Q.1 2022

Data Points

A Selection of AIRINC Research Results

This quarter’s cost of living research was conducted primarily in North America, Central and South America, the Middle East, Africa, and maritime Southeast Asia-Pacific.

Housing Update

Snapshots of expatriate-quality rental markets around the world

United States

Panama City, Panama

San Juan, Puerto Rico

Doha, Qatar

Dubai, U.A.E.

Australia

Singapore

United States

Rental markets in the U.S. continue to make headlines. A large number of cities are seeing double-digit rent growth. Broad trends include low supply as rental properties have been sold off in a hot sales market while construction lags behind demand. Single-family homes are especially popular, although apartment rents in urban cores are recovering as well.

Panama City, Panama

Rents are recovering from the pandemic dip, especially in prime neighborhoods. Construction had slowed or stopped during the pandemic and, with the return of demand, the supply has not kept up. A few condo buildings will be completed this year, but sources expect rents will continue increasing over the next year.

San Juan, Puerto Rico

An investment law designed to attract new residents to Puerto Rico has worked well. Tax exemption has lured people to Puerto Rico, inflating the sales and rental market with increased demand. New construction lags behind and available properties are extremely limited.

Doha, Qatar

Rents increased sharply ahead of the 2022 World Cup, which will take place in Qatar. Some landlords who currently have units available would rather sign a short-term lease or wait to capture the high rates from visitors in the fall. The governing body of football, FIFA, has started to secure serviced apartments for fans and it is estimated that by September they will have taken over half of the rental units. Properties available for long-term lease are limited and competition is very high. Rents in some areas have doubled from a year ago.

Dubai, U.A.E.

Rents in Dubai continue to increase, especially for villas. For many existing tenants, the best option now is to extend their lease, which offers some renter protection. Landlords would prefer to rent to new tenants and increase the rent more significantly.

Australia

Rental markets are up in Australia. During the pandemic, Darwin has been considered a relative safe haven and demand is strong as Australians repatriated or moved domestically to Darwin. Rents increase as landlords sell their properties in a strong sales market and further reduce supply. In Perth, the economy remained strong and, with the border restriction lifting, Australian nationals have returned to Western Australia. Melbourne is recovering from its previous pandemic slump and availability is low. Competition is fierce, especially for houses, and rents increased accordingly.

Singapore

Demand is up from returning Singapore nationals and from expatriates from all locations, including a surge of people previously living in Hong Kong. Both smaller and bigger apartments are in demand from various sections of the market. Restrictions on property viewing make the house-hunting process take longer and expatriates are spending more time in temporary accommodation.

Goods and Services Update

Highlights from AIRINC’s in-depth research
Turkish Lira Depreciation
Russian Sanctions and Impact on the Ruble
Cryptocurrency in Ukraine

In late 2021, the Turkish lira rapidly depreciated against the U.S. dollar, losing over half its value in the last quarter of 2021 alone. While many factors have led to the depreciation of the lira over the past few years, interest rate cuts have spurred the most recent devaluation. President Erdogan believes that lowering interest rates will help to stabilize the lira, contrary to traditional monetary policy. As a result, the Central Bank of Turkey cut interest rates multiple times in late 2021, which fueled the lira’s depreciation. So far, the lira has yet to recover much value in 2022.

As the lira has weakened, inflation in Turkey has accelerated. Inflation levels are currently the highest they have been in decades. AIRINC has been closely monitoring the situation and has conducted research of Istanbul in both November 2021 and February 2022 to measure inflation. We found that prices increased significantly during that timeframe largely due to the lira’s depreciation. We found significant inflation in all categories, especially food at supermarkets, personal care, household supplies and services, and transportation. We will conduct more research of Istanbul in May 2022 to capture any further changes to inflation.

Since the end of February 2022, the Russian ruble has heavily depreciated in value against the U.S. dollar. After Russia’s invasion of Ukraine on Feb 24th, the ruble lost half its value in only a couple weeks. The ruble’s steep decline is accredited to the economic sanctions placed by multiple nations in response to the invasion.

Sanctions were placed to put economic pressure on Russia to deter any further advance in Ukraine. For example, the U.K, EU, and United States placed sanctions impacting the exportation of goods by Russian firms. The EU also placed sanctions across several industries including the energy, transportation, and technology sectors. The Russian Central Bank’s assets in the United States have been frozen to reduce Russia’s ability to have access to those funds, perhaps being the most impactful to the ruble’s decline. Russia’s Central Bank proceeded to increase interest rates from 9.5% to 20% and freed local reserves to stabilize the currency and offset any future risk of inflation.

