29/06/2022 - Feature articles

Meeting the needs of the globally mobile client

This may broaden people’s horizons, but it can introduce considerable complexity into their financial affairs. Not only must they interact with multiple tax authorities, but they also need to navigate different investment structures and reporting requirements. As many will want to return to their home country one day, they may also need to keep their existing savings structures in place.

The toughest area is for US taxpayers. Whereas most countries only impose taxes on non-residents for income earned within that country, the US and Eritrea are the only two countries in the world to impose citizen-based taxation. Wherever a US citizen is living, they are subject to the taxation and reporting of their home country. This was already a complicated situation for US-related people worldwide, but in 2010 it became much worse by the introduction of FATCA rules, with so many reporting, filing, and tax obligations that compliance has become a great burden for those with foreign bank accounts and assets located around the world, and with significant penalties for non-compliance.

Furthermore, there is no easy way out from under this compliance burden. US citizenship is sticky, as young Archie Harrison Mountbatten-Windsor will soon discover. Any US citizen who has lived in the US within the past five years automatically passes citizenship to their offspring. Equally, renouncing citizenship can be a complex procedure involving lots of forms, navigating complex tax laws, filing tax returns and paying outstanding taxes and fees.

For those caught in the US tax net, there are complexities on the investment side as well. Standard collective funds are bound by the US ‘PFIC’ (passive foreign investment company) rules, which means that investors face onerous tax consequences for investing in non-compliant assets.

All of this complexity has prompted a lot of advisers to steer clear of clients with any US connections. Unfortunately, this can rule out a lot of potential clients – anyone who temporarily works in the US, has family connections or who chooses to study there for a period of time.

We believe advisers shouldn’t have to abandon clients simply because they have a US tax obligation. Additionally, the ability to serve this traditionally underserved market can open up new avenues for advice businesses. To make it possible for advisers to retain US clients and to attract new ones, we have built US tax compliance into our platform. Our fully IRS-compliant solution helps advisers and clients manage their investment portfolios including US tax reporting.

While US taxpayers represent the most complex area, there are important considerations attached to other internationally mobile clients as well. For example, a client that works abroad may be paid in a different currency and may need to manage investments across multiple jurisdictions. For any clients who have a spell abroad and want to keep investing, advisers should be able to offer a suitable solution for their needs.

Most expats return home at some point so will often need a solution that works both home and abroad. The Praemium platform offers just such a solution with the ability to handle multiple currencies, jurisdictions and international investments, enabling advisers to meet clients’ needs across the globe with minimum complexity.

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