Le Tour de Finance – 100th event in Dinard

By Spectrum IFA
This article is published on: 15th November 2015

Our 100th financial seminar was quite rightly our biggest yet with approximately 90 attendees out of the 106 who had RSVP’d.

Guest speakers from Rathbones, SEB, Tilney Best Invest, Prudential International and Standard Bank all flew in specially for this event alongside the organisers and founders, Pippa Maile from Currencies Direct and Michael Lodhi from The Spectrum IFA Group.

The venue, Le Grand Hotel Dinard, was a fabulous location with first-class service and an excellent buffet lunch to finish.

There were plenty of prized to mark the event – five lucky attendees went home with 100euros in cash each, everyone received a goodie bag plus there was a prize draw for other prizes including champagne, signed British rugby shirts and autographed books.

Thank you to everyone who came along and made this such a great success. If you are one of the people who unfortunately had to cancel at the last minute, please feel free to drop us a line at seminars@ltdf.eu if you would like copies of the presentations or have a specific topic that you would like advice on.

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Update on French Social Charges

By Spectrum IFA
This article is published on: 12th November 2015

My last article on this subject confirmed that France had accepted the European Court of Justice (ECJ) ruling of February that it should not apply social charges on ‘income from capital’ for French residents who are insured under the social security scheme of another EU/EEA State.

The article can be found at https://spectrum-ifa.com/recent-financial-updates-affecting-expats-in-france/ and more detail on the ECJ’s ruling can be found at https://spectrum-ifa.com/french-social-charges-on-worldwide-investment-income/.

As is well known in France, it is often the case that one tax office can follow a different practice than another! So some of our clients have already been successful in claiming refunds of social charges, whilst others have been told that they would have to wait until the ‘official instructions’ were received by the local tax office.

Happily, the official instructions arrived on 20^th October in the form of a ‘Communiqué de Presse’ from the Direction Générale des Finances Publiques (DGFiP). This concerns individuals who are not insured by France, but instead by another EU, EEA or Swiss social security regime.

Hence, all French tax offices have now been given the green light to process claims for refunds of social charges, as follows:

For French residents, social charges that have been applied to investment income and gains, regardless of whether these have arisen within or outside of France.
For anyone resident outside of France, social charges paid on French property capital gains and unfurnished rental income.

The communiqué highlights the fact that the ‘2% prélèvement de solidarité’ does not specifically finance any particular French social security organisation and as such, will not be refunded, reducing the refund to 13.5% of the 15.5% social charges paid.

Refund claims must be submitted by 31^st December 2015 for the following:

Social charges that have been paid from 1^st January 2013 in respect of gains on real estate.
For income and gains assessed via tax declarations made since 1^st January 2013, effectively limiting this to income and gains made since 2012.
For investment income that has been taxed at source since 1^st January 2013.

In all cases, the claim must be accompanied by a justification of the amount of social charges being contested, as well as justification of the taxpayer’s affiliation to a social security regime other than France, in the EU, EEA or Switzerland.

In view of the above requirements to justify claims, ‘early retirees’ and anyone else who is not covered by an EU, EEA or Swiss social security regime cannot depend upon the outcome of the judgement with certainty, even if they have private medical cover. Nevertheless, they may anyway wish to make the claim and be prepared to appeal if they are refused, perhaps on the grounds that they are not insured by France and therefore, should not have to contribute to a social security system from which they cannot benefit.

Looking forward, it is not clear what will happen from 2016. In the draft Social Security budget currently being debated by the French parliament, a proposal has been made to ‘redirect’ the CSG (8.2%) and the CRDS (0.5%) to the Fonds de Solidarité Viellesse (FVI) in an attempt to circumvent the ECJ ruling. Let’s hope that the Constitutional Council throws out this proposal when it undertakes its final deliberation on the draft legislation!

In reality, France raises more from social charges than from income tax. What seems clear is that the government will find some way to make up for this loss of income from social charges if it cannot get its own way, perhaps by the introduction of other taxes. Equally clear is the fact that people should always find legitimate ways to avoid paying unnecessary taxes and that is something that we help our clients to do.

The above outline is provided for information purposes only and does not constitute advice or a recommendation from The Spectrum IFA Group to take any particular action on the subject of investment of financial assets or the mitigation of taxes.