Ukraine legalized cryptocurrency amid a huge influx of digital donations intended to fund the nation’s resistance efforts against the Russian invasion. Previously, the Ukrainian government was engaged in a long process to legalize crypto, with Parliament passing a bill and sending it to President Zelensky to sign into law in late September 2021. However, the President rejected the proposed law, which appointed the Ministry of Digital Transformation as the regulatory body. Instead, Zelensky proposed that cryptocurrency in the country should be regulated by the National Commission on Securities and the Stock Market (an equivalent body to the SEC in the United States).

This process was understandably accelerated, as Ukraine has received a flood of cryptocurrency donations since the war began—over $100 million worth as of mid-March 2022. The government’s announcement specified that the market will indeed be regulated by the National Commission on Securities and the Stock Market, while the Ministry of Finance is working to accommodate the change with updates to the nation’s tax and civil codes.

Goods and Services Inflation

Selected locations with inflation higher than 5% for 6 months
Algeria
Angola
Argentina
Barbados
Brazil
Ghana
Mozambique
Nigeria
Suriname
Turkey
Venezuela

Selected 3-month Exchange Rate fluctuations of more than 5%

Russia

Currency: RUB

Change vs EUR: -30.2%

Change vs USD: -32.0%

Belarus

Currency: BYN

Change vs EUR: -18.5%

Change vs USD: -20.7%

Zimbabwe

Currency: ZWL

Change vs EUR: -14.7%

Change vs USD: -16.9%

Sri Lanka

Currency: LKR

Change vs EUR: -14.3%

Change vs USD: -16.5%

Kyrgyzstan

Currency: KGS

Change vs EUR: -12.4%

Change vs USD: -14.6%

Kazakhstan

Currency: KZT

Change vs EUR: -11.6%

Change vs USD: -13.8%

Ghana

Currency: GHS

Change vs EUR: -11.2%

Change vs USD: -13.4%

Tajikistan

Currency: TJS

Change vs EUR: -7.3%

Change vs USD: -9.6%

Ukraine

Currency: UAH

Change vs EUR: -5.3%

Change vs USD: -7.8%

Zambia

Currency: ZMW

Change vs EUR: -4.7%

Change vs USD: -7.1%

Argentina

Currency: ARS

Change vs EUR: -4.3%

Change vs USD: -6.7%

Sweden

Currency: SEK

Change vs EUR: -3.0%

Change vs USD: -5.5%

Morocco

Currency: MAD

Change vs EUR: -2.6%

Change vs USD: -5.0%

Dominican Republic

Currency: DOP

Change vs EUR: 6.0%

Change vs USD: 3.3%

Colombia

Currency: COP

Change vs EUR: 6.2%

Change vs USD: 3.4%

Uruguay

Currency: UYU

Change vs EUR: 6.2%

Change vs USD: 3.5%

Suriname

Currency: SRD

Change vs EUR: 7.1%

Change vs USD: 4.4%

Chile

Currency: CLP

Change vs EUR: 7.2%

Change vs USD: 4.6%

Guinea

Currency: GNF

Change vs EUR: 8.0%

Change vs USD: 5.2%

Namibia

Currency: NAD

Change vs EUR: 8.6%

Change vs USD: 5.8%

South Africa

Currency: ZAR

Change vs EUR: 8.7%

Change vs USD: 5.9%

Venezuela

Currency: VES

Change vs EUR: 10.4%

Change vs USD: 7.7%

Peru

Currency: PEN

Change vs EUR: 11.5%

Change vs USD: 8.6%

Brazil

Currency: BRL

Change vs EUR: 13.9%

Change vs USD: 11.0%

Afghanistan

Currency: AFN

Change vs EUR: 25.8%

Change vs USD: 22.6%

Angola

Currency: AOA

Change vs EUR: 26.0%

Change vs USD: 22.9%

Country
Tax Update

Changes in expatriate tax

Belgium

Germany

Indonesia

Poland

Tax blog post on Ukraine
For more information, please see our blog post on COVID-19 tax updates:

Belgium

Inflation-indexing was applied to deduction maximums, the income splitting amount, tax credits based on family size, other credits, and tax brackets. The top marginal tax rate remains at 50%. The social security is unchanged. The net effect is a small reduction in tax which varies by income level and family size. Effective for 2022, the expatriate tax concession was revised substantially. Under the new expat regime, qualifying individuals may claim an exclusion of 30% of gross income, up to EUR 90,000. The “deemed nonresident” provision from the previous expatriate tax concession no longer applies. Transitional rules apply for those individuals who used the old regime. The new expatriate tax concession also applies to social security contributions.

Germany

The tax rate formulas were indexed for inflation, and the social security maximums decreased slightly. The rate and maximum for lump sum pension deductions also changed slightly. The net effect is a small decrease in income tax and social security for most taxpayers.

Separately, the German Government recently announced a new policy that allows German companies to sponsor third-country nationals who are exempt from German social security contribution requirements to work in Germany as “skilled workers and local hire specialists.” Previously, employees who obtained a Certificate of Coverage to exempt German social security were ineligible to gain work authorization as a “skilled worker or local hire specialist,” unless they obtained EU Blue Cards. The new policy provides companies additional options for sponsoring third-country nationals while allowing for social security contributions in their home countries.

