Investing in today’s uncertain climate

People reading my piece last month about the state of the world’s economy may have detected a more pessimistic tone than in previous issues. This was not accidental. It came about as a result of the continuing Eurozone crisis in particular and other areas of concern in general that suggest it is going to be a considerable time yet before things start returning to normal.

In particular, one of my Spanish readers took umbrage at my rather negative comments on the position in his country. But the truth is that we see record levels of unemployment in Spain – the highest in Europe – the end of the construction boom and painful austerity measures adopted by the new government. The intention is to reduce the sky high deficit in what is after all a contracting economy – i.e. one that is clearly in recession. Developments since my piece last month have simply confirmed the negative outlook.

And when I say it will be some time before things start “returning to normal” I do not mean “back to where we were before”. One thing this crisis should have taught us is that simply adding to the debt mountain to pay for current expenditure is plainly not sustainable. But as I also tried to make clear last month, it’s not all unadulterated doom and gloom. There are distinct signs of improvement in certain economies – or should that be in certain sectors of those economies – that provide real evidence that growth is returning as opposed to a financial commentator’s sense of optimism.

For example, there is real evidence that many of the stronger companies in Europe and across the Atlantic in the US are building up huge cash reserves. It is all too easy to be totally negative when reading reports on practically a daily basis that this company or that has either announced losses, collapsed into administration or filed for Chapter 11 bankruptcy protection – the curious American convention that broadly speaking allows a bust company to carry on trading whilst conveniently ignoring its creditors, at least for a while.

The reality however is that capitalism relies on investment, mainly into companies be they private or public, and there is still a great deal of investment going on. As usual when discussing investment related topics in this column, anything I say is my personal view and should not in any way be construed as advice. So is this the time for those private investors who may have stood back from the markets in the last few years to start considering their investment options?

After all, individuals in the happy position of having savings or maybe cash released from sales of property, other assets or perhaps those in receipt of an inheritance are not going to see decent returns from bank deposits any time soon. True, some of the banking institutions are currently offering more interesting products whereby returns are considerably higher than the pittance offered on regular bank deposits, but with inflation in Gibraltar and other areas stubbornly high, due in very large measure to constantly increasing energy prices, the net return (that is the real increase in the value of one’s investment after one deducts the effect of inflation) is still disappointingly low.

I was minded to have a look at the investment climate for private investors when preparing this piece, not least because of the publicity generated locally in recent weeks concerning the changes in the EIF rules here in Gibraltar. The acronym stands for Experienced Investor Fund and the original legislation was enacted here in 2005. The funds can be used to invest in a wide range of asset classes and can also be established using what is known as a Protected Cell Structure for even more flexibility. New rules have been agreed that will enter force next year. These will enhance significantly the appeal of the Gibraltar EIF which is of course good news for local firms and the employment they generate. For a summary of the recent changes that should lead to increased international interest in Gibraltar, I refer readers to the excellent article penned by Grant Thornton’s Adrian Hogg in the May 2012 edition of The Gibraltar Magazine.

Gibraltar is well placed to compete in this area and with the infrastructure and industry experience to be found here, I can see significant growth opportunities. Gibraltar is of course a full EU member so can exploit its ability for investment firms to “passport” their services, something not so readily available to competing jurisdictions such as the Channel Islands and Cayman.

So this is all very well and good but let’s step back a moment. Is an investment fund a suitable way for ordinary people like you and me if we are considering investing or is it just something for these “experienced investors”. What about the rest of us?

There are many thousands of investment funds to choose from and they come in all types of shapes and sizes but the broad principles are straightforward. There are a number of very good reasons why a new investor might want to consider using a fund when thinking about their options.

By using a professional fund manager, an investor will benefit from years of experience and access to the world’s financial markets that are simply not available to the general public. Depending on the fund, they may provide diversity by asset class or geography while the level of risk involved can be matched to the deemed risk appetite of the investor. Every private investor will be different. It is easy to see why someone a year or two away from retirement will have a very different investment outlook than a single thirty-year-old with no dependents (Incidentally, most 30-year-olds will probably say they have no spare money to invest anyway but, as I was told, “it’s never too early to start”.)