Automatic Exchange of Information (AEI)

By John Hayward
This article is published on: 11th November 2015

11.11.15

Did you know that recently, approximately 100 countries have signed up to a new initiative by the OECD’s updated Common Reporting Standard (CRS) whereby a global information-sharing system is to be put in place amongst individual tax authorities. This means that information on taxpayers with offshore assets will be shared between the participating countries.

This transparency is meant to be a deterrent to taxpayers’ using offshore accounts and assets as a means of avoiding domestic tax. The participating countries are committed to applying this procedure in order to tackle tax evasion.

This “automatic exchange of financial account information” (AEI) will commence from 2017 on an annual basis between participating countries and is set to become the most comprehensive and powerful tool to date used by worldwide tax authorities.

The first AEI of 2017 will relate to all account information of 1^st January 2016 and reporting will involve individuals who own or control accounts either directly or via financial institutions, be it banks, brokers, investment vehicles, insurance companies or other financial organisations.

The Automatic Exchange of Information (AEI) is facilitated by having financial institutions in each participating country reporting relevant information regarding clients, who are resident in another participating country, to their local tax authorities. Local tax authorities will then automatically exchange this information with their counterparts in other participating countries on an annual basis.

The account information generally includes account number, balance and gross earnings in respect of any payments through the account including any investment income, income earned from assets etc. The information on each person generally includes name, address, country of residence, nationality, national insurance and tax identification numbers, place and date of birth.

So if you live in Spain and have overseas assets and/or investments that you previously thought were non-declarable to the Spanish authorities, then this may be something that you need to address.

Rendita catastale

By Gareth Horsfall
This article is published on: 10th November 2015

10.11.15

I admit it! I have been confused for years about the rendita catastale. I have never been sure about its role in the economy and how it benefited the individual or economy. Until now! (Care of Bloomberg online)

So, the story goes something like this:

The rendita catastale represents the amount of ‘theoretical rent’ that a householder pays him/herself as a measure of economic consumption.

In other words:

If a householder owns their house outright, i.e no mortgage or other debt, then that person is actually a ‘imputed’ consumer and investor of the ‘invisible’ rent money that they would have received should they be renting a similar house. This money is then assumed to be spent and go back into the economy.

And this is considered a growing financial benefit that property owners enjoy from not having to pay rent.

So, whilst the financial crisis shrank the economy more than 8 percent and unemployment doubled in the seven years of the crisis, property, proportionately, made up more of the gross domestic product. The weighting of property in Italian GDP jumped 2.1% from 2007 despite falls in property prices and transactions. (which gives you an idea of how big the falls were in other parts of the economy).

And given that the financial benefit from housing, i.e the rendita catastale, is taking up a larger proportion of a property owners income, then it comes as no surprise that Renzi has recently promised to abolish IMU on the prima casa from 2016. This also seems to imply that Renzi realises that Italians homeowner spending habits are more important than foreign buyers as a means to sustain property prices.

The Italian economy strongly relies on home ownership. Just by residing either in debt free housing or paying no rent (living in family houses) or a paying a below-market rent, Italians contribute to more than 8 percent of the nation’s GDP, up from about 7 percent in 2007. In a country where more than 73 percent of the population live in owned residences, this is a valuable contribution to economic growth.

Disclaimer
The views expressed here are my own. They are not necessarily shared by The Spectrum IFA group or any other company named or implied. They are subject to change at any time based on market and other conditions. This is not an offer or solicitation for the purchase or sale of any security and should not be construed as such. References to specific securities or companies are for illustrative purposes only and are not intended to be, and should not be interpreted as recommendations to purchase or sell such securities.

Full exchange of financial account information is on the doorstep.

By Gareth Horsfall
This article is published on: 9th November 2015

09.11.15

I have written in previous articles about the fast approaching days when all financial information will be available to all tax authorities. In fact, my last piece on the subject explained that the OECD had signed up approximately 53 members countries and were working on a standardised format (Common Reporting Standard, CRS) with which to exchange financial information across borders.
This email expands on this subject as more information has now become available.

The CRS, formally the Standard for Automatic Exchange of Financial Account Information in Tax Matters, (SAEFAITM – this abbreviation just flows off the tongue!) seeks to establish a global methodology for the sharing amongst tax authorities of relevant data in relation to financial assets. The transparency created by the CRS is meant to be a deterrent to taxpayers use of offshore accounts and to non-declaration of assets in other states/countries.

