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Tax & financial planning in Italy 2025

By Gareth Horsfall
This article is published on: 6th February 2025

06.02.25

Hello again and welcome to this E-zine. (Picture from the olive grove last Sunday morning as the sun was rising)

(Just a quick note to those people who are awaiting my promised E-.zine on the new UK IHT rules which came into force in Oct 2024. I have now completed a draft and will be sending it out soon!)

from under the olive tree

Since my last newsletter, back in December, I have received many emails of congratulations on the new house and equally many tips of how to manage the land we have. Thank you to you all. Please keep the tips and tricks coming: for example, leaving wild areas for the health of the fruit trees and encouraging diverse wildlife – seems logical but then to one who has never had to deal with these things, it is all new.  I am learning new things all the time and interested in the land and seeing it develop. My wife is taking on the task of the house and making sure it is furnished as we would eventually like it to be.

Thankfully, the land doesn’t need a lot of money spending on it, it’s more brute labour force which I am maximising to my benefit by staying fit in the early mornings before I throw myself at the computer.

I have also enlisted the help of a local gardener who , in the last week or so, has helped free 3 very old olive trees from years of being covered by ivy and by other much larger pine trees. They are now free to breath again and will get their well earned ‘potatura’ in a few weeks. (See photo below – there is one in the background, if you can see it!).

I have been busy piling the wood cuttings from the various trees to provide me with a varied menu of BBQ wood this summer! Finally, (the last thing about the house in this Ezine, I promise!) the trattorino tagliaerba arrived recently.   Thank god for that because the grass is starting to grow again with the warmer weather and I was starting to worry about managing all the grassy areas with just the push mower. It certainly kept me fit, but in the end it was a bit too much. Now, I just have to decide which bits to mow and which to leave to nature….decisions, decisions!

Anyway, enough of my land management problems.

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.

Trump 2.0

PRESIDENT TRUMP….again
I will provide an abbreviated version of what his Presidency is likely to entail because by the time I have written this and then edited it, it is highly likely that things will have changed again. So here are some bullet points we learned from the conference:

Whatever your view is on President Trump the consensus is that he is going to be good for the American economy. He is also about trying to bringing business back to the USA, putting the USA first and stimulating business in the US itself.

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.

China holds the greatest stock of rare earths which are required in all the latest technology and chips, so China holds an ace card in its hand.
*  In fact 90% of high end chips produced by Nvidia require these rare earths.
*  80% of Japanese trade goes through the Taiwanese Strait.
*  Access to technology is the US’s main priority.   So if China were to invade Taiwan ( considered unlikely – what could they benefit from it?), then what would be the US’s response?

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!

Finance in Italy 2025

By Gareth Horsfall
This article is published on: 5th January 2025

05.01.25

Buon Anno 2025

Happy New Year to everyone! I hope that you are reading this feeling relaxed and rested. Who knows what 2025 will throw at us from a political and financial point of view, but the most important thing is our health (physical and mental) and making sure we all keep communicating with one another.

So, in this January 2025 Ezine I just wanted to just follow up on my year with you. After sending out my last few Ezines, and writing about our new house and move away from Rome in 2024, many of you have written back to congratulate us and offered many words of support and also wisdom because I know that many of you have also been through, or are continuing to go through a similar experience. I have to say that I wake every morning now feeling fresher and more mentally alert than before. I even started my year this morning (2nd Jan) with some early morning outdoor exercise (no need for the closed gym anymore) to get back into the normal health and fitness regime that I follow (after all the panettone and other goodies during this period).

I wanted to thank you all for your words and thoughts of support in 2024 and thought this E-zine might be a good opportunity to send you some fotos and afterwards to provide some of my own thoughts about the year ahead from a financial and economic point of view (my own thoughts, I must add!)

Below are some pictures from my house adventures in 2024.

The house as it is now – day and night.

