To Fire Starter re: banking

kiria


Joined: 15/01/2009
Posts: 19

Message Posted:
11/02/2009 03:11

Hi Fire Starter,

From reading your posts I could see that you handled the purchase of your house in a very inteligent way, avoiding most (if not all) of the problems which many other buyers had (and may still have in the future). I made it therfore a point, to listen carefully to what you say.

As I intend to deposit a considerable amount in TRNC banks (for the high interest rate they pay on USD), and I read your strong objection to such a move, I was wondering if you could please:

1. Elaboate on your reasons as much as possible. Do you have any facts to support your objection?

2. What would be the better way/place to invest the money (low risk, good liquidity, reasonable returns)?

3. Do you know how they are able to generate and pay the high interest on foreign currencies (i.e. on USD 4% or more, when the LIBOR is 0.45%)?

fire starter


Joined: 19/06/2008
Posts: 3401

Message Posted:
11/02/2009 10:58

hi kiria,

1) a few years ago some banks here closed and people lost their money.

remember after all this is cyprus.

2) the interest rates are good on first look , but remember you will pay 8% tax on interest earned.

in the uk you have a yearly tax allowance where you can claim back tax paid if you didn't use your tax/earnings limit. here this doesn't happen.

the way i see it is if you are getting say 12% interest, then paying 8% tax then you only have 4% interest.

with the lira going up and down like a yo yo, i'm not convinced that there is a big enough profit involved in comparison to the risk involved.

3) no, this is also what worries me, the do lend at a high rate, but i don't see how they can keep this up.

along with lots of people who are now not paying their loans ect of.



at the end of the day everyone makes their own choice on their investments, off shore my interest has now dropped re the financial situation, but my money is guaranteed and sterling will always be ste

fire starter


Joined: 19/06/2008
Posts: 3401

Message Posted:
11/02/2009 11:02

sterling

it is better than interest they are giving in the uk and it is also tax free as my account is registered to my trnc address.



if you are bringing in a lump sum, why not ask the developer or estate agent if you can pay them into their uk account?

they way you won't get big transfer fees.



i hope this helps, you can always email me : sharpeisara@hotmail.com.

eager


Joined: 23/02/2007
Posts: 1272

Message Posted:
11/02/2009 11:41

Re- msg 2,

Refering to point 2 in your reply.

If you are getting 12% interest then paying 8% tax you then only have 4% interest, not so, tax is on interest earned ie...

£100 @ 12% interest +£12 interest earned, this £12 is then taxed at 8% so amount of tax would be 96p.

fire starter


Joined: 19/06/2008
Posts: 3401

Message Posted:
11/02/2009 11:47

sorry eager

i didn't make myself clear.

what i was pointing out was that the interest earned sounds high % wise but when you have to pay 8% tax on that interest then it is not so attractive.

i should have said that 8% tax is applied to your interest earned.

CreditwestRep


Joined: 04/11/2008
Posts: 214

Message Posted:
11/02/2009 12:12

fire starter you sure live up to your name, be careful as you appear to giving the wrong information to people who are already very sensative about their savings.



During the closure of banks in 1999/2003 no one lost their money, there may have been an intial delay but 250million dollars were pumped into the market and eveyone got paid.



The 8% off 12% is also incorrect the net interest rate on 12% after tax would be 11.04%, you pay tax on the interest earned.



Finally the high interest rates on lending will come down to lift the burden on borrowers as is the case all over the world but of course this also effects deposits as they are connected in order to bring down rates on borrowing you have to reduce the cost of deposits which does not make people very happy who depend on their interest income to live on.



Kiaria with the interest rate on the way down it may be time to consider longer terms when investing if you are not reliant on the interest income.

markvpiazza


Joined: 14/08/2008
Posts: 530

Message Posted:
11/02/2009 12:32

If you are not tax domiciled outside the UK, you are still liable for UK tax on any interest gained - having a TRNC address does not mean you are not liable for UK tax



Mark

CreditwestRep


Joined: 04/11/2008
Posts: 214

Message Posted:
11/02/2009 12:54

Well spotted Mark its vital to have the right information to make the correct decision.

breezyboy


Joined: 14/05/2007
Posts: 1179

Message Posted:
11/02/2009 13:15

Fire starter



I dint think you understood the previous nmessage.

The 8% tax is on the interest received which in my case is between 15.75 and 20%. You therefore receive 92% of the interest payable deducted at source.So it is still high, in fact very high compared to what is being offerd by UK banks which deduct 20% of the interest at source if you are a UK taxpayer so you only get 80% of nothing!

I have spent a good deal of time researching the possible pitfalls of TRNC banking. Considering that all Turkish and therefore TRNC banks changed their method of working after the 2000/2001 collapse their systems are safer than all the European and US banks who have recently hit huge problems. The last problem saw people paid out very quickly.