Hello again and welcome back to my Ezine after the summer break. I hope you are well and that the somewhat fresher Italian summer was a surprise for you as well. We were not sweltering in 38 degrees this year but enjoying a more pleasurable low 30s for most of the summer. It was a welcome change from last year, for example, when I saw the last rain in mid-May and not again until mid/end Sept.

It was also my first holiday away after our change of lifestyle to the country and with all this land, trees, and plants to manage. I have to say that although time at the beach was great and a welcome break from the country, I did find myself wanting to come back and see how all the plants were doing and also how the olives were developing after lots of summer rainstorms. It was pure curiosity because on my return I found that the whole situation is largely as it was last year at the same time. Grass needs cutting, and a few other jobs need doing, but in general everything is coming along nicely.

For those of you with whom I am friends on FB, you will have seen that I came back to a bumper crop of apples, pears, and figs. The figs are finding their way into my pancia quite quickly and are super delicious. (and I have my new wicker basket for collection – which my wife jokingly bought me at a ‘sagra’ event recently, very Laura Ashley)

The baseline rule is that if you are a resident in Italy and you sell a property after the first full five fiscal years from purchase (not your Prima Casa – different rules apply here, read on for details), you are NOT required to pay tax on any capital gain (CGT) resulting from the sale. This applies to properties you hold in Italy or abroad and applies whether it is your 2nd or 15th property!

This stems from the idea of a speculative intent to buy/sell property and where there is no intent then capital gains tax is not applied. (a nice tax planning opportunity!)

Speculation in Italy is defined as follows:

• the property is sold for consideration (e.g. sale, exchange, contribution to a company)
• the property is sold within five years of purchase or construction
• the property must not have been used as the seller’s (or family’s) main residence if it is a residential unit.

These rules also apply to property located abroad!

If the sale is subject to taxation (because you are selling within the first 5 years since purchase), then you can either opt for:

A substitute tax of 26% (standard capital gains tax rate) at the time of the deed (the notary is responsible for the payment), or
The standard income tax rates (IRPEF), with the possibility of using deductible and creditable expenses such as bonus edilizie, pharmacy expenses, doctors’ bills, etc. Bear in mind that the lowest rate of income tax in Italy is also 23%, so depending on your other income for the year you could fall in the lowest rate of income tax (€0–28,000 p.a.) and be able to reduce the taxable amount even further with deductions.

Below is a list of the main rules to consider:

Taxable conditions
As with all things taxation, it is important to understand the conditions:

• Capital gains tax applies as a result of property purchased, or built, less than five years earlier.
• An exemption is given for urban residential units that, for most of the time between purchase (or construction) and sale, were used as the main residence of the seller or their family. (The idea of Prima Casa)
• As well as, in all cases, capital gains realised from the sale of land that can be used for building (terreno edificabile) according to planning rules in force at the time of the sale.

In the case of donated/inherited property, the five-year period is calculated from the donor’s acquisition date.

(This is particularly important for anyone who might inherit a property from a deceased parent, for example. If you wish to dispose of the property it would be more advantageous to do so in the probate process, otherwise you may have to wait another 5 years before you could dispose of the property to avoid capital gains tax…. if any). However, if you take the property into your name and then can sell it quickly, you may avoid capital gains tax if the property value has not increased between the acquisition and sale.

Exemptions
Exempt from taxation are:

• Sales of properties used as the seller’s or their family’s main residence for most of the period between purchase/construction and resale (the 5-year rule does not apply here – Prima Casa rule!).
• Sales of inherited properties (per Article 67, paragraph 1, letter b) TUIR).

Speculative operations: property flipping
If you fancy yourself as a property magnate and decide to try your hand at buying, renovating, and then selling repeatedly within the 5 years (“property flipping”), this constitutes a commercial activity and in this case:

• The capital gains are taxable, and
• The seller is required to operate as a business with VAT registration and related tax and social security obligations.

Calculation of taxable capital gain
It’s a simple formula:

Sale price – (Purchase price / Construction cost + related documented costs)

Allowable related costs include:

• Notarial and accessory expenses,
• Indirect taxes paid at purchase (registration, mortgage, cadastral taxes, or VAT),
• Improvement expenses (extraordinary maintenance, renovations),
• Costs for removing tenants.

It is important to keep all documentation relating to any property purchase/sale for at least 10 years in Italy.

For construction:

• Building contracts, design fees, municipal charges, post-construction improvements.

The gain is taxable in the year the payment is received.

Other cases

• Donation: 5 -year period runs from donor’s acquisition date.
• Built by seller: 5-year period runs from completion.
• Main residence: exempt if used as main home for most of the ownership period, even within 5 years.
• Building land: always taxable when sold; substitute tax cannot be applied.
• Agricultural land: taxable only if sold within 5 years.
• Property with buildings to be demolished: treated as building land → taxable.
• Previously subdivided property: taxation depends on whether subdivision counts as new construction.

