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IF IN DOUBT, DECLARE THE ACCOUNT

By Gareth Horsfall
This article is published on: 22nd January 2018

22.01.18

The start of the year presents many challenges for me. The start of 2018 presents an interesting challenge that I am not used to. My quandary reminds me of my days at the school swimming pool. The water was always cold. The question was do I jump in and get it over with in one go or do I ease myself into the water gently and take it slower?

The question for me regarding my articles is always what can I write? However, the start of 2018 seems to be an exceptional year in that I have lots of ideas but the biggest question in my mind is how do I ease ‘you’ into these topics?

Well, I can tell you that in my schooldays I was always the jumper. I enjoyed (maybe the use of the word ‘enjoyed’ is a little strong but it was better than the other option for me) throwing myself in and then warming up through vigorous exercise. So it looks as though you are following me in as you read on……

LET’S TALK ABOUT BANK ACCOUNTS
I know that in 2017 you may have received a request from your non Italian bank asking you to provide a T.I.N. for International sharing of tax information purposes. The TIN being the Tax Identification Number or codice fiscale for Italian tax residents. This has caused a lot of concern as bank accounts abroad have often been left undeclared by Italian tax residents for a variety of reasons.

One of the reasons I often hear is that the balance is so low that a declaration is not required in Italy. This could be correct but in this E-zine I want to clarify this law to ensure that you don’t fall under the spotlight with the Italian tax authorities.

So what exactly is the law in Italy regarding the minimal balance which requires a foreign held bank account to be declared?
The law articolo 2, comma 4-bis, del D.L. n. 4/2014, convertito in Legge n. 50/2014, modificato dalla Legge n. 186/2014 states that there is a requirement to monitor foreign held accounts whose maximum total balance in the tax period exceeds €15000. (remember you need to convert to euro if your bank account is in another currency)

This means that if you have a foreign held account that in a calendar year has never exceeded €15000, you are NOT required to comply with the discipline of monitoring. If it has. then the Quadro RW should be completed.

IT’S NOT THAT SIMPLE
However, this is where the confusion begins because this implies that if the balance of the account does not exceed €15000 in the calendar year then no declaration is required. However, the obligation to complete the Quadro RW (declaration of foreign held assets) exists in relation to the average value of deposits into the same bank account, consequently bringing in a new measure of a minimum of €5000 in annual deposits.

e.g. if I were receiving a pension income of £1000 a month into my UK bank account and had outgoings of £900 pm, the balance of my account would never exceed the €15000 in any year, but it would exceed the annual deposit of €5000. (my income payments would be £12000 in the year). Those income payments could be subject to income tax. A declaration of the account should be made.

A CLEAR DISTINCTION EXISTS BETWEEN THE MINIMUM ANNUAL BALANCE OF €15000 AND THE ANNUAL DEPOSITS OF €5000
e.g. I have a dormant account in the UK and the balance is £3000. The account does not receive deposits but earns interest. I must declare the interest in Italy, but the balance of the account has never exceeded €15000 and the deposits do not exceed €5000. Do I still have to declare the account? Well, actually you do! Your commercialista should note it for monitoring purposes but it would not be taxed. However, there is still a requirement to monitor it on the Quadro RW.

CLEAR AS MUD?
My motto is, and has always been:

IF IN DOUBT DECLARE THE ACCOUNT
The best way to look at this is to consider the consequences of declaring versus the sanctions for not doing so.

THE COST OF DECLARATION
If you declare the account the fixed tax on the account is €34.20pa (not including any tax on income payments, interest, or VAT liable payments).

THE SANCTIONS FOR NON DECLARATION
If you don’t declare the account and you are discovered then the sanctions could range from 3-15% of the account balance if it is not a black list country.

If the country is black listed then the sanction is doubled. (6-30%)

IS IT WORTH THE RISK?
For the sake of €34.20 per annum it is probably worth declaring the account.

I would add that I have recently seen 5 letters from the Agenzia delle Entrate sent to different people living in Italy stating that under the Common Reporting Standard International share of tax information agreement, that the agenzia is aware that these people have assets and income payments from foreign financial institutions and that they are investigating why these have not been declared on the individuals tax return.

So, finally, we are left without a doubt that this financial and tax information is now being shared, as if we were ever in doubt.

I fully expect that in the coming months and years that the systems that tax authorities have in place to analyse the financial information they are now receiving will become increasingly more sophisticated and it will eventually be an automatic process should any information that we have declared on our tax returns NOT match with that which they receive from foreign financial institutions. Certainly I don’t foresee a return to the old days when the responsibility was only ours. That same responsibility has now been taken away from us and the automatic share of financial and tax information will only get more sophisticated moving forward.

On that thought, I will leave you will my simple message.

If you haven’t started any financial planning as an Italian tax resident, then start now. You might end up paying more than you need to!

Will Brexit affect your plans to move to France?

By Derek Winsland
This article is published on: 4th October 2017

04.10.17

The performance of the UK government’s Brexit negotiators, Theresa May included, is giving rise to concerns amongst UK businesses, EU nationals living in UK and, of course, us living and working in the EU. Sterling continues to react daily to the actions and reactions on both sides of the negotiating table, and the general uncertainty that this causes conveys itself to people’s decision-making.

Over the last 15 months or so, I have been approached by a number of prospective new clients, most of whom are asking the same questions: “How will Brexit affect our plans to move to France” and “How will Brexit impact our desire to remain in France”. The honest answer to this (at the time of writing), is no-one yet knows and until something concrete comes out of the negotiations, this will remain the situation. My own belief is that some compromise will be cobbled together to allow some continued freedom of movement in exchange for access to the single market.