But would anyone want to invest in the markets these days? It would be all too easy to say no, stay away, but times of uncertainty are also times of opportunity. Certainly, careful selection is needed and above all professional advice should be sought right from the outset. It is altogether too easy to look, say, at the (fictional) Ruritanian stock market and see that it has gone up by 60% in the last 12 months. But if the Ruritanian currency – the Cowrie Shell – has depreciated against the pound by 50% over the same period then it starts look rather less attractive. Add to that the problem of researching the right investments in Ruritania, the dangers perhaps of nationalisation or civil strife, and one can begin to see the inherent risks involved in such international exposure.

So if you do wish to invest in that particular country, it is better to do so as part of a regulated fund in which you are investing alongside others. In this way, the costs and the risks are spread and there is a professional team to make sure that investments are properly managed, monitored and administered.

So here’s my summary. If you are considering investment possibilities, there should always be markets somewhere that should be attractive. Many economies around the world, particularly in Europe, are still struggling and may do so for some time. Despite this, or maybe because of it, there are going to be opportunities for future growth or recovery. And with virtually zero returns available on deposits, if nothing is ventured then nothing will be gained.

The World PLC is Unwell

“World plc” is unwell. Before anyone gets the wrong idea – this is after all the Finance Column – I’m not about to stray into areas medical, psychological or spiritual. But after a period of extreme economic intoxication and dissipation, it seems appropriate to echo The Spectator magazine which, whenever the lifestyle of its late “low life” correspondent took its inevitable effect on his health and reliability, would simply post the notice "Jeffrey Bernard is unwell" in place of his column.

Conventional wisdom tells us that the onset of the present financial crisis dates back to 2008. But that only tells us when the disease presented – the symptoms were certainly there well before 2008. In Spain’s case, for example, the housing boom that ended in such a spectacular crash had been building for a decade or more.

It’s clear that World plc remains on the sick list – and parts of it are still in a critical state. As with any illness, it took a while before any doctors were consulted and still longer to think about taking the nasty medicines they prescribed. Second problem. The doctors were faced with so many competing symptoms when World plc was admitted for treatment that it was difficult to know what to tackle first. These and other questions have plagued world markets ever since. Now that we are fast approaching mid-2012, I thought I would step back and consider where we are now (My “plain English campaign” also demands that I try to explain, in passing, what on earth is meant by a “haircut”, quantitative easing and the LTRO).

It won’t surprise readers that when considering the overall state of World plc’s health, my first answer is to say that it depends on which bit one is considering. Before looking at those countries that affect us most here in Gibraltar, let’s start with the worst European case. Greece’s problems have been gripping the financial markets. Readers could be forgiven for thinking that Greece is now sorted. After all, a haircut has been ordered, EU funds lent and austerity in place. Problem over, right? Err, no – not exactly. Read on.

In March, Greece finally secured backing to cut over €100bn from its total government debt. The vast majority of Greece’s creditors accepted the terms – this is the so-called “haircut” on bond yields ­– and, as a result, the EU and IMF have agreed to the latest bailout worth €130bn. The objective is to cut Greece’s government debt from 160% of GDP to a little over 120% over the next eight years.

All seems well and good. The Greeks are off the hook and those who have had to take losses on their bonds seem to have accepted that this is better than a complete default. EU politicians are preening themselves at a job well done. All jolly useful given imminent French elections and the fragility of the German coalition.

The problem is that the crisis hasn’t gone away. Sure the Greeks owe substantially less now than before – but it’s still a debt mountain that will be impossible to finance in an economy that is not growing. And Greece is certainly not growing – it is contracting at an alarming rate. As tax revenues shrink and welfare costs rise, it is difficult to see how Greece can comply with the new debt restrictions. Unless of course there is a third bailout and Greece contemplates leaving the euro. Nothing much changes does it?

