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Hacks Tax and Expatriates

Panama law firm announces major data hack. Resignation of Icelandic PM. Swiss police raid Uefa offices. 20 global leaders alleged to have used tax havens. British PM gives 5 different answers to questions on finance after allegations that his father paid no tax for 30 years then eventually admits he profited from father’s offshore fund. China shuts down the Internet. Laundered cash from Britain’s largest gold bullion robbery was hidden in Panama. Argentinean President is being questioned by federal authorities. Thailand's Anti-Money Laundering Office investigating 16 people, including current and former politicians and well-known business people. Australia's tax office investigating 800 individuals named in data. Ukraine's President Petro Poroshenko says he has done nothing wrong. Austria's financial markets regulator says it is investigating whether two banks breached rules on money laundering after being named in the leaks. France opens a preliminary investigation into money laundering and tax fraud. Sanctions busting, arms dealing and more.

It sounds like the plots of half a dozen Nordic Noir television series, but it is all part of one scandal that took 350 reporters to reveal.

The Panama Papers includes more than 11.5 million financial and legal records from Panama law firm, Mossack Fonseca, exposing a global web that can enable crime and corruption.

The UK's Financial Conduct Authority has given banks and investment businesses only until Friday April 15th to hand over all dealings with the law firm in Panama. 

Even HMRC got a mention with much humour arising from the revelation that 600 offices of HMRC were owned and operated by a group of offshore companies that paid little or no UK tax.

What Is A Tax Haven?

Traditional tax havens are countries or regions where personal and business taxes are likely to be very low, or even non-existent. These countries often attract individuals and companies who are seeking to pay less tax than they would at home. Businesses may move their headquarters to a tax haven, or individuals choose to live there for some or all of the year, to qualify for the lower tax regime.

Tax Competition

Some countries or jurisdictions construct tax legislation with the explicit intention of becoming havens for those seeking to avoid tax in their own countries. This gives rise to tax competition between nations eager to get businesses to set up within their borders.

USA Tax Havens 

The term tax haven usually conjures up images of yachts, sea, sunshine and palm fringed, coconut white sandy beaches. But this isn't quite accurate.

President Obama likes to talk about Ugland House in the Cayman Islands that is home to around 18,000 companies, yet Delaware, which has a population of around 935,000, is home to some 945,000 companies, many of which are shell companies.

Shruti Shah, vice-president of programs and operations at Transparency International told The Guardian, “You don’t really have to go to Panama or other tax havens. They are not the only ones making it possible for corrupt officials and other criminals to launder their money. You can do it in every state in the US. In every state in the US, you can incorporate an LLC – [a limited liability company] – or another legal entity and you don’t have to disclose who the beneficiary on it is. In fact, Delaware is so synonymous with anonymous companies and ghost corporations that it was named in Transparency International’s Unmask the Corrupt campaign as one of the most symbolic cases of corruption.”

UK Tax Havens 

Without mentioning the numerous actual offshore islands like Jersey, Cayman or the BVI, closer to home The City of London, a pioneer in offshore currency trading in the 1950's still helps non-residents pay little or no tax. Changes to UK corporate tax law in 2011 allowed multinational's to pay little or no UK tax on foreign sourced income.

According to The Sunday Times January 2016, at least 6 of Britain’s 10 largest multinationals (including Shell, British American Tobacco and Lloyds Banking Group) paid no UK corporation tax in 2014.

Other companies that paid no UK corporation tax in 2014 were brewer SABMiller and AstraZeneca. BP and Glaxo Smith Kline declined to reveal how much UK corporation tax they paid but Glaxo Smith Kline did say they paid something.

Social network giant Facebook paid around £4,320 in UK corporation tax in 2014.

Few of us are paid enough to worry about which tax optimisation scheme to arrange, but for expats, advice on the best tax practices and even the best places to work is vital.

The semantics about tax evasion and avoidance by millionaires and corporations is sadly pointless. Both mean that people and companies do not contribute their fair share of the costs of schools, universities, hospitals, roads, railways, police and the other entire infrastructure that enables them to work or live in that country.

Reasons Expatriates Move Overseas

For many, especially the British, the weather can play a massive role in the reason to move overseas. Other reasons include a relaxed lifestyle, more career opportunities and apparently cost-of-living. Whilst it may be true that one may survive on $250PCM living in a mud hut in the Golden Triangle eating rice every day, to maintain similar standards as you may be use to back home, will be expensive. 