So far 100 countries signed up and committed to implementing this Standard and it is ‘likely to’ become (Sorry! I meant, ‘will become’) the most powerful tool of tax authorities worldwide.

There are nearly 60 “early adopters”, (see list below) and for these countries the Automatic Exchange of Financial Account Information will commence from 2017 on an annual basis between participating countries in respect to their tax residents, and in certain cases domicile persons. But here is the catch….It will relate to all account information of 1 January 2016.

Reporting will have to be made by all individuals who own or control accounts in financial institutions either directly or through companies, trusts, foundations and in certain cases insurance policies.

Financial institutions include, but are not limited to, banks, collective investment vehicles, custodians and insurance companies.

Financial institutions in each country will basically collect and report information to their local tax authorities regarding their clients who are resident in another participating country.

And the local tax authorities automatically exchange this information on an annual basis with their counterparts in the other participating countries.

Account information to be reported will generally include
* account number
* account balances
* gross earnings in respect of any payments through the account, including but not limited to any investment income such as dividends or funds from insurance companies
* income earned from assets and sale profits from financial assets

The exact nature of information to be exchanged between each participating country must be defined in the intergovernmental agreement between the two countries, but I think we can safely expect that all European states and the USA will be sharing data in a standardised format.

The information on each reportable person generally includes:
* name
* address
* country of residence
* tax identification numbers
* place and date of birth

Financial institutions will also need to disclose not only the account holder but also any beneficial owners, controlling persons or even in certain cases “relevant persons” of entities and trusts.

Data protection is also going to be a very interesting issue and the OECD do say that information exchanged in this way, i.e through the common reporting standard, cannot be provided to other governmental institutions once shared. I have my doubts whether that will happen!

So what can we take from this? Well I think it is becoming more and more self explanatory. Big brother has finally arrived and there are no more hiding places. As I have been ‘preaching’ for many years now: if you are a resident in Italy and have still not arranged your financial affairs ‘in regola’ then you have about 2 months to do so until all financial information will become available to tax authorities: 1st January 2016.

I have found the key to living in Italy is knowing that there is a difference between tax reporting and tax planning. Your commercialista is there to help you report your taxes through the overly complicated tax reporting system in Italy. However they are not there to help and discuss ways to plan around the Italian tax system. That is where the role of the financial planner comes in and with the extensive knowledge I have built up over the 11 years I have been living and working in Italy, I can sometimes identify areas where you can save tax, increase incomes and restructure your affairs in a compliant manner, not always, but I am happy to give it a go!

So, if you would like to contact me about this then feel free to do so on gareth.horsfall@spectrum-ifa.com or on cell 3336492356.

If you are also interested to know who are the early adopting countries, then the list is below. You will note that Italy and the UK appear on that list. The USA does not because it has already commenced its own International tax reporting standard known as FATCA.

Early adopter countries – undertaking first AEI by 2017 in respect of 2016 information
Anguilla, Argentina, Austria, Barbados, Belgium, Bermuda, Bulgaria, British Virgin Islands, Cayman Islands, Chile, Colombia, Croatia, Curacao, Cyprus, Czech Republic, Denmark, Dominica, Estonia, Faroe Islands, Finland, France, Germany, Gibraltar, Greece, Greenland, Guernsey, Hungary, Iceland, India, Ireland, Isle of Man, Italy, Jersey, Korea, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Mauritius, Montserrat, Netherlands, Niue, Norway, Poland, Portugal, Romania, San Marino, Seychelles, Slovak Republic, Slovenia, South Africa, Spain, Sweden, Trinidad and Tobago, Turks and Caicos, Uruguay, United Kingdom.

Supporting the International Community – The Spectrum IFA Group

By Barry Davys
This article is published on: 2nd November 2015

02.11.15

We are pleased to have supported yet another initiative for the International Community, this time at the Barcelona International Community Day. The day, organised by Barcelona Activa, was designed to provide the international community with a one stop shop for advice on living in Barcelona, including schools, relocation agents, solicitors, local groups and activities and independent financial advice.

Over 5,000 people attended the event and the team from our Barcelona office was on hand to answer questions on all aspects of financial planning whilst living in Spain. We had in excess of 15 nationalities asking for advice although it was noticeable our French speaking consultant was particularly busy.