Closer to home it is said that Spain is nothing like Greece, and in many ways that is true. Spain is quite simply “too big to fail”. The economy is not contracting at anything like the same rate and the recently-installed Spanish government has just brought in an austerity budget more radical than anything seen before. As a consequence, officials admit that 2012 is likely to be the most difficult year yet for Spain since the onset of the crisis

Normally bullish, in recent months I have become rather more pessimistic about Spain’s chances and whether this “austerity” medicine is going to work. Firstly, after 25 years of spending, the Spanish don’t like austerity. Look at the shiny new airports, motorways and AVE trains criss-crossing the country at 200 mph. The collapse in the property market has been astonishing. Literally millions are out of work with little or no chance of imminent re-employment. In places across Spain one person in three is out of work. Nationally the official rate is more than 23%.

Aside from increased welfare costs, another result of all this is that hundreds of thousands of Spain’s young are moving abroad to find work. London is just one example where the Spanish diaspora has grown exponentially in the last couple of years. Those leaving are more likely to be better educated, perhaps bi-lingual and more skilled. None of this bodes well for the future.

Across much of the EU, particularly across the Mediterranean, recovery is as far away as ever. The problems confronting Portugal, Italy and others remain. During a recent competition aimed at stimulating ideas on what to do about the Eurozone crisis, 11-year-old Jurre Hermans from the Netherlands got it about right. Singled out for a special mention as the youngest entrant in the recent Wolfson Economics Prize, his suggested solution for sorting out the crisis in Greece used slices of pizza as an analogy with Greeks exchanging their euro for “new drachmae”. It remains to be seen whether this will happen but in an effort to ease the strain elsewhere, the EU has joined the US and the UK by increasing market liquidity. Oh dear, jargon time again.

“Quantitative easing”, as undertaken by the US and the UK, is quite simply the issuing of government debt that is then purchased by the government. The result is that more money is pumped into the economy. National debt rises but the idea is that this is better than the alternative scenario. The EU’s version is called the Long Term Refinancing Operation (LTRO). Under this initiative, hundreds of billions of euro are lent to banks at extremely low interest rates for three years in an effort to facilitate bank lending. Even if the intended lending doesn’t happen, the banks have at least used the facility to shore up their balance sheets – so easing the strain during the crisis.  

So how about some good news? There are signs of a fragile recovery in the US and it is perhaps to be expected that it is in the States that the global recovery will begin. After all, there’s the small matter of a US presidential election to distract us between now and November. Another country that has actually taken a strong dose of the austerity medicine is the UK.

The British government is faced with a slowing service sector, a limited manufacturing base and a massive public debt burden. There is little or no room for manoeuvre in areas such as reducing interest rates or raising taxes. Yet one can point to several areas where the UK economy is starting to recover – albeit very gradually and vulnerable to external shocks. The UK’s currency floats freely depending on the world’s view of how Britain is doing, which is not a luxury available to the eurozone. This is one reason why all of us in Gibraltar take a keen interest in the UK and the impact seen on the euro exchange rate.

And in Ireland, there are some real signs that the recovery may be happening. Earlier this year Taioseach Enda Kenny said that by nature he was an optimist and that “Irish people are very pragmatic”. Ireland was the first EU country to approach the EU for assistance. Its banking system collapsed and several years of painful austerity lie ahead. But the “pragmatic” Irish are taking their medicine and, by all accounts, it is starting to work.

We have also come to realise that the US is no longer the only “superpower”. The effects of China’s insatiable appetite for natural resources can be readily seen in Australia, Africa and Latin America. Add to that the impact of Middle Eastern money – “sovereign” or state funding – that is buying up assets from Western banks and factories to hotels and football clubs, and we can readily see that the world economic order has changed for ever.

Contemplating just these few examples, my conclusion is that the economic prognosis is a very fragile version of the Curate’s egg – good in parts, but still pretty bad in others. And here’s the rub. Globalisation means interdependency. Those countries that are seemingly in better shape than others are dependent on growth elsewhere to create a market for their goods. There is still a long road ahead and we’re all in this together. I can’t tell you when the medicine will start to work but I know it has to work, eventually. As the editors of The Spectator surely appreciated, it is all very well to say “get well soon” but it may be better just to say “get well”.

