How the Expat Business World Can Respond to Coronavirus
WWC - Coping with Coronavirus
IN THIS SERIES OF ARTICLES TO HELP EXPATS DEAL WITH CORONAVIRUS, PROACT SAM EXPLORES HOW EXPATS CAN PROTECT THEMSELVES AND EXPLOIT OPPORTUNITIES PRESENTED BY THE PANDEMIC.
Part 11 - How the Expat Business World Can Respond to Coronavirus
The virus epidemic we find ourselves facing has brought an economic lockdown which impact Expat families and businesses especially hard particularly as there's no travel. The lockdown is making cross border trade, lifestyle, holidays and managing overseas properties very difficult for everybody.
So, from the perspective of Expats, our World War C: Coping with Corona series today takes us to look at what the opportunities are which are open to Expats going forward?
What should we do about those opportunities?
Importantly, where will the money come from to continue with our lifestyle going forward?
We need to ask these questions because money makes the world go around and, without consumers a business can't function.
Potential consumers include businesses who have received cash from sales, employees who have received income from their work within a business, or pensioners or investors who received income from assets they've accumulated from their previous business and work as employees. Money does make the world go round. So how are we going to progress and go forward?
Are we in a recession? Will we find ourselves stuck in recession in 2020 post-lockdown?
With the economic shutdown for what is shaping up to be between three weeks and three months, that will bring a recession about. Of that, there's no doubt. An economic recession is when economic activity falls for two quarters in a row. It's almost certain to do that, given that we've had a complete shutdown. And, even when the restrictions are lifted, there'll be a time, a place, and a pace for individuals to regain confidence and how they can get back out there and experience their lives after everything that’s been happening.
The issue is multifaceted. And we would like to open up the discussion to Expat families and businesses. If you've got any questions, contact us with them and we'll answer them through our Living & Working Abroad Facebook page or Living & Working Abroad group. But what we need to understand if we're a business is, how are things going to change?
During this lockdown, more people are learning how to work remotely, how to communicate online as a business, how to spend less time commuting in a car, less time doing their work.
If they can work entirely electronically without having to print and produce paper, without the boss waffling in meetings, and without unproductive meetings at work, then they can get their job done in less time (or more work done in the same time). So, how will those people, those employees react to that? Will they, as consumers then, have more time and greater availability?
Will the business opportunities going forward allow people to provide more/improved services: more personal services for their free time, more entertainment services? Or will specialists services enabling businesses to operate in this new environment become more important?
These are some of the issues that a business should consider.
Coronavirus affects Expat travel and businesses
For an Expat Living and Working Abroad, the same is true.
If your lifestyle is spent living between a holiday home and your home country and visiting family and friends in third countries, then all that's changed as well because these travel restrictions mean that you can't carry on that lifestyle.
If you're retired to Southern Europe, to Cyprus, Greece, or Spain, or Portugal, that lifestyle might not be sustainable or valid when you consider how your perception of your new world now is with respect to your children, your family, your work. A person could have been a European consultant for a business, based anywhere in Europe. But now, we've got travel restrictions. That work can be done online, but it can't be done by moving around so much. So, where are you going to be based? And how are you going to be treated for that when it comes to your financial, operational and tax situations?
A business needs to start considering now the costs and changes it will need to make in terms of its cost base, in terms of its strategy, how it's going to reorganise its staff when they comes back, and what work is it going to do.
For help and guidance on that reorganisation and this important step, contact us at ProACTpartnership.com.
How can Expats protect their assets, property and families when they can’t deal with those things locally?
Expats will also want to protect their assets, protect their property assets, protect their families in the event that they're not able to deal with them locally.
You may need local services to provide administration and control of your assets locally to help those continue to generate revenue and be secure in the event of death, or disability, or inability to travel, as we've got now.
Contact ProACTPartnership.com for help and advice.
International Monetary Fund provides funding
This last week, we've seen that the IMF have come forward to say that they're going to provide funding. The IMF is the International Monetary Fund, the bank of countries. They provide countries in trouble with funds to tide them over when hard times are hit. The USA contributes the largest percentage as a member via its quota. The IMF have come forward already with a two trillion dollar support fund during this period, which, for the USA, actually includes significant new guarantees for the IMF to allow them to provide extra funding around the world for countries that are going to be hard pressed.
This is important in two ways. One is that it provides the funds that are going to trickle down in terms of tax, business support, and grants to individuals, employees, and businesses. And second, is that it will open up more vulnerable countries and allow them less likely to be closed down.
If you want to continue to travel the globe and see remote places and not have a virus pandemic that's going to drag on for five or ten years, to get that under control, we need the IMF to keep those countries stable, growing, and viable.
Consider the impact of change post-Coronavirus
We saw after World War I that social changes that came about. But we also saw from the Irish Potato Famine in 1845 that the Irish population went down by 25% due to deaths and emigration, causing a break up of a whole country and culture (it is said that this is when English replaced Irish as the language of the majority, for example) – all due to a virus which affected their food stock.
Similar events have happened in the past and they're happening now. And we have to consider, in World War C, what the true implication of that is. Because, until a vaccine is introduced for COVID (which might take them a couple of years), countries are not going to be confident to freely let people wander in and out, potentially bring an infection to their shores, especially if they haven't got the resources to handle it in their communities.
These are big issues and there are big questions to be answered.
It's not that COVID is always a killer (we know that many people recover from the virus) or that there aren't other killer diseases out there. It's the fact that COVID is a new disease to human beings that's causing the problem.