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The living room, then and now: 

My wife has got quite handy at sunrise and sunset shots as well: 

 

Then I am sure you will all be happy to see me doing some hard manual labour for a change:

*From left to right: 
My first decespugliatore experience (in 38 degs!), picking pears, excavating a random pipe which led to nowhere, re-laying the same pipe which now goes somewhere!

And my famous ‘trinchea’ for laying the new pipes, which is now filled in and working like a dream! 

And finally, our famous kitchen which was finally installed 100% on the ‘Virgilia di Natale’ and we were able to make Xmas dinner in it. (Thankfully, as I didn’t fancy trying it on the camp stove in the outhouse).

My job over the next few months, apart from ongoing work, will be to get all the necessary papers together to present to my commercialista and take advantage of the Bonus Edilizia for 2024.  In the end we probably maxxed them all out, playing with the main one of 50% on most works, bonus eletrodomestici and then the other detractions such as the cost of the estate agent.   The paperwork will be a mission in itself but I have been quite good at documenting and filing everything as we went along so its just a case of putting it altogether for the commercialista.  (I can’t advocate enough for keeping good and regular records if you embark on this kind of journey as the paperwork requirements to take advantage of the bonuses are quite something).

THE YEAR AHEAD

And so, as my thoughts now move away from building to ongoing maintanence, I thought I would share some of my thoughts for what I see from 2025 and to touch on some of the things which are probably in everyone’s mind. (I should add that, as usual, I will be attending the Spectrum IFA Group annual conference again around the 22nd January and will be reporting back on the opinions of the people at the investment coal face, as they see it).

President Donald Trump

As far as I see things, I think we are in for a volatile ride.   This is not to say that I see things turning out negatively for use in 2025, far from it.   It could actually turn out to be positive for investment returns, but it will likely come with some periods of volatility during the year, certainly more so than 2024,  I suspect this will be driven primarily by President elect Donald Trump.   He has been voted for a second term and knows he cannot be voted for a third so he really has nothing to lose.   His rhetoric already has been quite interesting, from wanting Canada to become the 51st State of the USA to purchasing Greenland.

It is easy to write him off as a lunatic, and certainly I suspect the Canada comment was really a way to wind up Justin Trudeau, but Greenland would be a much more strategic and important asset for the USA, because of the Arctic shipping corridor which Russia is already utilising to it’s advantage. Rising arctic temparatures now mean that it is open for the whole of the year. (Goods shipped from East Asia to the UK could save up to 10-12 days in shipping time over the traditional Suez Canal route and save over 40% in costs!). Donald Trump is probably very aware of this and would prefer that Russia does not get power and control of this route.

USA Tariffs

Apart from that he is going to come out of the gate on the 20th January with the tariff gun, is my thinking.  I imagine he is going to hit everyone and everything with tariffs, where it is not in the interests of the USA. (The EU needs to prepare itself)  I would think that his biggest target will be China to try and balance trade between the 2, but even more so to encourage businesses to return to the USA rather than offshoring production in China.  He has also fired off a comment about imposing 100% tariffs on any country that joins a currency union in the newly formed BRICS economic community, so as to preserve the dominance of the US dollar.

However, the BRICS economic community are not going to be phased by this because they are unlikely to be ready to launch any common currency for quite some time and can always wait 4 years until Donald Trump is no longer in power. (Countries and economic unions have a much longer time outlook than a US Presidential term).

One thing which I hope he will achieve is his desire to put an end to the Ukraine Russia war.   I am not sure what form this will take, but will likely mean Ukraine ceding already lost territory to Russia in exchange for calling a ceasefire to the war.   Whilst I may not agree with the outcome,  it will stop a war which seems more like a killing ground than anything else and has only demonstrated that Russia is significanlty more advanced militarily than we may have thought.  The recent dropping of their ballistic Oreshnik bomb, as a warning to NATO, was a bit of an eye opener given that reports seem to confirm that it travels so fast that Western/NATO allies have no system to effectively intercept such a weapon.   On that basis it’s better that Russia never has a reason to use it, in my opinion.

