas you’d been dreaming about most of your life had just gone up by another EUR10,000. Now, in many developments, they can barely give the things away, with some properties being marketed at a 70 percent discount. Spare a thought though for the thousands of expats tricked into buying illegally built properties. It is thought that up to 30,000 of them were built in Marbella alone, and the chickens came home to roost for many involved last October when a court convicted 50 people for their roles in a real-estate scam that saw thousands of investors – including many British expats – tricked into purchasing properties that had been built illegally.
Later that month, a new video showing the demolition of an illegally-built Spanish villa owned by a British couple once again highlighted the plight of expats unwittingly caught up in building scams that flourished during Spain's property boom.
France: Où Est La Sortie?
With President Francois Hollande seemingly determined to squeeze France’s rich until the pips squeak, anyone with a bit of wealth and a desire to hang on to it has probably become an expat (or tax exile, depending on which way you want to look at it) by now. We’ve heard how high-profile Frenchmen like actor Gerard Depardieu and LVMH chief Bernard Arnault have departed France to some unlikely destinations (Russia and Belgium respectively), although the latter denies it is tax motivated. However, the French Government wants to make it that little bit harder (and less lucrative) for people to leave France for tax purposes by strengthening the country’s exit tax.
Malta Welcomes High Net-Worth Expats
Those thinking of leaving French shores for a ‘paradis fiscal’ could do worse than consider Malta, which launched its revamped Global Residence Programme in June (also the subject of our Expat Briefing on July 3, 2013). Under the scheme expats must make a minimum annual tax contribution (which is lower than the scheme that the Global Residence Programme replaces) and buy a property in the country. However, unlike some countries perhaps, Malta is prepared to give the necessary backing to the scheme in order that it succeeds, and according to government spokesman Edward Zammit Lewis the Government intends to support this scheme “with all the necessary infrastructure to operate and work well.”
“We will see that the procedures that operate this program are not bureaucratic and create the least possible disruption to applicants who want to invest and pay taxes in our country," he said.
If only some other countries would take a leaf out of Malta’s book!