Statute of limitations for tax assessments

The Agenzia delle Entrate can assess omitted/under-reported gains:

– Within 5 years from the year after the tax return was filed;

So there we have it.   All the facts regarding capital gains tax and property in Italy.   For most people I know it rarely comes into consideration because the properties are owned for more than 5 years.   However, on odd occasion CGT needs to be considered.    For somewhere like the UK that introduced CGT on property purchases for non UK residents, the tax interest lies in the UK and not in Italy which is a relief because you don’t have to worry about paying it in 2 places.   However, if you think it is applicable to you, then take the necessary advice before you sell.

Pensions, detractions, deductions and more……

I wanted to share some info on pensions (state/social security and personal) and the tax deductions and detractions that you/we can take advantage of in Italy to help reduce our taxable burden in this article .

As it has been observed many times, unlike many countries which offer non-taxable income allowances (US and UK as examples), Italy does not. Therefore we pay tax from Euro number 1. However, Italy does also have a system of deductions and detractions which can be used to offset against income to try and reduce the tax burden. If I am being honest I can’t say that they are as good as a non-taxable allowance in terms of their effect on income, but they can be help.

Pensions

Regarding the subject of UK pension payment:

UK state pension.
I am not sure why but a number of people have contacted me since 2024 to say that their commercialista is now saying that you need to declare your UK state pension on your Italian tax return and pay tax on it.  It has always been the case that it needed to be declared.  This is, of course, is the correct course of action but makes me question why some commercialisti are only now waking up to this fact. It always worries me when I get a surge of the same enquiry. My concern is for those people who have been legitimately taking advice from well meaning professionals who have not been doing the right thing and will now start to file. This could mean that the Agenzia delle Entrate will be alerted to the fact and may come asking for back payments, fines and penalties. If this is the case then they have 5 years to do so, and they have a sneaky habit of doing so about 4 years and a few months after the filing.

If you find yourself in such a situation then please remember that your commercialista has to carry insurance in the event of them mis-advising you. As long as you have the proof that they did so (which may be the hardest thing to prove because often they just provided verbal confirmation that something did not need declaring) then you can ask them to carry any costs incurred by you as a result of an error on their part. The hard part is proving it and then having that discussion with them. Check those historical emails discussions!!!

Sign the P85 with HMRC
On a similar note I recently met 2 people (2025) in the same Umbrian comune who had received a letter from the AdE which stated that they were no longer able to apply for the double taxation credit for tax paid in the UK on their UK personal / occupational pension payments. Now, this might sound like a contravention of the double taxation treaty, but as the AdE stated in their letter (which I managed to gain sight of), the correct action is that when someone leaves the UK with a pension in payment, they must apply to HMRC for gross income payments by applying through the DT (double taxation) individual form on the HMRC website. Failure to do so means that the AdE is not obliged to offer any tax credit for tax paid in the UK and instead can charge full Italian tax. This means that you could pay in Italy and the UK until such time as you have received a gross payment authorisation from the UK: Back payments can be claimed from HMRC (where tax credits have not been awarded already) by completing the DT individual form but this can take time.

In my experience, over the last 15 years, Umbria and Tuscany have always been at the leading edge of tax legislation and implementing it to the letter of the law so its not beyond imagination that this may spread out across Italy. However, there are instances in Abruzzo and Marche as well. If you are the holder of a UK pension, are still paying tax in the UK and claiming that back through the credito d’imposta option every year, it would be advisable to apply for UK gross pension payments via the DT indivdual claim form on the HMRC website, before the AdE refuses you the option and you end up paying twice. https://www.gov.uk/tax-right-retire-abroad-return-to-uk

• Deductible expenses (oneri deducibili) reduce your taxable income, meaning you pay tax on a lower income.
• Detractable expenses (oneri detraibili) give you a direct reduction in the tax you owe – usually a 19% tax credit on the value of item you are claiming, unless otherwise specified.

Both are valuable, and knowing the difference helps you understand how the savings work.

Healthcare expenses (19%)

Without a doubt the most common category is healthcare expenses ( detractable at 19%)

What you can claim is as follows:

• Pharmacy receipts (scontrini parlanti) showing the name of the medicine and your tax code (codice fiscale)
• Doctor visits (GPs and specialists)
• Surgeries and hospital stays (private and public)
• Diagnostic tests, X-rays, and blood work
• Dental care (e.g., orthodontics, if medically necessary
• Physiotherapy and rehabilitation
• Medical devices (e.g., glasses, hearing aids, prosthetics)

There is a franchigia related to these expenses, which means that it is only the accumulated expenses over €129.11 which are considered eligible. If your total health expenses are below this amount then you cannot detract from tax. (You cannot claim this credit if the expense is covered by insurance)

To give an example……if my total expenses are €800 during the year, then the calculation is €800 – €129,11 = €670,89, on which I apply the 19% tax credit = €127,47 tax credit.

This example may not seem much but a few years ago I had to have some urgent dental care which cost €10,000. It was not covered by insurance and so I had to pay myself. That year I had a tax credit of €1875,46. Every little helps.

So, for all those trips to the farmacia make sure you present your codice fiscale to the pharamcist and they will normally tell you whether it is an item that qualifies or not.