Another reason to move overseas can be to build up a nest egg, and that is why places such as Gulf States with low tax regimes are popular, particularly if the expats can avoid paying tax at home, or paying off their student loans while overseas.

But again, do not be fooled. Savings made on business rates and local taxes will be recouped elsewhere. Cost-of-living in some expat hot spots is ridiculously high and you will also pay in time due to red-tape and bureaucracy.

One recent example of the cost of expatriation is from a major EU expat hotspot. According to a source at iPMI Magazine, Government and local councils have no issue helping themselves to money from business and personal expat bank accounts. In some instances monies were owed. In other instances it was a major mistake. Other times fraud. "Money goes missing from our accounts all the time" said one expat who runs a local, not offshore, company. "Our house is in a small gated community and 3 houses share a lovely swimming pool and gardens. We have a separate bank account set up for maintenance payments to look after the up keep of the communal area. Local council will even dip into that."

Long Terms Affects

As yet no insurer has been mentioned in the Panama Papers but with so much material yet to emerge it seems inevitable. Investment arms of some global insurers will be involved in investment advice that uses tax havens plus many insurers do operate offshore.

What comes next is any ones guess but one thing is for sure, The Panama Papers are causing a massive stir that could lead to a backlash, affecting global businesses and expatriates; particularly those in locations regarded as tax havens.

The serious message to any expatriate or business based in a tax haven is to ensure your tax affairs are in good order, in case you get caught up in the knee-jerk responses from formerly asleep-at-the-wheel tax authorities.






Taxpayers Who Lost Health Insurance Due To Tax Compliance May Be Eligible For Special Enrollment Period With Federal Marketplace

Consumers who tried but were unable to enroll in 2016 health insurance coverage through the federal marketplace and receive an Advance Premium Tax Credit (APTC) may now be able to re-apply and enroll in affordable health insurance coverage through a special enrollment period ending March 31, 2016.

H&R Block (NYSE: HRB) advises taxpayers who received APTC for 2014 to file complete and accurate 2014 returns to qualify for this special enrollment period. To ensure access to the APTC to help pay for coverage on the federal marketplace next year, taxpayers should file a complete and accurate 2015 tax return by April 18.

The federal marketplace special enrollment period will help taxpayers who were denied APTC in 2016 and dropped coverage or declined to enroll because they could not afford coverage. Taxpayers who received the APTC in 2014 and did not file a complete 2014 tax return are ineligible for the credit in 2016. Now, these taxpayers can re-apply for the APTC and enroll in 2016 coverage if:

  • they were not enrolled in health insurance coverage through the federal marketplace as of January 31, 2016,
  • they file their 2014 tax return and reconcile their 2014 APTC and
  • they attest to the marketplace that they filed a 2014 return reconciling their APTC.

"Thanks to this special enrollment period, consumers who had to cancel their 2016 health insurance because it was too expensive without the APTC can now re-apply and enroll in coverage, but only if they file their 2014 return and reconcile the APTC they received in 2014," said Mark Ciaramitaro, vice president of H&R Block taxes and health care services. "The key to getting affordable health insurance through this special enrollment period is a correctly filed tax return. Once again, we see that taxes and health insurance go hand-in-hand."

Taxes are the key to affordable health insurance now and in the future

This year is the first year when taxpayers could lose their APTC if they had failed to file a complete tax return for a previous year they received the credit. Because this is the first year consumers are facing this issue, the federal marketplace is offering a special enrollment period to help consumers understand and meet the requirement.

"Consumers not only need to file their 2014 return to qualify for this year's special enrollment period, but they also need to make sure they file a 2015 return so that they do not find themselves in the same boat next year, when the marketplace is less likely to extend a special enrollment period," said Ciaramitaro.


Insurance Premium Tax Increase Will Affect 3 Million Private Medical Insurance Policies

The standard rate of Insurance Premium Tax - the tax paid each time an insurance policy is purchased in the UK – rose from 6% to 9.5% on the 1st November 2015.

This change will affect:

  • 7.3 million car policies
  • 4.7 million household policies
  • 3 million pet policies
  • 3 million private medical insurance policies

Any of the affected insurance policies with a start date after 31 October will have IPT charged at the new rate. This is likely to add the following to premiums:

  • Nearly £13 to the average comprehensive motor insurance policy
  • More than £10 to the average combined building and contents cover.
  • More than £10 to average pet insurance
  • More than £40 to average private medical insurance

The Government exempts the following products from IPT:

  • Life insurance
  • Mortgage insurance
  • Insurance for spacecraft
  • Commercial ships and aircraft
  • International railway rolling stock
  • Lifeboats and lifeboat equipment
  • Goods in international transit

Higher rate IPT remains unchanged at 20% and applies to:

  • travel insurance
  • warranties for some mechanical and electrical goods

This means that a family with two cars, a pet and medical insurance is likely to have to pay almost £100 a year more.