Questions included:

What tax do I have to pay if I transfer money to Spain?
What will happen to the exchange rate and how do I transfer money to Spain?
So what is the top rate of tax in Spain?
How good are the pensions in Spain?
What do I do with my existing investments?
How do you charge for your services?

Our favourite question was “We are digital nomads coming to Spain for a couple of years. Does the Beckham Rule apply to me”. Fortunately, we knew what a digital nomad is and we had our expert in the Beckham Rule available to answer the question.

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Can you make decent profits without a degree of market risk?

By Spectrum IFA
This article is published on: 22nd October 2015

22.10.15

My article last month focussed on types of risk that that can present danger to the unwary investor. My top two risk types were Institutional Risk and Market Risk, but I concentrated mainly on my third risk factor – Foreign Exchange, largely because of my previous experience in this field. I was quite surprised by the interest the article produced, partly because the people who commented weren’t really ‘grabbed’ by F/X risk; but rather more interested in the other two categories. Can the modern investor really fall foul of institutional risk? Is anyone really daft enough to think that you can have decent profits or returns without taking on some degree of market risk? Unfortunately, the answer to both those last two questions is yes. I thought you might be entertained if I gave you some examples that hopefully won’t ring too many bells from your own experiences…

In 2009 I met a very interesting lady who was referred to me by a colleague in Spain, not that that is particularly relevant, but I did end up wondering if she’d had too much sun. All I knew before I met her was that she was due to receive a large sum shortly, and she wanted some investment advice. I spent ninety minutes with her, most of which was taken up with a battle of hope over reality. This unfortunate lady had been investing for a number of years with an organisation called The Liberty Wealth Club, and was 100% confident that she would be receiving a pay-out of $150,000 from the club in a matter of weeks. The more I listened, the more appalled I became, for this was truly a forerunner of a ‘Ponzi’ scam, labelled and outlawed in the UK as a Multi-Level Marketing scheme. Nothing I could say to her would make her listen. In the end, I told her that I would be delighted to help her invest her funds when they arrived, and we agreed to meet again on that basis. I never heard from her again.

A year or so later I took on a new client with a much more understandable problem. He had bought an apartment in Spain ‘off-plan’, with a view to selling it on before completion, at a healthy profit. As far as I’m aware, to this day he is still the legal owner of this apartment, although he returned the keys and stopped paying the mortgage years ago. It is a nightmare waiting to revisit him.

Another client with a similar problem bought a flat in Budapest, again unbuilt and ‘off plan’. The amount invested was sizeable, and it took four years for a brick to be laid. In desperation he eventually managed to sell it at a 60% loss.

Undeterred, this same client, before I met him I might add, then decided to invest in a forestry scheme designed to give him a regular income payment for the rest of his life. Unfortunately a drought seems to have interfered badly enough for the income to have dried up (sorry) completely.

Recently I have come across a mind-boggling concept called GCR – Global Currency Reset. Please, please, do not let anyone persuade you to invest any of your hard earned cash building up reserves in currencies such as the Iraqi Dinar or the Vietnamese Dong in the expectation that they will soon be revalued overnight and make your fortune. Believe me, this is not going to happen.

Sane people make these totally irrational investment decisions, albeit whilst temporality on the throes of some form of dangerous mental instability, as it is the only justification I can think of. Please do not be tempted to join this group of dramatic under-achievers. Sound financial advice may seem boring; much along the lines of ‘single digit gains’ and ‘realistic investment profiles’. Sound financial advice will however always save you from the nightmares that can result from your own flights of fancy, should you be that way inclined. And believe me, some of you are.

The UK’s future membership of the EU

By Spectrum IFA
This article is published on: 13th October 2015

13.10.15

As the media hype heats up over the question of the UK’s future membership of the EU, clients are already asking what will happen if the outcome of the referendum is to leave the EU?

The simple answer is that we do not really know because a country has never left the EU. What we do know is, as British expatriates ourselves, we will be affected in the same way as our clients.

The more complicated answer is that it will depend upon whether it is a ‘soft exit’ or a ‘hard exit’.