** FARMACIA AND HEALTH EXPENSES ARE NOW REGISTERED AUTOMATICALLY ON THE AGENZIA DELLE ENETRATE WEBSITE (YOU CAN ACCESS THE WEBSITE AND CHECK THEM YOURSELF) HOWEVER THERE ARE OCCASIONS WHEN THEY DON’T APPEAR SO MAKE SURE YOU KEEP YOUR RECEIPTS AND GIVE THEM TO YOUR COMMERCIALISTA / FISCALISTA WHEN YOU FILE YOUR RETURNS **

Home renovations and energy efficiency (various rates from 36% to 50%)

This is by far and away the next biggest category for gaining tax credits. I know myself because in 2024 we spent alot of our savings on the new home and this year we will be applying for almost all of these bonuses as tax credits.

The key incentives for home improvements are as follows:

• Bonus Ristrutturazioni (Renovation Bonus) – 50% for general home upgrades
• Ecobonus – 50–65% for energy-saving improvements (e.g., insulation, windows, solar panels)

On your ‘Prima Casa’ you can claim a 50% tax credit up to a maximum spend of €96000, spread over 10 years.

On your second home or property (other than Prima Casa) it is a 36% on a maxi psend of €96000 spread over 10 years.
(excluding boilers which burn fossil fuels, such as caldaia gas)

• Sismabonus – 50% on Prima Casa for 2025 then 36% for 2026/27 for work related to protection against sismic risks
  36% on non-Prima Casa in 2025, falling to 30% from 2026/27.
• Bonus mobili (e grande elettrodomestici) – tax credit of 50% on spend of up to €5000 on electrical appliances and furniture that are linked to renovations.
• Nuovo contributo per elettrodomestici ad alta efficienza – 30% up to €100 discount on electrical domestic appliance purchases, outside renovation works
• Green Bonus – 36% on garden and green area improvements.

A FEW THINGS I LEARNED BY GOING THROUGH WORKS LAST YEAR:

1. All payments must be made by traceable means i.e bonifico or credit card payment. No trace, no bonus!
2. If paying by bonifico then you need to use the bonifico per agevolazione fiscale option with your bank NOT the bonifico ordinario option. It asks for more info, such as the partitia IVA of the company / person you have worked with and this is needed for the bonus.
3. If you employ single workmen working alone then you don’t need an authorisation (SCIA or CIA) from the local authority but if they are a ‘dita edilizia’ (this can include even 2 people working together as a construction company) then you need to have a ‘piano di sicurezza’ from an architect who will need to draw that up and provide you with the necessary numbers/reference codes. No ‘piano di sicurezza’ no bonus! (Our’s cost about €1000)
4. Your workmen can apply for 10% IVA (VAT) on purchased items, but this is not necessarily a given. Our commercialista recommended that we signed a document ‘richiesta di applicazione dell’IVA ad aliquota ridotta’ for each workman / company so they would be authorised to apply for it as the materials would fall under the approved renovation works.

Insurance premiums

This is a category which people often fail to utilise because there are some questions over whether foreign insurance premiums paid can be deducted in an Italian tax return.

The policies which qualify are Life insurance, accident ( both max €530) and long-term care insurance (LTC) – (€1291)

They must qualify ( even if issued outside Italy) under the following conditions:

1. Policy must be with an EU or EEA-authorized insurer (i.e. the company must be licensed to operate in the EU/EEA under EU regulations).
2. The policy must cover eligible risks: life, accidents, disability, or LTC.
3. The beneficiary must be the taxpayer or close family (not a third party like a bank).
4. The contract must not be speculative (e.g., pure investment policies are excluded unless they include real coverage of life or disability).

I myself still insist on entering my life policies issued in the UK years ago, before Brexit, and which cover me throughout the EU and were issued whilst the UK was still in the EU. I principally have life insurance contracts with Legal and General and they provide cover across the EU. The other alternative is to take out Italian equivalent policies especially for things like health insurance. It’s worth getting a quote from one of the bigger insurance providers such as Generali (or Genertel, their online offering) Allianz, Zurich, Groupama, Unipol Sai, Banca Intesa, Reale etc

Other categories include:

Donations (19-30%)
donations to recognised NGO’s, religious institutions or universities.

Mortgage interest (19%)
You can deduct interest on mortgages for your first home (prima casa) up to a cap of €4,000 per year.

Education expenses (19%)

• Kindergarten through university tuition (both public and private, up to limits)
• School meals and after-school program
• University housing (if located outside the student’s home province)

Max annual deduction for private schools may vary by level and region, with a cap around €800 per child.

Rental deductions

If you rent your main home, you may claim a tax credit based on your income and contract type.

For example: Ordinary rental contracts (contratto 4+4), Student housing and transfers for work (if you’ve moved for employment reasons)

The credit varies depending on income, age, and contract type (e.g., up to €495.80 or more).

Family related deductions and credits

Dependent children and other family members, alimony and maintenance payments (deductible), Nursery/kindergarten costs (detraction up to €632 per child)

Disabled persons (LEGGE 104/1992 BENEFITS)
Special deductions and detractions for people with disabilities or their caregivers, including: 19% for adapted vehicles (with limits), full deduction of medical devices, assistance costs, etc.