Cyprus lowers VAT for Yacht Leasing Scheme

Under the Scheme, a Cypriot company can purchase a pleasure yacht and enter into a lease-sale agreement for the yacht with a third-party lessee - an individual or company irrespective of their location. Since this is a service deemed to be supplied in Cyprus, VAT is due on the lease at the normal rates of VAT in Cyprus - currently 17% - but is payable only on that portion of the lease which the yacht spends in EU waters.

To avoid the difficulty of establishing the exact length of stays in EU waters, the VAT Service has issued its own percentage scales based upon "presumed" lengths of stay for different types and lengths of yacht. Motor and sailing boats over 24-metres in length are deemed to spend only 20% of their time in EU waters (compared to 30% under the Malta equivalent scheme) to give an effective VAT rate of 3.4%, while motor boats below 8-metres and sailing boats below 10-metres are deemed to spend 60%, giving an effective VAT rate of 10.2%.

The yacht, which can be registered anywhere within the EU, must arrive in Cyprus within one month of the date of inception of the lease agreement and the initial lease payment must amount to at least 40% of the value of the yacht. Further lease payments are payable on a monthly basis, and the lease period must under no circumstances exceed the period of 48 months (36 months in Malta).

The lessee may purchase the yacht at the end of the lease period, for a final consideration of not less than 5% of the initial value of the yacht. The VAT authorities will then issue a certificate to the lessee confirming full payment of the total VAT liability. The lessor is expected to make a total profit from the leasing agreement of at least 10% on the initial value of the yacht.

Prior approval from the VAT Commissioner is required for every application of the Yacht Leasing Guidelines.

Getting into the time Zone

For as long as I can remember I have always been fascinated by the quirks of geography and in particular, different time zones and unusual facts relating to dates. I am always looking out for the oddities around the world that make unusual exceptions. For example, did you know that not only are some time zones measured in ½ hours from CET – India is actually four and a half hours ahead, while neighbouring Nepal goes one better and is four and three-quarters hours in advance. Try explaining that to your gap year teenager when they are trying to ring home from Kathmandu!

Another example is brought home every New Year’s Eve when half way through our day we see news coverage of the fireworks in Auckland, then Sydney and Hong Kong before we even think about going out to begin our nochevieja celebrations. And of course even the longest lasting parties in Europe will be over before Honolulu finally gets to greet the same New Year.

And it doesn’t end simply with one day at a time. Readers may recall the publicity generated when the western-most islands of the Samoan chain skipped Friday 30 December 2011 altogether. The population went to bed on a Thursday and woke up on Saturday morning – but why? Read on.

Further back in history the change from the Julian calendar to the Gregorian version began in the 16th Century – although some countries took several decades to catch up. As a result, to this day, the Orthodox church celebrates festivals a full fortnight after the rest of us. In Britain, the change wasn’t implemented until 1752. By then, unfortunate Britons missed out on 11 whole days – they went to sleep on Wednesday, 2 September, and woke up on Thursday, 14 September.

Except, that is, in Pembrokeshire’s Gwaun Valley where they ignored this decree and carried on ringing in the Julian New Year regardless. To this day children in the valley still walk from house to house on 13 January and sing traditional songs in Welsh that have not altered for centuries. In return, householders shower them with sweets and money – or "calennig", literally "New Year gift or celebration".

I could go on to cite many other examples of such international oddities and eccentricities that survive to this day. That’s all very interesting, I hear you say, but other than helping one show off at Trivial Pursuit why does all this matter?

Let us consider time zones first. As the globalisation of international business becomes ever more important, it is vital that we work to take advantage of the opportunities offered and minimise any disruption caused by the fact that many of us work on a daily basis with people all over the world. For international groups such as the one for which I work, active steps are taken to ensure that someone is available throughout the working day – wherever that may be.

Some of the larger institutions, such as global banks, seek to avoid any such difficulties by offering clients online services 24-hours a day. Some even allow you to speak to a human being at all hours of the day and night – heaven forfend! – although you can be sure extra fees are involved for that kind of attention.