I suspect the situation in the Middle East, Israel and Gaza and Syria will not get any better in 2025.  I can’t see any reason why anything will change there, sadly.  More of the horrific images coming from Gaza and human rights abuses on both sides.    I was taken a bit by suprise by the falling of the Assad regime in Syria, not more so than by an ex-Al Qaeda second in command, who is now a western ally.   Somehow I don’t see that ending well.

EU nations

And lastly, I will touch on the EU because it warrants some mention given Donald Trumps re-election.

It has become evident that EU nations have been riding on the coat tails of the USA for defence, through NATO since World War 2.   I remember when Donald Trump was President first time around that he started demanding that NATO allies contribute their fair share of the defense budget to NATO and ‘requested’ that they increase their expenditure to 3% of GDP.   I don’t remember the facts but I don’t think many EU countries did, apart from Estonia if memory serves me correctly.

This time I have seen reports of Donald Trump requesting 5% of GDP or he may withdraw the USA from NATO.  This would seem to be a significant worry for the EU, and rightly so because ultimately any defense/borders/war with Russia are going to have to be funded/managed by the EU and no longer by the USA.   Additionally, USA Tariffs on goods and  increased defense expenditure are going to have a significant impact on EU member states.   Already with the increased gas prices that we are paying (DT will also de-regulate energy exploration and production in the USA so they can start drilling and mining and become more resource independent again) many businesses are moving to the US or to places like Dubai to benefit from lower costs and /or lower taxation.  This is a long-term serious problem for the EU and the bureaucrats in Brussels are going to have to step up to the plate.  In the very short term I see this as having a serious economic impact but could lead to an economic boom time in the EU, especially in defense, as it relies less on the USA for support in the medium term.

There is so much more to say here and I could make some more predictions.  The fun thing is that none of this will not define your investment returns in 2025.  Would you have predicted that in 2024, whilst Russia was at war with Ukraine, Israel/Gaza were was committing their deeds, the fall of Syria and the re-election of Donald Trump, would produce of return on the US stock market of over 20%?   The analysts predict a return of around 14% on the US stock market in 2025.

Black Swan event

I will finish this E-zine just by saying that I am a great believer in the Black Swan event.   For anyone who is not familiar with this theory it was coined by Nassim Nicholas Taleb in his book The Black Swan.  The theory goes that until Western colonial powers discovered and colonised Australia it was believed that all swans were white.   N0-one had ever seen a black swan.   Therefore to see such a creature was a moment of shaking belief and requiring  a re-thinking of ideas and plans.

He overlaid this onto the investment markets explaining that there are events of which we are ignorant, even to go as far as saying we have no knowledge whatsoever, until such time as they become evident, normally because of problems occuring in their respect markets:  think mortgage backed securities (2008/9), Long Term Capital Management (Russian debt crisis 1998)  The point is that we can never measure, prepare or be cognisant of these things before they happen, but they inevitably have significant consequences and create more stress for investors.   The good thing is that they come along rarely and they pass, and we move on.

As always we need to remain diversified, manage costs where we can and have the right people managing our money to get us through such events.

In this E-zine I have shared some thoughts about what will happen politically and economically in 2025, but I remain postive for the year ahead from an investment focus.     Good luck to all of us for the year ahead.

From the new house in Amelia….. Auguri alla Befana !!!!

Finance in Italy – November 2024

By Gareth Horsfall
This article is published on: 1st December 2024

01.12.24

Before I get into things I thought I would share a picture of my olive oil container (fusto), all 50 ltrs of it! The raccolta, which I did at the start of October with the help of some locals, produced approx 150 ltrs of oil, of which we split 3 ways.

under the olive tree

It seemed only fair given I had no equipment and had no idea what I was doing and this will easily cover our annual consumption and maybe some gifts to friends and family. What a great experience though!

Next year I will get more organised and see what I can arrange. The olive oil may be virgin but my virgin olive oil raccolta days are now finally over! I am now starting to really earn that Italian citizenship!