Sport and Youth activities (19%)

Up to €210 per child under 18 for gym, swimming, dance classes, etc. Applies to recognized sports facilities and clubs.

If you would like to discuss these or any other tax or financial planning related issues for your life in Italy then please don’t hesitate to contact me on  gareth.horsfall@spectrum-ifa.com or call / message on +39 3336492356
Always happy to help where I can!

If you want to know more about me or the things I do then just click here. 

Understanding your taxes and timing of tax payment in Italy

It’s that time of the year again folks!
am always given warning that tax time is approaching because a number of clients start to ask for valuations of accounts, interpretation of some documents and also help with organising and sharing some documents with commercialisti.

TAX ON INCOME

INCOME TAX RATES FOR 2025 (IRPEF)
In a move to simplify the tax regime in Italy the tax bands have now moved from 4 to 3 in 2024.

PENSIONS

Most of my clients are in, or planning for, retirement to some degree and so understanding how your pension will be taxed as a resident in Italy is of paramount importance.
PRIVATE PENSIONS AND OCCUPATIONAL PENSIONS (Income tax rates – IRPEF)

Private pension provider income: 401K / IRA’s etc / Occupational pensions / Personal pension income / State pension or social security.

All these types of pension incomes fall into the income tax rates ( IRPEF), they are added together and the rates applied to the progressive bands of income.

GOVERNMENT DERIVED PENSIONS

(tax in country of origin unless Italian citizen!)

The definition according to the Italy / UK / USA double taxation convention 1988 is, paid from:

” a political or an administrative subdivision or a local authority”

The pension awarded is generally taxable only in the state in which it originates and tax is generally deducted at source in that country of origin, unless your are an Italian citizen and then it becomes taxable in Italy as well.

(Check the double taxation treaty from the country in which the pension payments originate)

(This income is not taken into account when calculating the tax on your other income sources in Italy, e.g. rental income, and it is not declared on your tax declaration in Italy)

HOWEVER, the more your total income, from all sources, increases over €8500, the more of the tax credit you lose.

If your total income is €50000 or above you would not receive any tax credit.

BANK ACCOUNTS AND DEPOSITS

A very simple to understand and acceptable €34.20 per annum is applied to each conto corrente e libretto di risparmio: current account or deposit account. This would typically include fixed deposits, short terms cash deposits, CD’s etc. The charge is the equivalent of the ‘imposta da bollo’ which is applied to all Italian deposit accounts each year.
(Money market accounts, premium Bonds in the UK and other deposit based instruments will not generally fall in this category and would be subject to wealth tax – see below)
Interest income is taxed at 26%.

INVESTMENT INCOME AND CAPITAL GAINS (26%)

A flat tax rate of 26% is payable on interest and income payments from capital and realised capital gains are also taxed at the same rate of 26%.

(Interest from Italian government bonds and government bonds from ‘white list’ countries are still taxed at 12.5% rather than 26%, as detailed above. This is another quirk of Italian tax law as this means that you pay less tax as a holder of government bonds in Pakistan or Kazakhstan, than a holder of corporate bonds from Italian giants ENI or FIAT).

If you are invested in NON-EU harmonised collective investment vehicles i.e. funds which are listed in a place outside the EU, then the gains and income from these assets are NOT taxed at the flat 26% rate in Italy, but would be added to the rest of your income for the year and taxed at your highest marginal rate of income tax! Funds or ETF’s, for example, which re listed in the UK with a GB ISIN code or in the US with an equivalent US number, would fall into this category.

This is particularly important for UK and USA domiciled assets. If you have a brokerage account with a group such as Fidelity or Vanguard or one of the many other asset management firms, or you invest through a platform such as Hargreaves Lansdown in the UK/USA, then depending on which assets you invest in could mean you are pushing yourself into a higher tax bracket on taxable gains and income for the year. Your portfolio may need restructuring for life in Italy!

WEALTH TAX ON ASSETS (0.2% PA)

Any financial assets other than property attract an annual wealth tax of 0.2% on the value of the asset as at the 31st December each year.

Here are examples of a few:
GENERAL INVESTMENT ACCOUNTS, ISAS, BROKERAGE ACCOUNTS, PLATFORMS, DISCRETIONARY MANAGED PORTFOLIO, DIRECT INVESTMENT IN FUNDS, STOCKS AND SHARES, COMMODITIES, ART WORK, CLASSIC CARS, ETC.

If the assets are located in one of tax regimes around the world which are considered fiscally privileged by the Italian authorities, then the rate of tax is 0.4% pa. The list can be found at the end of this article HERE

INCOME FROM OVERSEAS PROPERTY (Income tax rates – IRPEF)

Overseas net property income (after allowable expenses in the country in which is located) is added to your other income for the year and taxed at your highest progressive rate of income tax.

THE WEALTH TAX OF 1.06% ON THE VALUE OF THE PROPERY (IVIE)

For properties based in the EU, the value on which this tax is based is the Italian cadastral equivalent. You will find that the market value will, in most cases, to be significantly more than the cadastral equivalent value. For a list of the different tax values across Europe see the table below.