But despite all this, markets are still open only for limited periods. By the time the European bourses start their daily trading – typically at 9 a.m. CET, the Far East is already closing and the Americas are nowhere near awake. In these days of 24-hour non-stop news it can take these markets quite a while to catch up. Readers may have noticed how very common it now is for important corporate announcements to be made on Friday evening – the “Friday Night Drop” in PR parlance. This means that everyone has the weekend to digest the story before relevant stock markets open again on Monday morning. For the same reason, much of the work relating to the bailout of the British banking system was conducted over several weekends; there are many more such examples in recent years.

Turning to dates in the calendar, these can be even more critical. For example, every company will have a “year end” and it’s very common, particularly in those countries whose systems are based on English law, for such dates to be spread out across the year. Indeed using alternative year-end dates can be a real boon for anyone working in financial services who, like me, has toiled until late on several New Year’s Eves so that important transactions be completed – and when most of the world is already out partying,

But such niceties are not limited to the corporate world. For most individuals too, year-ends – and in particular fiscal or tax year dates – can throw up both real challenges and useful opportunities. Consider this simple example. Suppose Mr Brown of England decides that the climate, austerity and Sky News has become too much for him. He decides to move to Spain for a year or two. Then, having read some of these fascinating finance columns in the Gibraltar Magazine, he decides to move again – to Gibraltar. Depending on the dates chosen for all this gallivanting, he may be in for an unpleasant shock. But with some careful planning and help from his professional adviser, the result could be the opposite. Why? It’s all to do with tax years.

In the UK, the tax year for individuals starts on 6 April. This is because while the British moved to the Gregorian calendar (as mentioned above), the tax year remained tied to the Julian version. So the date for the tax year jumped from 25 March to 5 April. The tax year then moved to its current 6 April after a Julian leap year in 1800 – but didn’t change to the 7th after the 1900 Julian leap year. Easy isn’t it? You can see why tax planners charge fees?

Spain, in common with many civil law jurisdictions, works to the altogether more convenient and readily understandable calendar year – ending on 31 December. Here in Gibraltar, as in so many things, we like to be a little different. Our tax year starts on 1 July. Readers can readily see how with careful thought, one’s personal tax affairs, at least during the year or two following an initial move away from home could be managed using periods of residence across these jurisdictions.

You should not however make the mistake of believing that the oft-used phrase “I don’t pay tax anywhere” – what we might refer to as attempting to become a long-term “fiscal nomad” – is going to work. It won’t. Someone somewhere is going to want to tie you down to at least one domestic taxation system. But there is certainly no harm in exploiting the intricacies of the different tax years to your benefit from the outset. As with anything involving tax, get advice as soon as possible once you have decided to take the plunge.And to finish, let’s go back to the unfortunate burghers in Samoa and Tokelau who missed out on 30 December last year. What was all that about? Put simply, it was to do with the commercial realities of world trade in the 21st Century. By remaining east of the International Date Line – around the same time as Hawaii – when Sydney and Auckland woke up on Monday morning, Samoans were still enjoying Sunday breakfast. And of course the same thing happened at the end of the working week – while Samoans downed tools on Friday evening, New Zealanders were already playing rugby (or whatever it is they do on Saturday nights). This may have made commercial sense at the end of the 19th Century when the overwhelming majority of Samoan trade was with the US – but it did not make sense today. The decision was therefore taken that the Date Line should simply be re-drawn such that Samoa moved to the same day as Australia and New Zealand.

Sadly such options are not open to individuals – but, with careful thought and advance planning, it is possible to exploit the opportunities that arise from such differences. And not just in time zones, but in dates themselves. As for whether the UK should adopt Central European Time, that’s all about milking times for Scottish farmers. Don’t get me started!

Exponential growth necessitates new premises for Sovereign

EXPONENTIAL growth continues in the Guernsey branch of Sovereign Trust with five new members of staff and an extension into a new office.