James Dalton, Director of General Insurance Policy at the ABI, said, "Whether you are a homeowner, driver, own a pet or buy medical insurance, millions of people across the country face being hit in the pocket by this rise in Insurance Premium Tax. Whether it’s a legal requirement or you want to buy extra cover, insurance is a financial safety net, not a luxury.

"While insurance remains one of the most competitive industries in the UK, its affordability can’t be taken for granted. Further tax increases must be avoided if insurance is to remain accessible for all.”

According to the Treasury the IPT increase will bring in an additional £8.1bn for the Treasury by 2021*. This was the second largest revenue raiser in the Summer Budget.

Insurance Premium Tax was first introduced to the UK in 1994. The rise on 1 November is the 4th increase in the standard rate since its introduction.

  • From 1 October 1994, a single rate of 2.5% was charged
  • 1 April 1997: increased to 4%
  • 1 July 1999: increased to 5%
  • 4 January 2011: increased to 6%
  • 1 November 2015: increased to 9.5%

*This is according to HMRC’s own figures summarising the impact of the move


The IRS Moves Towards Implementing The Cadillac Tax

Regardless of the opposition of congressmen, brokers, and employers, on July 30th, the United States Internal Revenue Service (IRS) issued another notice on the Cadillac Tax, which will go into effect in early 2018.  Notice 2015-52 Section 49801 – Excise Tax on High Cost Employer-Sponsored Health Coverage addresses additional topics and issues related to the Cadillac Tax, which will seriously impact most employer-sponsored group health plans.

In February, the IRS issued Notice 2015-16. That notice brought into light the preliminary ideas for the reason of developing future proposed Cadillac Tax rules and regulations dealing with excess benefits, determining costs of coverage, and defining applicable coverage. Notice 2015-52 continues where Notice 2015-16 left off, and addresses such issues as who is responsible to calculate and pay the tax, how the tax should be paid, when the tax is to be paid, and detailing the types of challenges the employer aggregation rules may pose.

The purpose of this tax is to reduce excess healthcare spending by both employees and employers, and to help finance the continual expansion of healthcare coverage under the Patient Protection and Affordable Care Act (PPACA).    The IRS points out that these types of notices should not be construed as official guidance.  The following is a brief summary of some of the issues addressed in this notice. 

To view the full notice visit this link from the IRS:

Who will be liable to pay the excise tax?

Each “coverage provider” must pay the tax on its share of excess benefits for the applicable tax period.  Even if the plan year is not, the applicable tax period will be the calendar year.  Depending on the type of plan, the liable coverage provider varies.  The excise tax is not a deductible expense.

What is applicable coverage?

In general, applicable coverage is coverage under any group health plan that is made available to the employee, former employee, surviving spouse, retiree, or other primary insured individual which is excludable from gross income.

Who determines the cost of applicable coverage?

The employer will be responsible to calculate and determine the amount the excess benefit provided to an employee during any month during the calendar year.  All employers must notify both the IRS and all coverage providers of the exact amount of the excess benefit, and then, the tax must be paid by the coverage provider (not the employer).

The guidance in the notices issued by the IRS, so far, should be used to give employers an idea of how the IRS is intending to implement the Cadillac Tax.  Employers should also note that after 2018, the inflation adjustment to the dollar limit amounts will be indexed to CPI, an index typically lower than healthcare inflation.  Further, employers should pay very close attention to the forthcoming regulations in order to adequately prepare for the implementation of the Cadillac Tax.

Wrapping things up, you may ask, how may the Cadillac Tax affect expatriates and international employers?  Employers who hire expatriates and international employers may be subject to the Cadillac Tax, unless certain measures and changes take place to balance the coverage between domestic and expatriate members.  WellAway Limited specializes in plans designed and in compliance with the USA Government for expatriates and employers, in general.  For more information as to how WellAway Limited can help you with solutions that can accommodate both your domestic and expat employees, as well as complying with the Cadillac Tax, please contact them at This email address is being protected from spambots. You need JavaScript enabled to view it. or +1 441 296-0651.

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Medical, Healthcare, Expatriate And Travel Insurance

A guide to leading international medical, healthcare, expatriate and travel insurance underwriters, companies, providers, operating within leisure, expatriate and corporate travel business markets, globally.