Indonesia

A new top marginal rate of 35% was created for incomes exceeding IDR 5,000,000,000. The maximum contribution to pension security decreased slightly. The employer contribution rate to work accident insurance decreased. This scheme is considered a taxable benefit to the employee, therefore the net effect is a small decrease in social security and income tax for most taxpayers, but an increase in income tax for individuals with income exceeding IDR 5,000,000,000.

Poland

Poland implemented major tax reform effective for 2022. In addition to other tax changes impacting corporate taxpayers and other taxes, the following changes were implemented for individual taxpayers. The personal allowance credit was repealed. The partial credit for contributions to health insurance was repealed. Married taxpayers may file jointly even if married for only part of the tax year. The tax brackets were adjusted with the top marginal tax rate unchanged at 32% and a tax-free allowance of PLN 30,000. The wage base used for determining the maximum contributions to social security increased, effective January 1, 2022 to PLN 177,660.

United States Tax Update

At the Federal level for 2022, there were inflation-indexing adjustments to tax brackets and the standard deduction. There is an increase in the social security wage base.

Build Back Better

The White House and Congressional Democrats are still attempting to craft a version of the Build Back Better Act, which is anticipated to include various tax provisions, including a revised State and Local Tax (SALT) deduction cap (currently $10,000, but may be increased to $80,000), a surcharge on high-income individuals, and enhancements to the child tax credits and advance payments. AIRINC will closely monitor the legislation and will prepare, release, and announce V2s, as necessary.

Notable state tax developments

Arizona

Proposition 208, the Invest in Education Act, was passed in November 2020, which imposed a 3.5% surcharge on taxable income exceeding $250,000 (single) and $500,000 (joint). In response, Governor Ducey signed into law a 2022 budget and separate bill that reduces the state’s individual income tax rates and caps the top marginal rate (including surcharge) at 4.5%.

Colorado

Itemized deductions are now limited for individuals earning more than $400,000.

District of Columbia

The top marginal rate increased from 8.95% to 10.75%.

Georgia

Lawmakers are hoping to eliminate state income tax through legislation.

Idaho

Retroactive to January 1, 2021, Idaho enacted the largest single tax cut in state history. The tax rate schedule was reduced from seven brackets to five, and the top rate reduced from 6.925% to 6.5%.

Indiana

Revenues exceeded the budget by $1.2B, triggering an automatic refund payable to all Indiana residents via a tax credit on 2022 Indiana tax returns. The final amount is still to be determined at a later date, but initial estimates suggest a $170 credit per taxpayer ($340 for joint filers). The refund will be payable as a tax credit on 2022 tax returns.

Louisiana

Louisiana eliminated the deduction for federal income tax paid, but enacted new lower rates: 1.85%, 3.5%, and 4.25%, down from 2%, 4%, and 6%.

Massachusetts

Massachusetts voters will decide in November whether to enact a “Millionaires’ Tax,” which would assess an additional 4% tax on income exceeding $1M.

Montana

The top rate is reduced from 6.9% to 6.75%. Additional reform is scheduled for 2024, scrapping the seven-bracket system (1% – 6.75%) with a two-bracket system (4.7% & 6.5%).

New York

New York enacted tax increases for higher income taxpayers. Combined top marginal rate for NYC residents is now over 50%.

North Carolina

The flat rate was reduced from 5.25% to 4.99%.

Ohio

Ohio enacted a budget with large tax cuts for individuals, with the top marginal rate reduced from 4.797% to 3.99%.

Oklahoma

Each of the six tax brackets were reduced by 0.25%.

Oregon

A new Portland Metro income tax was enacted, assessing 1% on incomes exceeding $125,000 (Single) and $200,000 (Joint).

Research Location Update

Q.1 2022 Researched Locations and Upcoming Q.2 2022 Locations

AIRINC researches more than 150 locations each quarter.

Q.1 2022 Researched Locations
Q.2 2022 Upcoming Locations

White Papers & Articles

Sustainability In Global Mobility

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Benchmark Surveys

Flexibility in Mobility

It seems almost everyone in Mobility is considering the concept of flexibility in mobility policies. There are many reasons driving the need for flexibility; some focused on the business…

Benchmark Surveys

DE&I and Global Mobility

When asked about DE&I and how it relates to Global Mobility, the most common theme heard from mobility professionals is “this will be an increasing area of focus for us” or “we’re just starting to think about it”.

White Papers & Articles

Is it Time to Rethink How You Set Compensation Levels in the “New” Normal?

The pandemic’s impact on a growing distributed workforce has been highlighted by many different talking heads. However, no one has really addressed the longterm consequences to the total…

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