On the property front we are finally getting to the end of the things to be done….at least for now.

After a disastrous first kitchen fitting we had to order another one and will receive that in the coming weeks. We have been cooking and eating in an out house for the last 4 months, but as the colder weather is now settling in it’s becoming more difficult to say the least!!

All the other little bits, which take time and effort, are getting completed meanwhile I am still loving the surroundings, olive trees and watching autumn turn to winter and the changing landscape. I am also finding that on our ‘terreno’ we have a whole load of wild plant foods growing: cicoria, wild finocchio, asparagus, and numerous other edible plants.

I would never have known if it wasn’t for the ex-owner who came around and pointed them all out and advised to do some foraging rather than keeping the grass short everywhere. I will see how that pans out, but it could be interesting and I am keen to try and use the land rather than just curate it (mainly because cutting grass every 2 weeks is hard work) and so I have lots more to learn. A fresh organic larder on the ‘terreno’ might just be the thing; in the areas that I have let grow wild to date the insects and birds seem to be having a ball anyway and some interesting wild orchid type plants have popped up as well.

Anyway, moving swiftly onto financial matters because I imagine you are more interested in that than my explorations of country life…

USA elections

I refrained from writing an E.zine directly after the US election because everyone seems to have their own opinion of Donald Trump so it matters not what I think. In the end what does matters, for our purposes, are the financial markets and how they react to such events.

If you hadn’t noticed the immediate reaction was very healthy indeed and stock markets rose on the back of the news. Trump is a self confessed businessman after all !!

 

I saw him doing an interview the other day in which he said that he had spoken to lots of business people since his last time in the Oval Office and had asked what was more beneficial for them: reducing taxes or reducing regulation and bureaucracy. He explained that every one of them said that reducing over-burdensome regulation and bureaucracy was more important by far. So, it might be reasonable to assume that should he be able to follow through with this aim that he can provide a healthy landscape for US companies to flourish.

Certainly the indicators are good! He also has his Department of Government Efficiency head – Mr Elon Musk, rationalising the US government agencies so that should be something interesting to watch if his firing of employees when he took over Twitter is anything to go by.

I myself can confirm that over-burdensome regulation affects our business tremendously these days; there seems to be more and more paperwork than ever before, and much of it could be eliminated or reduced significantly. However, I don’t see that happening any time soon especially from the direction of EU, who set the rules, so we will continue to deal with it. Tech now plays an important part for us in gathering and dealing with client information and it saves you and I a lot of time.

But regardless of all of this, we have to consider how financial markets will continue to react and, at the time of the election someone shared on LinkedIn a graph which I will share with you below:

financial markets

As you can see, the stock market doesn’t care who is in power, we can all have our own views on Donald Trump and his effect on the world, but in the end it doesn’t matter one tiny bit; but there are 2 takeaways from this graph:

1. The market rises over time
2. In every period there is market volatility and there will be moving forward.

The stock market may have risen since the election and Bitcoin is equally flying, but be under no illusion, at some point markets will correct.

The best thing to do is be invested in solid companies and diversify your portfolio. Match it to your risk profile and decide how much of those ups and downs you can stomach. Patience will take care of the rest for you.

Your financial enemy is not Donald Trump nor anyone who will come after it is simply inflation! The rise in the cost of goods and services over time. Keep your eye on that and not on the daily swings in markets.

On the subject of inflation, it continues its rise – I can’t believe how much things cost in relation to the new house we bought. I asked for a quote from a local gardening firm to cut a long hedge, which is quite overgrown, and when I got it back my eyes started to water. So, like a good Yorkshire man I went out and bought a chainsaw for €180 and thought I would just do it myself, piano piano. In the process I saved myself a whole load of money! Equally, the daily rate for builders, electricians, plumbers etc is now so high! Obviously their cost of work has increased and that is being passed onto us.

CRYPTO INVESTORS in Italy

Crypto Investors

Are you an investor in crypto currencies? Well there is some rather alarming news for you moving into 2025, if you are an Italian resident for tax purposes.

