“For every action in life there is a reaction, our countries are still heavily in debt that’s why taxes rise.”
The Grid: Being based in Dubai, most of your expatriate clients hail from the United Kingdom however there are universal issues that face anyone living away from home over a certain period. What are the top three long-term monetary concerns that expatriates most often seek counsel on?
Paul Sharman: The current climate affects all expatriates no matter where you’re from, if the UK has a financial issue there is only so much money in the world and each problem has a knock-on effect worldwide. 90% of my time is spent helping clients to secure failing pensions to stop losing more money, this is the hottest topic, based on excessive loss and way more to come. Property in the UK is also key due to legislation changes, how its taxed, but very key right now with Article 50 approaching the anticipated rule changes on the horizon for any held asset in your home country, investments, property or money in a bank will need specific planning to be safe. People don’t realise by holding something in a jurisdiction they used to live in can have a massive impact by leaving it there. If they change the rules overnight so do your rights to the money held there. Recently there is a notable concern from my informed clients toward how we are viewed from a worldwide tax perspective. Its great earning the money, but what is the best way to realise the assets when you move to your home country… You have rights to pass on wealth in the most efficient correct and regulated way ensuring tax efficiency.
The Grid: Yes, if you live or work abroad your tax status will almost certainly be affected by your change of residence.
Paul Sharman: Agreed, moving money using proven approved solutions to plan effectively is very key. To level with you, no one expected the BREXIT, experts said it wouldn’t happen, people initially laughed at the idea of Trump… the things we thought would never would happen have. For every action in life there is a reaction, our countries are still heavily in debt that’s why taxes rise. The action is driven from a country who wish to recoup their loss, the reaction points toward people that left their country to be held more accountable for that revenue loss. Expat tax status is a complex area. Without careful planning, you can be subject to a punitive tax liability. As well as your changed tax status, the tax laws in your new country of residence will need to be considered. The BREXIT is not fully realised and yet it dropped the pound to an all-time low… the impact was huge and is set to be bigger when Article 50 is agreed… this will influence things.
The Grid: And those tax laws in regards to expatriates (non-residents) are certainly undergoing a lot of change in recent years. Ok, let’s move to a closer look at pensions. With an aging demographic and lower birth-rate, governments and organizations are being faced with the challenge of meeting pension commitments. There are a multitude number of factors that could make our pensions less secure than bygone days. Can you elaborate on the most obvious ones?
Paul Sharman: Yes, pensions were set up when people had lower life expectancy and the money invested had less exposure to modern day economics. On the upside, improvements in mortality are here to stay however they introduce uncertain and challenging variables particularly to pension schemes that were calculated on lower life expectancy.
Other challenges include the fact that traditionally pensions were invested in ‘safe bond’ solutions, in their day considered infallible with good rates of return and dividend. Now, few countries are growing at the rates they need to…the returns on bonds disappeared based on a bond being a promise from a government. This is one area of many that dramatically impacts the size of your pension. You have one pot, the money going in is frozen, you no longer contribute, bad investment choice, retirees taking money out, people exercising their right to move the money using offshore solutions has also decreased the money held. In the UK, the total deficit reached over a trillion. Other factors include but are not limited to, political reform, HMRC changing rules, macroeconomics and now the Brexit referendum lowering the pound beyond its lowest point ever… this will have another detrimental effect.
The Grid: What typical concerns do expatriates have around property held offshore?
Paul Sharman: First of all, they need to ask themselves is it a property I will keep for emotional reasons, will I go back to it? If not, then why hold it in your home country? one of the most taxed jurisdictions worldwide… does it make any sense to keep it…?
Factually if they are getting taxed heavily on earnings and capital gains at higher rates it begs the question why hold it? Why be treated like residents that are back in their country of origin, after all most expatriates left home to increase earnings, yet they leave their hard-earned assets in the country they left behind.
The question arises as to whether they should buy property in a country where it is more tax efficient for them to do so, where they can sell and realise a bigger portion gain in cash, to then plan the next step.
The Grid: And finally, we probably all have rainy day cash reserves back home or that we have built up in our new home countries that are not optimized. What advice are your clients seeking regarding held cash?
Paul Sharman: I think it’s fair to say… no one likes paying tax but it cannot be ignored, everything you do from a loan right to opening a bank account requires you to verify it’s you who owns it by your passport/ID, anyone that thinks they can hide is foolish. We should take note, there are very “tax efficient” solutions that you may not be fully aware of. My time is taken tailoring an approach for each person I meet they seek information on options and solutions available to them to get more growth in a “tax-efficient environment”, this allows them to move cash reserves correctly, plan correctly, protect it in a trust to pass on as a legacy or build a realistic amount for future areas of their lives. If you plan the correct way, using the correct solution it’s perfectly fine.
This is an extract from an interview with Paul Sharman, Senior Wealth Manager, Globaleye (Specific Experience: Pension & Tax Efficiency) (CII & CISI – Accredited).
Interview by May Khizam, Founder & Chief Strategist, The Grid Media Ltd
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