For properties located outside the EU (inc the UK/USA/Canada/Australia/NZ etc) the value for tax purposes is defined as the acquisition value (purchase /inherited/acquired) where this can be evidenced, otherwise it is the current market value of the property.

DISPOSAL OF PROPERTY

Disposal of properties both abroad and in Italy (exc prima casa) are not deemed speculative if you have owned the property for more than 5 full tax years and therefore are not capital gains tax liable on the disposal, in Italy.

NOTE: If you gain residency in Italy then by default your previous ‘first home’ or ‘family home’ for the purposes of the Italian tax authorities is now classified as an investment property. By definition, if you have a home in Italy and a property in another country, even if you consider this property your family home, it can no longer be considered your ‘Prima Casa’ for Italian tax purposes.

If you have any questions about any of these taxes and how they might apply to you and your individual financial situation, or if you think that you might be paying more than need to, then do get in touch and I will be happy to see if I can help you with your plans.

I can be contacted on email: gareth.horsfall@spectrum-ifa.com or on cell: +39 333 6492356

Well, as you might have expected I have decided to write to you at this particularly fragile moment in world politics, and which has now reverberated around world investment markets. As of Friday last week a sell off started in the equity markets which effectively created a bear market situation around the world for fears of global recession based on the Trump tariffs. (as of today we have seena slight rebound, but more volatility is likely)

What was your reaction? Maybe we were too distracted by the pandemic to really pay much attention – and rightly so! but what about when Russian invaded Ukraine and it sent global markets into a panic and a global inflation spike, sending us from years of disinflation and near zero interest rates, to an overnight significant rise in prices which to date continues. Did you panic sell off your portfolio?

Probably the answer is no and you did the right thing because markets rebounded (albeit more slowly after the Russia Ukraine war) but they did and the same happened after 2008 Financial Crisis and 2010 Euro crisis: hanging on and riding through the panic was the best thing to do… and it is now!

You might argue ‘It’s different this time’ ; the whole world is changing and markets will never recover. If you think this then I would coach you to read the book, ‘It’s different this time -Eight Centuries of Financial Folly’ by Reinhart and Rogoff. Largely financial markets are governed by human behaviour and that has not changed since time began, or at least over the last 8 centuries according to the data they present.

Please also bear in mind that success for every US President is judged on the US stock market. Most, if not all Americans, have significant assets invested in the US stock market and so it is a sign of health of the US economy and more importantly a measure of the US Presidents success at home ( interestingly, Pres. Trump’s favourability ratings have increased from 48% at election time to 53% now. clearly, he is increasingly approved of in the USA).

After reading so much on this topic and trying to syphon through the almost hourly noise, my view is that he is front loading all the bad news now to get it out of the way. He knows that come the mid-terms in 2026 he needs to have made significant inroads into making good on his promises to the American people and for that reason he is getting the worst out of the way now, whilst he can, after which a flurry of good news will likely follow.

1. Get oil prices lower
Gas at the pump is the beating heart of the America middle class and the Trump administration will go to any lengths to reduce the price of oil at the pumps. (When I was in New York in February the gas at the pump, I calculated, cost €1 a litre!!!!!!! – compare that to the the €1.59 a litre, this morning, that I just paid for diesel. Petrol was €0.20 higher still). So, if this administration can reduce gas prices further that could stimulate a mini economic boom in the US.

Bear in mind that the US is already the worlds largest producer of oil at 40% higher than its nearest competitor ( Saudi Arabia). Pres. Trump has stated clearly that he wants to aim for 100% energy independence and I think they will not just aim for it but do it at any cost.

(It should be noted that I paid €1.59 a litre for diesel this morning. 1 week ago it was €1.67. – Is his strategy working?)

2. Mortgages are the second lever to pull
If he wants the American public to gain confidence in his policies then he needs to give them breathing room economically (i.e. more money in their pockets) and he can then continue to go about reshaping the US economy . (At time of writing, with pressure building on a possible recession, pressure is equally being heaved on Jerome Powell – head of the Federal Reserve, to reduce interest rates). Was the market correction manufactured to some degree, or at least expected, to pressure the Fed to reduce interest rates?

This administration has also openly stated that they will also look to deregulate the banking industry, to release them from overly administrative and bureaucratic procedures and to allow them to get back to banking. This will also assist in bringing interest rates down. (This point I can fully agree with :banking regulation, anti money laundering legislation, source of wealth and origin of wealth obligatory requirements have become, quite frankly , out of control and any simplification in this regard, in my opinion, is warranted).

3. Lastly – the Trump administration will focus on food price inflation

Remember to watch out for the first 100 days of the Pres. Trump term which is often linked to his early successes; the 100th day lands on April the 29th!

So, there you have it, a few thoughts of my own on the Trump administration and why it might not be as bad as it seems.

So, let me turn to the technical for a moment: some data about market volatility.

The data below courtesy of one of our investment management partners, New Horizon Investment Management.

When markets turn volatile, perspective is everything

This market volatility feels tumultuous but, of course, we’ve been here before. The table below reveals that after severe drawdowns, the market has often recovered the full decline and finished the year strongly positive.