From 1st Jan 2025, the capital gains tax rate on crypto currency speculation will increase from the flat standard CGT rate of 26% to a whopping 42%! Not great news for you if you have been investing in crypto and are sat on healthy gains, certainly given the fact that Bitcoin has risen significantly over the last few months, effectively doubling in price.

One way to mitigate the higher tax rate on your historic gains might be to cash out before the end of the year and pay your 26% on historic gains in next years tax return. At the same time you can buy back in and in that way you reset the clock on the purchase price, to the new amount. Clearly this means paying 26% CGT on your gains to date, but if significant then it could be worth it. From there on in it will be 42% on realised gains.

Checking your Italian tax return – it might save you money!

One of the things I help my clients with these days is taking a look at their tax returns and making sure that the section Quadro RW ( declaration of overseas assets) is prepared correctly.

This year I found a number of incorrect entries from commercialisti and got them corrected, saving some clients thousands in tax. However, to be fair to commercialisti they are often bombarded with information which is in English and on statements which they don’t know how to interpret. It is no wonder they sometimes get it wrong and we can’t expect them to understand non-Italian portfolio or cash transaction statements. However, that’s no excuse and either we or they have to be more attentive.

So, here’s one tip for checking your own Quadro RW.

You will find in that section that there are lots of little boxes, in which various values need to go. In box No.3 you will find the title.

‘codice individuazione bene’

'codice individuazione bene'

This is nothing other than the number which you (or your commercialista) must select to identify the type of asset that you hold abroad, but clearly it’s not much good if you don’t have the list of identifier numbers. So, here, below, I have included a list of all the different codes:

CONTI CORRENTI E DEPOSITI ESTERI 1
PARTECIPAZIONI AL CAPITALE O AL PATRIMONIO DI SOCIETA NON RESIDENTI 2
OBBLIGAZIONI ESTERE E TITOLI SIMILARI 3
TITOLI NON RAPPRESENTATIVI DI MERCE E CERTIFICATI DI MASSA EMESSI DA NON RESIDENTI 4
VALUTE ESTERE DA DEPOSITI E CONTI CORRENTI 5
TITOLI PUBBLICI ITALIANI EMESSI ALL'ESTERO 6
CONTRATTI DI NATURA FINANZIARIA STIPULATI CON CONTROPARTI NON RESIDENTI 7
POLIZZE DI ASSICURAZIONE SULLA VITA E DI CAPITALIZZAZIONE 8
CONTRATTI DERIVATI E ALTRI RAPPORTI FINANZIARI CONCLUSI AL DI FUORI DEL TERRITORIO DELLO STATO 9
METALLI PREZIOSI ALLO STATO GREZZO O MONETATO DETENUTI ALL'ESTERO 10
PARTECIPAZIONI PATRIMONIO DI TRUST, FONDAZIONI O ALIRE ENTITA GIURIDICHE DIVERSE DALLE SOCIETA 11
FORME DI PREVIDENZA GESTITE DA SOGGETTI ESTERI 12
ALTRI STRUMENTI FINANZIARI ANCHE DI NATURA NON PARTECIPATIVA 13
ALIRE ATTIVITA ESTERE DI NATURA FINANZIARIA E VALUTE VIRTUALI 14
BENI IMMOBILI 15
BENI MOBILI REGISTRATI (es. yacht e auto di lusso) 16
OPERE D'ARTE E GIOIELLI 17
ALTRI BENI PATRIMONIALI 18
IMMOBILE ESTERO ADIBITO AD ABITAZIONE PRINCIPALE 19
CONTO DEPOSITO TITOLI ALL’ESTERO 20

Each number relates to the different type of assets you may hold. No 1 being conto correnti e depositi, which is current accounts and deposit accounts. However, be aware that there are different interpretations because National Savings Certificates or money market accounts, for example, will not fall into this category in Italy even though they may seem as though they should based on our interpretation.