What we do know is that if you have aspirations to live in France, you will become resident for tax here and there is nothing more certain than taxes (apart from death of course). As a French tax resident, there are a number of different taxes you will become subject to. This is no different to the position in UK, indeed comparisons undertaken on behalf of a number of prospective ‘movers’ to France has shown only minor differences in tax payable for those people. The proviso used though was that those people put their financial house in order before moving to, and becoming resident in, France.

My Limoux colleague, Sue Regan in her last article, pointed out the pitfalls in assuming UK-based investments would serve the same purpose in France, and that the tax treatment of those investments in UK would transfer across the Channel to France. This is not the case, in fact holding and maintaining UK investments can and do result in nasty tax shocks for those ex-pats who wrongly believe investments like ISAs would be tax exempt in France.

Also, with the introduction of Common Reporting Standards, financial information is being shared across borders, so considering oneself to be hidden from the tax-man in France, whilst holding bank accounts and investments in UK, is delusory. If you have recently received a letter from your UK bank asking you to confirm your address, this is Common Reporting Standards in action; your bank will pass the information on to HMRC who in turn will share it with their French counterparts.

It is better to acknowledge that the ways of the past will not continue to hold true and that work needs to be done if you want to live in France and this includes re-structuring assets to make them French tax-efficient. The simplest way to approach this is to invite an independent financial adviser to carry out a financial review of your circumstances. He or she will put together a report of recommendations, to ensure your move to France will not result in tax shocks further down the line. All you have to do then, of course, is act on the recommendations.

If you feel you could be affected by this, or have personal or financial circumstances that you feel may benefit from a financial planning review, please contact me direct on the number below. You can also contact me by email at derek.winsland@spectrum-ifa.com or call our office in Limoux to make an appointment. Alternatively, I conduct a drop-in clinic most Fridays (holidays excepting), when you can pop in to speak to me. Our office telephone number is 04 68 31 14 10.

I look forward to seeing you soon.

What will happen in 2017?

By John Hayward
This article is published on: 23rd January 2017

23.01.17

There cannot be many people who were able to answer this question accurately in 2016. There were many “shocks” most notably the Brexit vote and the election of Donald Trump as President of the USA. There were several celebrities who died in 2016 but, more importantly, we may have lost loved ones which had financial implications, aside from the grief.

There are many events already planned for 2017 but I suggest that in December our conversations will focus on aspects that are not already known by the vast majority of people.

How do we cope with the unknown?
Our role, at The Spectrum IFA Group, is to help people cope with all things financial. With interest rates at such a low level, banks have little to offer, especially to the cautious investor. In fact, Spanish banks have an additional problem since the European Court of Justice ruling in December. They could face billions of euros in refunds due to inequitable “floor clauses” they had in their mortgage agreements.

Here are some of the ways we help:-

Improved exchange rates – banks may not charge for currency exchange but often offer poor rates. We can help you protect your income today as well your capital in the future.

Higher income/returns on investments – Whether a cautious or speculative investor, we have access to some of the top investment companies. With their expertise, they are able to make financial decisions prior to an event. Most people will react to an event when it is too late.

Tax friendly and compliant investments – We specialise in providing access to products that are tax efficient in the country of tax residence and which are portable within the European Union. This means an investment, whether this is a personal arrangement or a QROPS/ROPS (Overseas pension scheme), is tax efficient wherever the policyholder lives.

Registered and regulated in Spain – With the upcoming Brexit, it is possible that companies, who are not registered in Spain, or in other EU countries, will not be able to function. The Spectrum IFA Group has a Spanish company that holds a licence in Spain. Once the UK leaves the EU, companies based in the UK and Gibraltar may no longer be able to operate and service their clients in Spain.

Back to the question. We deal with the unknown by being prepared. This generally means applying caution and care. It means having access to experts who can react much quicker to events, if not predict them. We live where you live and so, if something needs dealing with urgently, we are available

Automatic Exchange of Information (AEI)

By John Hayward
This article is published on: 11th November 2015

11.11.15

Did you know that recently, approximately 100 countries have signed up to a new initiative by the OECD’s updated Common Reporting Standard (CRS) whereby a global information-sharing system is to be put in place amongst individual tax authorities. This means that information on taxpayers with offshore assets will be shared between the participating countries.

This transparency is meant to be a deterrent to taxpayers’ using offshore accounts and assets as a means of avoiding domestic tax. The participating countries are committed to applying this procedure in order to tackle tax evasion.

This “automatic exchange of financial account information” (AEI) will commence from 2017 on an annual basis between participating countries and is set to become the most comprehensive and powerful tool to date used by worldwide tax authorities.

The first AEI of 2017 will relate to all account information of 1st January 2016 and reporting will involve individuals who own or control accounts either directly or via financial institutions, be it banks, brokers, investment vehicles, insurance companies or other financial organisations.

The Automatic Exchange of Information (AEI) is facilitated by having financial institutions in each participating country reporting relevant information regarding clients, who are resident in another participating country, to their local tax authorities. Local tax authorities will then automatically exchange this information with their counterparts in other participating countries on an annual basis.

The account information generally includes account number, balance and gross earnings in respect of any payments through the account including any investment income, income earned from assets etc. The information on each person generally includes name, address, country of residence, nationality, national insurance and tax identification numbers, place and date of birth.

So if you live in Spain and have overseas assets and/or investments that you previously thought were non-declarable to the Spanish authorities, then this may be something that you need to address.