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Expat Investor : November 2008
OFFSHORE SAVINGS Bond. However, there are some forecasters who are now predicting that the fixed rate bond boom is over. Michelle Slade, analyst at Moneyfacts.co.uk, is one of these as she explains, “Earlier this year, fixed rate bonds were paying some of the highest rates ever seen, but as the pressure in the money markets eases, rates have started to decline. “Fixed rate bonds virtually guarantee that a provider will have your money for a set period of time, as the majority do not allow access during the term of the bond. As the cost of providing the funding for mortgages increased, a large number of providers looked to their savings book to provide some of the funding. Now that swap rates have been declining, many may be reverting back to more traditional methods.” Moneyfacts.co.uk noticed that in just one week early on in Autumn it had received over 30 changes to fixed rate bonds, with most either withdrawing their products or decreasing rates. “Fixed rate bond best buy tables had for the first time been completely dominated by rte of 7% plus, but now such high rates have started to fade away. “Some providers are withdrawing their bonds as they are fully subscribed, but others are doing so due to market conditions. As the fallout from the Lehman Brothers debacle continues, we may see further bonds being withdrawn,” predicts Ms Slade. All of which points to savers having to stay vigilant and not be afraid to move their savings to a more generous rate payer if their account rates show signs of falling behind. Selecting the right offshore Expat savers and the EUSTD The European Union Savings Tax Directive (EUSTD) has been in effect for three years. We explain what it’s all about to help you ascertain whether it impacts on your tax obligations. The European Union Savings Tax Directive (EUSTD affects all individuals who are resident within the European Union’s borders. Expats who are not affected are those individuals resident outside the European Union, regardless of nationality, and those whose accounts are held in a company name or under the name of a Trust. In addition to these exemptions, some life assurance type deposits and investment products are also outside the scope of the Directive, regardless of the country of residence of the underlying investor. The main aim of this Directive is to assist the gathering of tax revenues from all non-resident personal deposit accounts which are held in EU member state countries by EU residents throughout the EU. And so, practically speaking, the Directive works like this: any EU tax resident with money earning interest in any of the EU member states is subject to Zurich Bank International There’s strength and then there’s Zurich Strength To find out more, or to request an application form call: Fixed for 1 Year account A savings account is one of the essential financial tools for any expat organising money management during time spent overseas. But before snapping up the first offshore savings accounts that comes to your attention, it pays to research the full range of accounts on offer in this market and make comparisons. First, consider how quickly you may need to withdraw funds from your savings account. Term accounts require notice periods from a few days to six months before access to funds can be made. Otherwise a penalty must be paid, usually in the form of a loss of interest. Some expats are drawn to a selected number of offshore accounts available on notice terms that permit a specified number of immediate withdrawals per year without imposing penalties. An important factor linked to accessibility concerns the additional features associated with an account. For example, a number of major banks with tailored services for expatriate customers offer dedicated online banking services. Such facilities enable savers to check balances, order statements and make Continued on page 8 November 2008 ? EXPAT INVESTOR 7 Fast Facts 99004 6.75% GROSS PA/AER* +44(0)1624 671666 Email: relationship.banking @zurich.com or visit our website (quoting ref no. EI11) Secure your deposit and interest rate by opening a 1 Year Fixed Rate Bond with Zurich Bank International Limited. Backed by one of the world's largest financial services providers, Zurich Bank International is part ot the Zurich Financial Services Group, which has its Group headquarters in Switzerland. The Zurich Bank International 1 Year Fixed Rate Bond (Issue 11) gives you a superb annual interest rate of 6.75% gross. • Interest rate fixed for one year from account opening • minimum balance £10,000 • limited issue. www.zurichbankinternational.com the rules which require deposit-takers to exchange information with the account holders’ relevant tax authorities about their deposits and the interest those deposits have earned. In addition to the EU, various other countries have agreed to implement EUSTD. These include Andorra, Liechtenstein, Monaco, San Marino, Switzerland and the United States of America, as well as all dependent and associated territories of EU member states, such as Jersey, Guernsey and the Isle of Man. Withholding tax Austria, Belgium, Luxembourg, the Isle of Man, Jersey and Guernsey have all opted for the automatic option which is to levy a transitional withholding tax on savings instead of exchanging information. This tax was introduced at the rate of 15 per cent. Three years after the implementation of the Directive in July 2008, the rate increased to 20 per cent. Its ceiling of 35 per cent will be reached in 2011. Seventy-five per cent of the tax generated will go to the individual’s home country while the rest will go to the country where the funds are held. All the offshore deposit-takers based in Jersey, Guernsey and the Isle of Man provide extensive information on EUSTD and how their customers can comply with the rules. Expats unsure of their position or uncertain whether they should opt for exchange of information or the withholding tax rule should seek advice from their deposit-taker. R *AER stands for Annual Equivalent Rate which is a notional rate illustrating the contractual rate as if paid and compounded on an annual basis. Zurich Bank International Limited, PO Box 422, Lord Street, Douglas, Isle of Man, IM99 3AF, British Isles. Telephone: +44 (0) 1624 671666 Fax: +44 (0) 1624 627526. www.zurichbankinternational.com Registered office: 43-51 Athol Street, Douglas, Isle of Man, IM99 1ET, British Isles. Zurich Bank International Limited is registered in the Isle of Man Number 22847. Telephone calls may be recorded. Licensed by the Isle of Man Financial Supervision Commission to take deposits.