A good start is to get a copy of your Unico tax return and check that the numbers are inserted correctly. You can work the figures out as well, but an asset declared incorrectly i.e bank account instead of stock portfolio, could end up costing you!

Remember, that you can down load a copy of your tax return now on the Agenzia delle Entrate website if you have a SPID or the carta d’identità elettronica which you have linked to the app. We have all the tools, so let’s use them or alternatively, just ask me!

On that note, I will leave you with this shorter E-zine. I will be writing about UK Inheritance tax and the very important changes that have occurred in the 30th October budget in my next E-zine. For once some tax changes could be a huge bonus for anyone looking to live in Italy for the rest of their lives and then pass on as much as possible to their heirs. The rules have been changed to make it much more clear on how you can now escape UK inheritance tax. For the likes of us who live in Italy, where from an inheritance tax point of view the country is like a fiscal paradise, we have a clearer path to taking advantage of Italy’s rules rather than the UK, but like almost everything it will require carefully planning and a full understanding of the changes.

I will certainly get that Ezine to you before Xmas !!

Wealth taxes in Italy

By Andrew Lawford
This article is published on: 15th October 2024

15.10.24

If you follow Italian media reports, you may have picked up on the idea that a one-off wealth tax may be on the way to help lower the levels of government debt.

It probably comes as no surprise that Italy has a long history of over-promising and under-delivering when it comes to reducing its debt levels. If a picture is worth a thousand words, then the graph below shows how each budget forecast (dotted lines) promised a reduction in the ratio of Debt/GDP, whilst the actual level (solid red line) generally heads in one direction only.

Source: Mazziero Research from NaDEF data (Nota di Aggiornamento al Documento di Economia e Finanza)
Source: Mazziero Research from NaDEF data (Nota di Aggiornamento al Documento di Economia e Finanza)

Of course, the Debt/GDP ratio is one thing, the absolute level of indebtedness is quite another. I note with some uneasiness that over the last 20 years Italian Government debt levels have increased by almost 100% whilst nominal GDP has only increased by around 60%. Soon I fear that Italy will cross the threshold of €3 trillion in debt. That’s €3,000,000,000,000 for those who like lots of zeros.

Is a wealth tax a likely route to try and bring the public finances back into line? Italy has seen this sort of thing before, and the mention of a wealth tax (una patrimoniale) is enough to provoke any Italian who had a bank account at the time to start grumbling about the “patrimoniale del ‘92”, when Giuliano Amato, the recently appointed prime minister, did an overnight raid on Italian bank accounts, withdrawing 0.6% of the value to try and bolster the parlous state finances. Interestingly, Mario Draghi was Director General of the Italian Treasury at the time, apparently willing to do whatever it took even back then.

In considering the likelihood of new wealth taxes, it must be noted that Italian residents already suffer an annual 0.2% tax on the value of their financial holdings (either through stamp duties or the foreign assets wealth tax known as IVAFE). A one-off wealth tax of 0.6% would be preferable to 0.2% per annum in my opinion, but getting both would be a bit rough.

One must also consider the current political landscape compared with 1992. Back then, the system was beginning to crumble as the tangentopoli bribing scandal was getting started. This eventually led former prime minister Bettino Craxi to flee to Tunisia and brought about a supposed cleansing of the political classes dominant in the post-war period. The new system, known as the Second Republic, continues to this day and is currently dominated by Giorgia Meloni. Notwithstanding her somewhat inauspicious background and the fact she is surrounded by a cast of more or less unsavoury individuals, she has managed to convince the world that she is a force for good. My own view is that she is an able political operator and figured out fairly quickly that, if you play by the rules of modern conservatives, you get invited to far better parties – have a look at this video from the Atlantic Council who recently gave her the Global Citizen Award. From minute 1.30 you can hear what Elon Musk has to say about her.