A soft exit would be, for example, remaining as an EEA State (in the same way as Norway, Iceland and Lichtenstein). As such, the UK would still have access to the single European market and full freedom of trade within the EU. However, in addition, the UK would be free to negotiate bilateral trade agreements with countries outside of the EU, something that is not possible with full EU membership. The UK would still have to adhere to EU product and financial regulations, as well as social and employment rules. EU budget contributions would still be required, although at a reduced level. Ability to restrict inward EU migration would not be allowed.

A ‘hard exit’ would take the UK outside of the EEA, resulting in it having no automatic access to trade within the EU, but it could continue to negotiate trade agreements with non-EU countries. There would be no more EU budget contributions and also no requirement to adhere to EU Regulations. Inward EU migration could be restricted.

With a ‘hard exit’, as British expatriates living in France, we would need to apply for a Carte de Séjour, but if already resident in France for 10 years, may be granted a Carte de Résidence. Certificates S1 would become a thing of the past and so British expatriates would have to pay cotisations for French health cover. Equally, EU nationals living in the UK, would no longer have an automatic right to live and work there.

The referendum is to take place by the end of 2017, but it is more likely now that it will be in 2016. What we can be certain about is that in the period leading up to the referendum, there will be uncertainty – in capital markets (particularly in the UK) and in currency markets (Sterling is likely to be under pressure).

As if the referendum was not enough to think about, we also have to continue playing the guessing game with central bank policy! It was widely expected that the Fed would start to increase US interest rates in September, but that was not to be. Whilst an increase is not entirely ruled out before the end of this year, no-one can be certain. It is unlikely that the UK will move on interest rates before the US.

In times of such uncertainty, it is more important than ever to seek advice on how to protect your wealth. At the Spectrum IFA Group we have a range of solutions to offer clients, depending upon attitude to investment risk and objectives. For example, have a range of capital protected investments and other low volatility multi-assets funds available. Hence, clients’ portfolios can easily be adjusted to protect their wealth, as and when necessary, something that is particularly appropriate during times of volatile markets.

Even when markets are not volatile, the benefits of diversification gained through investing in global multi-asset portfolios cannot be overstated. If this is combined with using investment management firms that have the size and capability to carry out extensive research into global markets, and investment risk is managed effectively, this considerably increases the chances of the clients’ investments performing better than the average over the medium to long-term.

Some people may be afraid to invest in capital markets during times of uncertainty. However, sitting with large amounts of cash in a bank is not risk-free. Apart from institutional risk, there is the real enemy of inflation, which can erode the real purchasing power of your capital, particularly since interest rates continue at ‘all-time lows’. Holding cash in the bank should really only be for short-term needs which of course includes any short-term capital projects that you might have planned, as well as a cushion for emergencies. Bank deposits are not usually appropriate for medium to long-term investment.

The investment solutions that we recommend to our clients are all carried out within tax-efficient products, which are also highly beneficial for inheritance planning in France. Everyone is different and that is why it is very important that we carry out a full review of a prospective client’s situation to find the right solution for them. It is equally important to ensure that this is kept under review and to not be afraid to make adjustments, when necessary.

The Spectrum IFA Group advisers do not charge any fees directly to clients for their time or for advice given, as can be seen from our Client Charter at spectrum-ifa.com/spectrum-ifa-client-charter

Le Tour de Finance – Autumn seminars

By Spectrum IFA
This article is published on: 9th October 2015

The autumn run of seminars in France kicked off this week in Endreol,La Motte and moved onto the beautiful Chateau La Coste in Le Puy Sainte Reparade with a final stop in the Languedoc region at The Domaine Gayda.

These autumn seminars proved to be very successful offering English speaking expats a chance to meet various experts from fields including; specialist expat independent financial advice, mutli-asset wealth management, currency exchange, QROPS/pensions and expat tax advice. The string of autumn seminars will culminate in Dinard, Brittanty with Le Tour de Finance’s 100th event.

The next events are:
11th Nov 2015 Avrille, Loire
12th Nov 2015 Dinard, Ille-et-Vilain, Brittany

If you would like further information or would like to book a place, please contact us

The objective of Le Tour de Finance is to provide expatriates with useful information relating to their financial lives. We try and cover frequently asked questions that we receive from our clients. It would be helpful for us to know what your particular areas of interest might be.

For further details and to book your place at a future event please register here

Below you will be some photos of our lucky prize draw winners walking away with a refreshing bottleof champagne, together with our speakers and attendees.

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