The American ‘Center for Disease Control' just released statistics showing that from October 19 to March 20 they estimated somewhere between 39 and 56 million Americans have had seasonal flu. Of those, it is estimated that between 24,000 and 62,000 have died. That's a big variation. But we know that millions of people (up to 56 million people), have had seasonal flu in America.
And up to 65,000 have died. However, for the majority of those who suffer with it, flu is not that deadly, but it's known, and it's assessed, and it's a liability each year. Every year millions of people die. And one of the causes that can bring along an end of life situation is seasonal flu.
At the time of writing this article, COVID, has reported just over 760,000 recorded cases in America. And it's killed over 40,000 people. So, nowhere near the potential 56 million flu sufferers in America, but with a much higher death rate of the seasonal flu virus.
This is the biggest concern; the death rate is so much higher. So, we have to treat this new disease with caution. And that caution will be exercised by countries around the world. We've got the longer term to deal with as well as the short term now, it's going to take time to recover. And your business, your family has to recover.
How we could move out of a recession in 2020
The IMF have got funds to provide to multiple countries and allow people to get the financial support they need to move forward. If the system moved perfectly without corruption or people siphoning off their profits to get rich quick, potentially, by the end of 2020, the IMF believes the world economy could be moving out of recession. So, we'll have one or two, maybe three quarters of recession. But, by 2021, the economy is back and rock and rolling into a full season.
It's naive to try to think that the lockdown will end and everything will be back to normal. It won't because there will be caution among governments, among communities, among individuals on how to get back and how to get working effectively. And that means that the recession will progress. When the consumers come back (be they businesses or employees), we don’t yet know what habits will have changed or what demands will have changed.
In World War I, between 1910 and 1920 we saw a huge difference in transport, moving from horses as the main method of transport in 1910 to the motor vehicle, motor engine, cars and lorries, which became the main modes of transport from 1920. Before the second and first world war, the plane came of age. International flight between America and Europe was possible. And the world opened up as a result to the global travel that we knew before the COVID crisis.
There is potential as a result of World War C, to have the same sort of dramatic social changes. We don't yet know what they are. We don't know how they're going to evolve.
Important points for Expat businesses to consider
But you can look forward and anticipate with your business. And businesses locked into old ways and old habits that are unlikely to survive.
We need to look at your business, look at your costs, look at your organisation and how you run your business and see how you should adapt. It doesn't stop you doing business online, communicating with staff and customers online. As we train each other up as customers and employees to do that, online business and communication will become even more normal than it is now, giving consumers more free time to consume and buy products and services in a different way: more restaurant time, more beach time, more travel time, depending upon the circumstances.
The world will change post-coronavirus. And we need to have a look at what that's going to do and how that's going to affect your business and your lifestyle. When we are able to freely travel again, are your assets protected abroad? How will your business need to adjust and adapt its ways?
VAT deferrals in Europe
On the tax side, the monies coming down from the IMF are quite varied. VAT deferrals are common throughout Europe for businesses. If you're not clear on what that means, you need to contact us and talk that one through.
We're going to produce a tax handout, a download from our website next week which shows the changes to tax deadlines and tax payment deadlines for Expat families and businesses around Europe. So, we will create a that summary and it will be available from our website at ProACTpartnership.com next week.
Generally however, with VAT deferrals businesses need to be careful because, obviously, it involves holding onto VAT money. If you’ve got a tax liability to pay, you've still got to pay it. So, it frees up money, but if you spend it, and then you've got no more money to pay it back, that becomes an issue. This is about cashflow, and the message ‘don't lose it all’ is the key. The VAT still needs to be paid.
The second issue at hand is to consider what you will be doing in terms of tax payments. Income tax, rental taxes, savings taxes have all been deferred. Different countries have different periods of deferral to the payment of that tax: a tax will still be due, but it will be deferred. Self-employed people in the UK can apply for a grant. It's effectively ‘free money’, but it is taxable income. So, if a self-employed business had an impact, it could get up to £2,500 per month for 3 months (which may be extended) to support its business this year. But that is taxable income to be paid next year. So, it can replace lost income now, but the tax will still need to be paid going forward. So, that's something to consider. And, if you need any help and that sort of application, contact us at ProACTpartnership.com.
There are also social insurance benefits. The government is offering to support the payroll of a business. So, the business can apply for the staff's wages to be paid directly to them or through their payroll system. This allows jobs be kept open and employees to continue to see income, to sustain the lifestyle as consumers going forward.
If your business needs help setting those schemes up, contact us.
If you do lose your job, you need support, and you've been paying social insurance, then there are opportunities to accelerate and shortcut the system to get support for your family and your business.
There are lots of actions to be considered today to get the cash that's being released into the system to minimise the impact of the economic lockdown, to minimise a period of recession moving forwards, and to allow the landscape to open up and resume our lifestyles.
But things are going to change. And you need to identify the opportunities which are available to you as there are indeed opportunities there. We can move forward and, in 2021, have a prosperous year ahead, getting through 2020 with the assistance of the financial support available.
If any help is needed for taxes, business reorganisation, protecting assets, for Expats Living and Working Abroad, contact us at ProACTpartnership.com.
And look out for our guide to changes to tax return deadlines and tax payment deferrals that will be available from our website next week.
One last point I would just say is that generally tax returns still need to be done on time. So again, if you're restricted through location, or travel, or facilities to do that, we can help you do those returns online and keep the returns up to date. Contact us at ProACTpartnership.com for more information.
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