Wealth Tax Spain

As far as Meloni’s attitude towards raising taxes, she has recently declared them to be una cosa di sinistra (a left-wing thing), presumably meaning that any dirty work of raising extra taxes will be left to a technocrat like Mario Monti or Mario Draghi at some point in the future.

Whatever the case, it is always prudent to maintain a solid asset base outside of one’s country of residence and it should be clear that any overnight raid on financial assets could not include those deposited outside the Italian financial system.

Foreign assets may well be dragged into the tax net in other ways, of course, but at least you won’t wake up one morning suddenly poorer than when you went to bed. In extreme circumstances, which admittedly are almost unimaginable for the moment, capital controls and the like could severely reduce your financial flexibility in the event that all your assets were held in Italian financial institutions. This may seem like scare-mongering, but remember that the unthinkable has happened in the EU in recent memory, so it pays to be prepared. If the weather is uncertain (and when is it not?) then it’s always a good idea to have an umbrella with you. If you end up not needing it, all the better.

If you feel like discussing your own financial set-up to see if it can be improved, then do get in touch. I’m happy to provide a no-obligation consultation to discuss any concerns you might have and the options you have available.

Income tax rates in Italy 2025

By Gareth Horsfall
This article is published on: 7th October 2024

07.10.24

Welcome to this E-zine once again. I thought I would share a few bits of news which have cropped up in the last week or so and which may interest you, non more so than a rearrangement of income tax rates in Italy from the 1st Jan 2025.

But before I get into that I thought I would just give you an update on the house situation here in Umbria.

Thankfully all the major works have now been completed, the last of them being the installation of the new windows and persiane and the painting of the outside of the property. These were all finished last week (thankfully before some of the rains moved in). I also spent the last weekend in September digging a trench to run water pipes and a new electrics cable through.

Under the olive tree

It has been asked why I didn’t just get someone with an excavator to come and dig it, but we learned that there were a number of hidden pipes in the ground and cables which no-one knew exactly where they were positioned and so it was digging the old way – by hand. That was a big job, but now completed and once the new ‘impianti‘ are in place then I can have the enjoyment of filling the long trench back in again. The ‘idraulico‘ has nicknamed me ‘la talpa‘ for my efforts!

We are still living among boxes, but after the kitchen is finally fitted correctly (the first attempt was a complete mess! – Apparently they were not used to working with ‘wonky’ walls in old houses), then we should be able to move forward with unpacking and start to reassemble our home again. My son, Alexander is loving his new school, despite the 6 days a week and 40 min bus ride to school, so that makes everything much more easy to withstand. (They got a day off today on Thursday 3rd Oct due to high winds and torrential storms in the area!)

Anyway, I know many of you have been through similar experiences and much worse, so I finally feel like I understand your pain and despite all of this I am loving living among the olive trees, nature and the fresh air. I need to take some trips back to Rome regularly enough to see clients so I will get my city fix often enough.

So onto the new and interesting things which might affect you, the first is for everyone who is a resident in Italy.

IRPEF scaglioni (income tax bands)

IRPEF
From Jan 1st 2025 the IRPEF scaglioni (income tax bands) will be changing again. The government is following up on its promise at the elections to modernise the taxation system and move to simpler and more ‘interesting’ tax bands.

Giancarlo Giorgetti (Finance Minister) said ‘ We are committed to not only cutting the tax rates and reducing the 3 tax bands, but also realising them from the next tax year [2025]’

So, the current and proposed (but not yet confirmed) IRPEF rates for 2024 and 2025 respectively are as follows:

2024 Tax rate% 2025
€ 0 - 28000 23% 23%
€28000 - 55000 35% 33%
€55000+ 43% Here they will likely leave the rate at 43% but instead increase the band to income over €60000

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!

UK Budget

The UK Budget
The UK autumn budget will be taking place on October 30th this year and there are some interesting changes afoot. As yet, nothing confirmed until the big day, but I attended a couple of online seminars looking at possible tax changes that could turn out to be quite interesting ( positive and negative) for any Brit’s looking to move to Italy and become long-term residents, or those of us who are already here.

