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The Future of International Financial Planning - Published in March 2016

The debate has quietly raged for some time but now it is officially underway. Will the UK stay in or leave the EU? As with any complex issues the implications are wide touching on, amongst others, aspects of our financial lives.

Not only just for Brits living in Portugal, for all of us it is a matter of perspective.  The debate also indirectly affects other foreign nationals residing here to once again contemplate the future of the European Union and, subsequently, the potential impact on any decisions they may have about their financial future.

Financially planning in an era where the ebb and flow of politics, fiscal and monetary policies are highly acute is not straight forward.  The constant moving target means that in these periods we all (investors and advisers) must raise our game because never has it been truer to say one size does not fit all. 

Portugal is no different as here the pendulum swings from pro to anti-austerity.  Many foreign nationals have been left reeling trying to stop something bad happen when fiduciary structures were attacked leaving holders with little or no room to plan.  We are now waking up to a new era of the Common Reporting Standard (CRS), also known as the Automatic Exchange of Information which is a huge jump from the “voluntary” exchange of information implemented in the EU Savings Directive.

What is the CRS?

The Common Reporting Standard (CRS) was created from an OECD-led initiative, agreed in May 2014, whereby more than 60 countries will start to exchange details of individuals’ bank accounts and trusts on an automatic basis from September 2017.  Its mandate is to prise open the secretive affairs of those who are evading tax, and to play a part in reducing the so-called “tax gaps” of governments struggling with stubbornly high fiscal deficits.  No longer is it a case of choice but rather now a mandatory exposure of one’s private wealth to public authorities in your country of residence and the country where the source of your wealth is hosted.

Regardless whether Britain stays or leaves or whether, from a Portuguese perspective, you are dealing with a fiduciary structure in a black or white-listed jurisdiction is arguably irrelevant to the CRS.  The new standard could potentially provide a level playing field whereby those deemed to be “outside” of the agreement may be the black-list or fiscal paradise of tomorrow.  Portugal, the UK and other commonly used offshore centres such as the Isle of Man and the Channel Islands were included in some of the first countries to sign up.  Whether held in trust or another similar structure, as of the start of this year governments in the source country are collecting values and sharing these with the respective government lined to the country of residence of the account holder.

Invasive? That is down to perception, but serious it is!  The world, both economically and financially, is going through fundamental changes.  It has no choice but to change and we have no other option but to comply.  If there is a level playing field then in this globally mobile world whatever, wherever and whenever we do, we should now plan so as not to throw up any unnecessary surprises to blind side us.

Reporting overseas income and gains, as it is the case in Portugal whether remitted or not, where there is no discrimination between the perceptions of black/white or a fiscal paradise means that there can be no surprises. 

From 6th April 2016, whether the UK will stay in Europe or not, neither UK savings accounts nor UK shares will suffer tax at source and therefore automatically be paid gross.  For those who have experience reporting this form of income in Portugal will appreciate the difficulties, particularly when fitting the UK tax year to the Portuguese tax calendar year. 

Brexit?  Anti-austerity?  These are relevant events but not ones to be drawn into when you could miss some historical changes to international financial planning.

This article is intended to provide a general review of certain topics and its purpose is to inform but NOT to recommend or support any specific investments or course of action. 

Raoul has a weekly radio feature (Raoul’s Rant) on the Owen Gee Solid Gold Sunday morning show on KissFM Algarve.

The Future of International Financial Planning