Years to Note:

• 1970: Market fell -26% from peak to trough… yet ended +3.6%
• 1975: Dropped -14.1%, but closed the year up +37%
• 1987 (Black Monday): Down -33.5% mid-year, still finished +5.8%
• 2009: Deep in the Global Financial Crisis, dropped -27.6%, yet ended +26.5%
• 2020: COVID crash brought a -33.9% drawdown… ended +18.4%

On each occasion, the best course of action would have been to avoid the noise and stay invested.

“History doesn’t repeat itself, but it often rhymes.” – Mark Twain

Whatever happens in the market we have bigger things to worry about!

Besides, when markets sell off, why on earth would you not buy into them at these prices? They are at bargain basement prices and as the saying goes ‘fill your boots!’ I had a measly amount of cash available to invest and have taken advantage of these prices.

Let me tell you a couple of my own investment tales:

My first tale which I have written about before was during the financial crisis of 2008 ( which by the way was a many times worse than what we are going through today) and my wife had just sold a house in the UK and we had some cash to invest. I knew I had to invest but I was very nervous because, working at the coal face of what was happening at that time, I knew that things were very serious. However, I also knew the theory of markets and that the best time to buy was in the height of the chaos. I went for it and the next 3 months were tragic and I lost 20% in value on the portfolio. (I never told me wife!) 6 months later the portfolio was up 45% ! It should be noted that I am an adventurous investor profile and so was invested 100% in equity ; it was a wild ride I can tell you but I knew the logic and I just had to be patient. Later we needed that money for something else and had to sell a sizeable portion of it, but it did its job.

My other tale is that at the start of my career as a financial planner I thought I was smarter than the market itself and that I could time my way in. I waited and waited and…. waited for the right entry point, waiting for a decent correction to buy in at the price I deemed to be right. I arrogantly waited 6 years before buying in! (What an idiot!) I can’t even bring myself to calculate the gains that I missed in those 6 years even with the correction that happened.

Lesson: It’s time in the markets, not timing the markets, that counts…

As I said to someone recently “I have made all the mistakes in the books, so you don’t have to!”

Again, it might be useful to provide some perspective here because the all so surreptitious march of inflation is often upon us when we notice it, by which time it is far too late to do anything about it.

1. The price of my journey to Rome on the autostrada from Orte has increased from €4.50 in 2024 to €4.80 in 2025. That’s a 6.6% increase. I track this price and it has never, in my 20 years in Italy, increased at inflation levels or under. Always above!

2. The water machine in central Amelia, where I go to fill our drinking water bottles was 5 cents for a litre and half, they have just changed the machine and it’s now 5 cents a litre. That’s a 33.3% increase. (It’s hardly breaking the bank but a great example)

3. The news on RAI announced a few nights ago that the price of Colomba Easter cake is up 31% year on year and Easter eggs up 26%.

4. I took my son to KFC 2 weeks ago, reluctantly, and asked for the 4 large pieces of chicken. The last time I went to KFC was about 15 years ago and I remember these 4 huge pieces of chicken. Now, the 4 pieces resembled the size of 4 larger nuggets. Shrink inflation in practice so if you can’t increase your prices, reduce the amount of product. It has the same effect !

OK, I hear you say ‘These are not everyday items’ but they do reflect the general trend of the stealthy march of inflation.

Be under no illusion that this is your main financial enemy and investing is your only tool to protect yourself from it!

Investing requires patience and courage…or a financial adviser who you can ring and let off some steam. Make sure you can tap into any of these things if you get concerned about world events and market volatility!

So, on this happy point let me leave you with this information about the life ahead of you.

Life Expectancy 

More people needing to finance live beyond 90th birthday

• Ratio of women over age 90 to men was about 2:1 in 2023
• The number of people aged 90+ has doubled over the last 30 years
• The ratio of women over age 90 to men was 2:1 in 2023 compared to 4:1 in the 1980’s. About one in every 100 people is now aged at least 90.
• The odds of living to beyond 90 are high enough that people shouldn’t assume it can’t happen to them. Historically, this has been mainly women but the numbers of men are catching up fast.
• For those who are age 66 this year there is about a one in 3 chance (33%) for men and nearly an evens chance (46%) for women of making it to at least age 90 and if they do get to age 90 there is nearly an even chance they will survive to beyond 9%

The message: Think long term and not Donald Trump term!

If you would like to let off some steam with me or discuss any of what is going on in the world, tax or financial planning related issues in Italy then please don’t hesitate to contact me on: gareth.horsfall@spectrum-ifa.com or call / message on +39 3336492356

Always happy to help where I can!

In this E-zine I wanted to tell you about The Spectrum IFA Group Annual Conference which I attended between the 20th and 24th Jan, this year in Casablanca, Morocco.

We had some of the usual asset managers and specialist firms there from Rathbones Asset Managers, Evelyn Partners, New Horizon, LGT Wealth management amongst others. Interestingly the first day of the conference was Donald Trump’s inauguration day and so we were observing live some of his first actions. He was very much a topic of conversation during the conference; so much so, that since his first day in office things have moved so quickly that I was thinking of not writing this E.zine because almost as soon as I wrote something then it either came to pass, or was wiped aside with another executive order. However, in the last few days a number of people have contacted me about what he is doing and if it is going to cause inflation, an economic downturn in the US and across the world and how it will affect your investments. So, with this in mind I decided to provide some of the information that I gleaned from the investment managers’ minds. Those people who are right at the coal face of what is likely to be a profitable period for America, but one with increased investment market volatility.

