Protection News & Insights

Despite the protestations of expats in the Netherlands, expat financial advisers and business leaders, the Dutch cabinet recently announced that it would proceed with plans to reduce the favourable 30% expat ruling from eight to five years.

However, there will now be a transitional period for certain expatriates, meaning they will have time to consult their expat financial advisers in the Netherlands to take the necessary tax planning steps to adjust to the new landscape. Nevertheless, there are still a number of consequences associated with changes to the 30% tax break that need to be explored. Here we will attempt to bring some clarity to those who may be affected by the new rules.

When I first meet a client it takes time for us to get to know each other, and every single person is different with different needs. However, at the root of those needs is usually the desire to find out how best to keep all those hard earned savings, investments and pensions as tax efficient as possible.

Once you have left the UK and become resident in France, the ISAs and other tax efficient savings you may hold in the UK are no longer tax-free and you need to give careful consideration about how you deal with this.  With the new Common Reporting Standards that were introduced recently we can no longer bury our heads in the sand and think that the French taxman will not know about the assets you have left in the UK and will not look to tax you accordingly.

Living as an expat in Spain, or indeed in any other country, brings particular and sometimes very complex wealth management requirements because managing personal finances across multiple jurisdictions is inherently complex and invariably requires specialist advice.

This goes some way to explain why thousands of British expats have recently been caught and penalised for either failing to pay taxes or unlawfully claiming British pension and other social security benefits while living and, in some cases, working abroad.

Cross-border taxation for expats is a notoriously confusing area of wealth management and can seem especially onerous with new data sharing and enforcement rules in place. Unfortunately, not all asset managers are as familiar with tax reporting requirements as they should be. This may seem inconceivable, but wealth management professionals in Spain, across Europe and indeed the globe have an obligation to clients to ensure that they understand and follow all the rules.

Spanish newspaper ABC has reported that tax authorities in the country are cracking down on expats who fraudulently claim Gibraltar residency for the purposes of wealth management.

Apparently the measures have already led to the collection of €20 million from 160 high-net-worth individuals (HNWIs) claiming residency in Gibraltar when in fact they lived in nearby Andalucía. This meant that, on average, €125,000 was collected from each HNWI.

Jorge Ramírez, a representative of the Tax Agency in Andalucía, told the newspaper, "A tracking system was used to collect verifiable documentary evidence, and we found some Gibraltarians whose primary financial interests were actually entirely situated in Spain."

Opposition to the imminent changes to the Dutch 30% tax reimbursement scheme (see the Blacktower news feed) is growing. Now, VCP, the Dutch white collar workers' union, has joined the dissenters by calling for, at the very least, a transition period for expat workers who will suffer unwanted changes to their Netherlands wealth management plans as a result of the amendments.

It is easy to see why so many people find the timetable for the ruling so unjust; those affected could see their incomes reduced by around 20% once the ruling comes into force in under six months.

It could also result in unwanted damage to the Dutch economy, with real fears that it could deter expat workers from coming to the Netherlands in the first place.

As I sit in my back garden, in "good ol' Blighty", I often watch the planes flying overhead. My house is on several major flight paths which cross the country and the Manchester to Marbella flights are a regular feature in the blue skies of June.

As the summer holidays kick in, I wonder how many passengers on these flights will fall so in love with their destination that they take a sneaky look at property for sale, and how many will dream of retirement in Spain or even make it a firm plan?

Rapid developments in IT systems, financial databases and data-sharing platforms over recent years now mean that it is easier than ever for nation states to share and exchange financial information relating to the investments, income, taxes, savings accounts, properties and pensions of individuals who have assets placed in multiple locations across the world.

Inevitably, this also means it now crucial to ensure you disclose your full list of assets whenever required.

As a British native you might be a little complacent in this regard. The UK has one of the most stringently and best-regulated financial advice sectors in the world, and in many cases if your adviser fails to disclose your full spectrum of assets and interests it is he or she, rather than you, who will be liable.

The importance of putting money into a pension cannot be understated, and the British government has a regulation in place – the pension tax relief scheme – to encourage people to save. But many experts are predicting significant changes to the scheme. If you're planning to retire overseas as an expat and take advantage of international pension transfers, you'll need to stay updated with these changes.

The pension tax relief scheme is an incentive to entice people to put money into their pension pot. To reward people for thinking ahead to their retirement, the government currently tops up their pension contributions based on the rate at which they pay income tax. So, basic rate taxpayers will receive 20 per cent tax relief (meaning they only need to pay £80 into their pot to get £100), while higher rate taxpayers are entitled to 40 per cent relief.