The global company opened its local operation in April 2010 with four members of staff at Sarnia House in Le Truchot. Only a year and a half later, the organisation now employs 27 people.

Staff moved to a larger office in St Peter Port House in Sausmerez Street earlier this year but the recent addition of five new employees necessitated an expansion into another office within the same building complex.

Since setting up in the island in 2010, Sovereign Trust has seen unprecedented demand for both international and domestic pensions services.

Managing director Rob Shipman said it had been a whirlwind couple of years and he saw no end to the expansion.

‘We are an independent company rather than being affiliated with a law, bank or accountancy firm, which means we give our clients complete freedom. We do not try to guide them towards any particular pension product.

‘Qualifying Recognised Overseas Pensions Schemes (QROPS) and Qualifying Non-UK Pensions Schemes (QNUPS) are services that have been very popular and we now enjoy a significant percentage of the market in those areas.


‘This as well as our expertise and commitment to providing a first class service is what I attribute our success to. We have taken on some very talented staff members and will be looking to hire more in the coming year,’ he added.

Sovereign Trust provides both internal and external training for new recruits and is determined to invest in their young people as they begin their careers.

‘It’s a very exciting time. It has been a huge success story and we are exceptionally pleased,’ said Mr Shipman.

Nationality by Investment

Countries who sell their passports are often frowned upon but the reality is that all countries try to encourage immigration by the wealthy by granting residency which leads to nationality, or nationality itself, in return for investment – it is just the price and timescale that differs. Many of you will recall the rush by Hong Kong persons to obtain the insurance of a right to abode elsewhere in the lead up to 1997. Canada and Australia were the favoured jurisdictions as they had relatively clear rules and a relatively modest level of investment required in order to grant foreign nationals a residency. And those new residents had to wait only a relatively short time before becoming eligible for, and normally being granted, citizenship. Many of those taking out these residencies did not necessarily want to emigrate but did want to know that they could do so if things didn’t work out for them in Hong Kong after 1997. In the end things turned out swimmingly and lovely and many of those who moved abroad came back or shelved any plans they might have had to move away. There are still many countries where the future is uncertain either politically or economically and this encourages their citizens to either emigrate or take out an alternative residency or citizenship as an insurance policy in case things get worse. There are many from the more troubled areas of the world who fear for the future and may more who have money to invest and choose to do so in countries which will give them some kind of formal status in return.

If you are considering a second residency or passport then there are factors worthy of consideration:1. How much do you need to invest to get residency (if anything) 2. How long does it take before you are eligible for citizenship? 3. Do you have to remain in the new country for a certain minimum number of days in order to be eligible for citizenship?4. Does your new country allow you to maintain your old citizenship or prohibit dual citizenship?5. Does your old country allow you to keep your existing passport or does it prohibit dual citizenship?6. Does the passport issued by your new country give you easy travel i.e. does it have arrangements with lots of other countries for visa free entry?7. Are there any requirements for national service (joining the army)?8. What are the costs of living including the tax rates and tax incidence?

Imagine being offered immediate citizenship by Rumbabwe only to find that they do not allow you to keep your old passport, their citizens are unwelcome everywhere else in the world so you need a visa to go anywhere and visas are not necessarily readily available because Rumbabwe freely offer citizenship to other nationalities, that you immediately have to sign up for the army and they are currently engaging war with Freestate and their taxes are 95% on worldwide income and capital gains with no planning opportunities to avoid those taxes.

One of the more interesting possibilities for immediate, well the process takes about 3 months, citizenship is currently available from St. Kitts and Nevis. They have run a successful “nationality by investment” programme since 1984 which allows citizens of other countries to become passport holders in St. Kitts and Nevis in return for a one off investment of US$350,000 in a qualifying property. Applicants must continue to own the property for 5 years or risk losing citizenship. After that they are free to sell the property if they wish. And there is no difficulty in financing the purchase so applicants need only put up about US$200,000 in cash with the rest of the purchase price being borrowed from a bank. There are conditions attached but they are not unattractive. One property developer even offers a scheme whereby applicants can buy a share in a company which owns property for US$400,000 and the developer will buy back those shares for the same US$400,000 after 5 years. This scheme qualifies the purchaser for citizenship. In all cases expect government and other fees of about US$100,000.