He can only run for this final term as US President therefore he has 2 years before the mid terms when the situation could all change again. So, the thinking is that he is in it to make a BIG splash and create large improvements for the US economy in a short time frame. What has he to lose?

We have already seen that he is going to use tariffs as his weapon of choice, at time of writing Canada and Mexico already seem to have caved in to his demands. The tariff threat is being used merely as at a threat with the idea to create change. And it’s no surprise, re Canada and Mexico, given the figures that we can see below.

** Don’t listen to what he says, watch what he does **

DEREGULATION: Expects big things in this regard: less red tape, cutting the tax code, stimulating business and if you think this is a bad thing, then have a look at the slide below courtesy of Evelyn Partners:

Small business and consumer confidence rose significantly as a result of deregulation during Trump’s first term in office and confidence is rising once again.

DRILL: Some of the best performing stocks in 2024 were mining and explorations stocks: Chevron, Shell and Schlumberger, to name only 3. President Trump has made executive orders to drill for shale gas and open oil fields in the USA as well as mining for rare earths. He wants the US to be energy and resource independent again and become a net exporter. This has obviously come at the price of withdrawing from the Paris Climate Agreement and he has turned back investment in ethical/sustainable projects which poses the question whether this could mean difficult times for wind and solar?

IMMIGRATION: Regardless of the headline news re: illegals being sent back home, the main point is that he is going to make it harder to get into the USA, but it might be important to remember the following:

• 72% of workers in US agriculture are immigrants
• 40% of which are illegal
• and, of which many are employed in Republican Trump states
• so would he want to alienate too many of his core voting states?

Unlikely.

DOGE: (The Department of Government Efficiency headed up by Elon Musk): One of the first orders from the new department was that all government workers must get back to work in the office 5 days a week. Is this good for productivity?? Elon Musk cut 80% of Twitter staff when he bought it, is he about to do the same at Government agencies? Certainly some of the news coming out of this area already is quite interesting from USAID being involved in funding groups to overthrow foreign governments, to blank cheques being written in government agencies without checking what they are being allocated for. The goal is to cut $2 trillion from the government budget, even Elon Musk said that this was a long shot, but watch this space!

(On a more realistic note, there are real life effects of these cuts. One of our relatives in the US is a dog trainer and Professor in animal training and was applying for a job in a California University, all hirings have now been put on hold in academia and she may be back to living in a camper van again as she goes from job to job!)

JYNA: Did you know that this is how President Trump refers to China? (I had no idea)

Apart from the recent 10% tariff imposed on Chinese goods into the US, there is really only one thing to be concerned about re China and the US: Taiwan.

Whilst the US / CHINA spat is the pretext political risk to the world, President Trump is about making deals, not starting wars and compared to other Presidents he has a good track record:

Whilst the US / CHINA spat is the pretext political risk to the world, President Trump is about making deals, not starting wars and compared to other Presidents he has a good track record:

(This slide might be difficult to read, but it’s worth expanding the text to see which US Presidents started the most new wars. A big surprise to me was that Ronald Regan and… Barack Obama! share the record (7 each) – Donald Trump – zero!)

So considering all this, what was the message from the investment managers at the conference?

Trump will be good for America, he will stimulate growth in small to mid sized companies in the US. He will bring jobs and businesses back to the US and he will likely be good for your investments where you have exposure to the US stock market. We may also see a bull market in commodities as well.

But it will come at a price and one which we, as investors, must be mindful of.

INCREASED VOLATILITY: More swings in assets prices based on what I stated above:

** Don’t listen to what he says, watch what he does **

Markets will respond to what he says, but as investors we need to keep our eyes on the actions he takes and cut out the noise. It will certainly be an interesting time but could turn out to be a profitable one for those who ride his Presidency out, and, yes, markets will likely fall at some point and we will all feel some pain for a short period, but remember that investing is mid to long term and most of us have been through something similar, if not a lot worse , before…

And if you need confirmation of this then check out the following slide:

Equities/stocks are the drivers of growth in most portfolios, what you can see here is that by riding out any invasions/wars, investors in US stocks, in most cases, after just 6 months were experiencing positive returns once again. A good sign for holding your nerve through equity market volatility.

The next E-zine will be the update on the new UK IHT rules which came into force in Oct 2024, which could have an impact on any UK person living in Italy.

If you would like to discuss these or any other tax or financial planning related issues in Italy then please don’t hesitate to contact me on gareth.horsfall@spectrum-ifa.com or call / message on +39 3336492356

Always happy to help where I can!

Now, let’s be honest, I don’t think this is going to affect many of us in any significant way, however, it might mean some savings here and there. So not to be sniffed at!!

But, you might ask why they don’t amend the first income tax bracket to make it more attractive to lower earners?

From submitted tax returns completed in 2023 we learn that 40% of 42 million taxpayers declare less than €15000 per annum in Italy and 70% of all taxpayers pay less than 20% in tax (after deductions). In 2023, the declared average income from calendar year 2022 was €22806. So given the majority of Italy’s income tax take comes from the bottom income tax bracket, it is unlikely that they will start tweaking with that any time soon, in my opinion.

However, all will be revealed in the ‘Legge di Bilancio‘ (Budget) in Jan 2025, as usual!

Inheritance Tax Overhaul
The UK inheritance tax system has always been determined by a UK person’s domicile. This always meant that the UK could wield the right to tax the estate of a UK national, even where they may have lived abroad for many years.

The classic tale regarding this situation is the story about the actor Richard Burton. I have told this story before on my E-zine, but the story goes that he was born in Wales (UK) but got into the movies and became very famous and moved to the USA, earned his money there and transferred his whole life to the US owning no more assets in the UK. On his death the UK, under the domicile rules, reserve the right to tax the estate where there are significant ties back to the UK. In Richard Burton’s case he ‘supposedly’ (I have never researched whether this is true or not, but it’s a good story anyway), wrote in his last will and testament that he wished to be buried in the Welsh cemetery where he grew up. Apparently, this was considered a sufficient tie back to the UK and the UK HMRC taxed his entire worldwide estate. I am not sure if this story is true but it does go to demonstrate the lengths to which the domicile system can come knocking, should the UK tax authorities wish to do so.

However, the talk on the street is that from October 30th the UK will move to a residency based test for inheritance tax purposes. So what does this mean?

In brief, the proposal is to allow any UK national who has lived away from the UK for more than 10 years to be able to have their estate taxed in their country of residence at the time of death (but with the UK government reserving the right to tax the state for a further 10 years should they wish to do so). This presents a HUGE financial planning opportunity for residents of Italy, as I shall discuss below.

If your intention is to live and die in Italy then Italian IHT rates are so low that it could be classed as a fiscal paradise for inheritance tax purposes. I won’t go into details, but just to say that direct line descendants (spouse and kids) all get a €1million allowance before they would pay tax at just 4%. Compared to the UK’s 40% on estate value over £325,000 (plus the possibility of main residence relief), the Italian system is much more attractive.

However, if you have invested assets (not real estate!) which you would like to protect from inheritance tax altogether, then you can potentially invest in an Italian polizza assicurativa (Investment Bond) which protects all assets within it from any inheritance in Italy, so effectively reducing your IHT bill to zero.

What a planning opportunity

I am not sure the UK government had this little tax opportunity in mind when thinking about the change but for UK nationals who are long term residents in Italy and who want to live out the rest of their lives here, this represents a great financial planning opportunity.

And here come the negatives:

Capital Gains Tax increase
For anyone holding onto UK property assets and thinking of selling them you may want to watch carefully what happens with capital gains tax rates in the UK post 30th October 2024.They are expected to be increased; currently at 18% and 24% for residential property, they are likely to increase and the change be effective immediately!

Remember that as a non-UK resident UK property owner, if you sell the property then you are subject to UK CGT on the proceeds. If you have owned the property before 2015 (when the law came into effect) then the cost (purchase) basis for your property is 6th April 2015. If purchased after then the purchase value in the contract is the cost basis for capital gains tax purposes.

If you have owned the property/ies for more than 5 years then Italy will not deem them speculative and will not tax you on them.

Here we are faced with a clear financial planning necessity because if you are invested in tax efficient vehicles (ISA’s) in the UK then it would make sense to cash them in and pay no capital gains tax on them in the UK whilst still a UK resident, and then leave them in cash (no capital gains tax on cash!) whilst you transition over to your new residency in Italy and reinvest from there. However, if a tax is levied on capital rather than assets then it may not be avoided. How the UK HMRC will do this is anyone’s guess but should this be introduced then financial planning before the move for UK resident individuals will be very important.

The bigger question is what they might do with already non-UK resident individuals who have assets still situated in the UK? Tax on transfers overseas?

Whatever law is likely to be announced will probably come into effect from April 6th 2025, so there may be time to plan, but it might be time to look at how to remove some or all of your assets (depending on your circumstances) from the UK and potentially avoiding any exit taxes.

I would repeat that this has come as a bit of a shock, but does not surprise me given the UK’s current economic difficulties. Putting in measures to avoid flight of capital overseas would not surprise me and has been bounded about as an idea in the past by a Conservative government. Will Labour finally follow through with these more draconian measures? We will soon find out.

Surcharge for non-resident buyers of UK property.
Here we have a tax increase for anyone who may be non-UK resident at the time of buying UK property. The surcharge may increase from 2% to 3%.

At the moment we don’t know any specifics and so I can only relay that which I have heard on 2 different tax seminars specifically on this topic. Some of these proposals may rightly cause some level of immediate concern and others maybe there is the opportunity to wait. At this point, if I hear anything else I will report on it straight away but I imagine that the next time will be Budget day itself.

If you would like to discuss these or any other tax or financial planning related issues in Italy then please don’t hesitate to contact me on gareth.horsfall@spectrum-ifa.com or call / message on +39 3336492356

Always happy to help where I can!