St. Kitts and Nevis allows dual nationality and is an UK commonwealth country which many think makes the place rather credible. Their passport gives visa free access to around 190 countries and allows visa free travel within Europe as it has signed agreements with the Schengen countries which is all of Europe apart from the UK. The UK allows visa free access for all Commonwealth citizens. This seems pretty attractive.

The only equivalent programme that we can find is the Economic Citizenship programme run by the Commonwealth of Dominica (do not confuse this with the neighboring Republic of Dominica) where they will offer immediate citizenship in return for an investment in government bonds of US$75,000. Unfortunately the visa free access is much more limited. This programme that has been running quite successfully for quite some time but has recently fallen out of favour as St. Kitts has gained favour.

No other countries seem to legitimately offer the same immediate citizenship program. From time to time I have been approached by others purporting to represent countries which are now offering economic citizenships but the first question to them is to show us the clause in the nationality law which allows citizenship by registration in return for investment. Frequently the laws do not allow it so the scheme seems to rely upon something rather more sinister and should be avoided at all costs.

Other countries offer a swift route to residency in return for a relatively modest investment which in time will lead to citizenship. Canada continues to attract new immigrants under its investment program which requires US$800,000 in investment. This can be financed so the cash contribution is only US$200,000. Citizenship should follow within five years.

Bulgaria has recently announced an interesting program. Bulgaria is full member of the European Union and will grant residency in return for an investment on BGN 1,000,000 which is about US$500,000. Once residency has been granted it is relatively easy to travel freely within Europe. Citizenship should follow 2 years after residency and once granted the EU principle of free movement of labour and right of establishment should allow the new immigrant to live and work anywhere within the European Union without further authorization. This could be very attractive and has attracted many non-EU immigrants. The US, of course, still has many different ways to enter. Each year, 50,000 immigrant visas are made available through a lottery to people who come from countries with low rates of immigration to the United States. None of these visas are available for people who come from countries that have sent more than 50,000 immigrants to the United States in the past five years. Anyone who is selected under this lottery will be given the opportunity to apply for permanent residence (a Green Card). If permanent residence is granted, then the individual will be authorized to live and work permanently in the United States. Successful applicants are allowed to bring their spouse and any unmarried children under the age of 21 with them. The number of places are awarded according to quotas for each country but they treat it as a form of foreign aid so award different countries different quotas depending on their close connection with the US and then the perceived need to help their citizens. One of the biggest recipients is the Philippines so if you are a Philippine citizen you have the biggest chance of winning a green card if you enter the lottery. It is free to enter although many offer to assist with the entry process for substantial fees.

The financial impact of considering residency abroad

It may seem that I have written nothing but doom and gloom stories – the state of the global economy or the crisis in the eurozone – during the past few months. And we have all seen government announcements across many of the industrialised countries about increased rates of personal taxation or savage cuts in public spending.

As just one example, our neighbours in Spain are going to have to get used to a top income tax rate of 55% - one of the highest in Europe. And it’s not much better in the UK – we are told that the highest income tax rate of 50% is likely to stay until at least 2015 and a recent study showed that up to a third of the population has, at one point or another, considered leaving the country.

Whilst accurate information is difficult to obtain, it was estimated in 2010 that some 200 million people were living as expatriates around the world. Of course for most people, leaving their home country is just not economically or politically viable but, for those who are in a position to do so, the financial impact of any such move is likely to be the most critical factor in any final decision.

In my day job -–when not penning magazine articles, that is – I have to deal with these issues on a regular basis; in recent months it is noteworthy how much more frequently I am being asked for advice and practical help. So for readers who might be considering Gibraltar as one of the places where they could live, what suggestions could I make from a financial perspective? And indeed, what are the alternatives?

It’s no secret that I am an avid supporter of Gibraltar and of course I moved here myself more than seven years ago. So how does Gibraltar compare to other jurisdictions around the world seeking to attract new residents? It’s not all about tax and the other financial implications of moving of course, but that’s the area where most people require advice.

Most people probably daydream about just “upping sticks” and moving somewhere else. After all, the grass is always greener. But how practical is it and what must be taken into consideration? As always, the answers will depend on the personal circumstances of the individual concerned, as well as what they are trying to achieve.

In recent years, we have seen an increasing number of predominantly younger people moving abroad for work reasons. And once the initial break with a home country is made, it is so much easier to remain abroad. We all know people who have made the “expat life” a permanent feature of their existence. Indeed having left my home island of Jersey over 25 years ago and lived in several countries since, I am a prime example – although if my boss is reading this, I should emphasise that I am very settled here in Gibraltar!

But there are also many people who are not just considering their next career move. They could be retired and looking for a different lifestyle or, having enjoyed commercial success in their home country, they may be seeking new challenges, markets and horizons. There is clear evidence that more people in their forties and fifties are now looking at where they want to live in a different way and it is generally people in this demographic that I am called upon most often to assist.

What is driving this and how do I advise such people when they start making enquiries? Without doubt, TV and other media play their part. The 24-hour news culture tends to focus on the negative aspects of social and economic landscape, while at the same time programme makers churn out endless programmes on travel and overseas property. All of this whets the appetite of the northern European who may well be seduced by images of 365 day-a-year sunshine, sangria and a low tax existence. Add to that the seemingly inexorable rise of low cost flying, especially here in Europe, and one can easily believe that moving abroad is easy. Everyone else seems to be doing it, so why not take the plunge?

The fact is that uprooting one’s life and moving abroad is just not for everyone and the reality is often very different from the media images. It’s one thing for the super rich who can simply globetrot from one of their homes to another as the mood suits, but for most of us a serious reality check is normally to be prescribed.

But when it becomes more serious and someone really wants to take the idea forward, what should they consider? It’s tempting to say that the tax rate is so high in one’s home country that they are being “forced” to move overseas but there is much, much more to it than that – family, work, assets, income, healthcare, pensions, language, culture, living costs, banking and legal systems, and the ever present currency risks, will all need to be carefully considered.

European law permits EU citizens to live in any one of the 27 countries that make up the Union. With a combined population far greater than the US, Europeans tend to forget that despite the EU’s problems we do all enjoy these rights – unparalleled in the rest of the world – to live in any of the diverse nation states that make up our continent. But in fiscal terms, there is often little to choose between them so other factors must come into consideration.

Instead, let us consider a couple of countries that actively encourage inward immigration by using specific residency rules. In Gibraltar high net worth residents – defined as those with assets of at least £2 million – can apply for a special “Category 2” status. In addition those with special skills not commonly available may also live here under the HEPSS rules, again where taxation is capped.

Other countries in Europe offer alternative solutions including the Channel Islands and the Isle of Man. Malta’s residency rules were tightened up during 2011 but remain attractive. It is possible but becoming more difficult to take up residency in Switzerland, whilst property prices in Monaco put that principality out of reach of most ordinary folk. Both in Europe and further afield, there are many other places one might consider.

For example, tempting alternatives exist in the Caribbean. St. Kitts & Nevis offers citizenship with a passport to incoming residents who invest a minimum amount into the economy. Depending on personal circumstances this can be extremely useful. Moving across oceans rather than within Europe won’t suit everyone, but such opportunities exist across the world.

Readers will expect me to conclude that there is nowhere better to live than Gibraltar. I happen to think that might be true, especially for British expatriates. After all we have the sun, familiar legal and banking systems, a common language and, compared to other European countries, very low taxes (or none at all) on succession, capital gains etc. – and there’s no VAT. But the Rock may not be for everyone and there are many alternatives available, as I have set out above.

As always though, it’s the overall picture that counts and professional advice should be sought at the outset. Although the rewards can be outstanding, moving to a new life overseas can also be extremely challenging and potential émigrés should always proceed with caution. However, given the current state of the world this might very well be the time to consider taking the plunge.