Let’s start with the positives:

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:

Gift Tax

Gifts for Inheritance tax purposes
There is talk of removing the gift tax break known as PET’s (Potentially exempt transfers) where a gift made, after a 7 year period, is no longer considered in the inheritance tax calculation. May they remove this? It might be a good time to discuss with family members, who may want to gift you funds, to do this before October 30th before the rule would likely come into force.

There is also the question of money being paid to a non-resident individual and whether that could attract a UK exit charge (see Potential exit charge for UK nationals section below)

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.

exit tax

Potential exit charge for UK nationals….and maybe UK located assets?
I have to say that this one surprised me, and as of yet I haven’t heard anything more about it, but the jungle drums are beating that there may be a possible exit charge on anyone who becomes UK non-resident.

A tax of this nature is currently applied to UK trusts who become non-UK resident. A deemed disposal value of the assets is made just before the moment of non-residency and a subsequent deemed re-acquisition of the same assets at market value is made for the purposes of calculating the CGT.

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.

25% tax fee lump sum pension

Pension tax free lump sums
As anyone with a UK pension will know you are currently eligible to withdraw 25% of the valuation of the pension at age 55 (moving to age 58). The possibility is that this will be reduced to a maximum of £100,000 for all pensions and will likely be effective immediately.

As a reminder to anyone thinking of moving to Italy, it is always better to take the tax free lump sum in the UK before moving to Italy because Italy does not respect this tax break and would tax the whole amount as income. However, in light of this new UK proposal you might want to accelerate your decision to remove your full 25% before October 30th and hold it in cash/deposit, before you make your move to Italy.

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!

Finance in Italy

By Gareth Horsfall
This article is published on: 16th September 2024

16.09.24

I have been rather absent this summer mainly due to my change of residence from Rome to Umbria. Works are still going on at the house although now in their final stages and should be done by the end of Sept, which I will be very thankful for because quite frankly it’s all driving me a bit mad.

Then of course, the work of getting the house and land in order will start and which will be much longer term. I still haven’t a clue what to do with the olive harvest, although after taking a tour of the trees the other day and given the very long hot dry summer this year plus the fact that the trees themselves have not been trimmed well in many years, it looks like the harvest would not be so great anyway, save a few trees which have produced quite a bit of fruit.
So all in all I am less preoccupied with that now and I may even take a weekend to have a go myself and see what happens… there is always a first time for everything! 😉

Saying all this, the thing that is driving me more mad is the fact that my long term rental car has now been playing up for over a year and I have had it in with the mechanic 6 times (yes, that number is correct !!) and every time within 48 hours the same problem arises. I am now going mad with LeasePlan about getting another car to which I cannot be promised a similar vehicle (which I need given the amount of Kms I do and also the types of ‘strade‘ I have to drive along). I think this fight is actually ageing me a lot more than the house renovations. Being without a car which functions properly is incredibly stressful.

Anyway, enough of my travails. Let’s talk financial stuff.

finance in italy

From €100,000 to €200,000
Firstly, a small mention of something that cropped up during the summer, and is unlikely to affect many of us, but Italy currently has a flat tax regime for high net worth individuals (did you know that by definition high net worth starts at €/$/£ 1 million of assets exc home?). In brief, there is the opportunity for those HNW individuals who wish to transfer their residency to Italy to pay a flat tax of €100,000 a year for a maximum of 10 years without the need to enter into the general tax system. This forfeit regime usually works out best for anyone who is earning a high enough income and would be paying over this amount in income tax. For anyone with invested assets, generally speaking, they could be organised in a way to not get anywhere near €100,000 in taxation, depending on factors such as how much one might need to spend each year etc.

Anyway, my point was that the Italian authorities have chosen to increase this flat tax to €200,000 pa. for new applicants (the effective date is not clear yet).

The interesting point about this was not the increase itself but the wording used by the Minister for Economy and Finance: Giancarlo Giorgetti. He stated:

“We [Italy] are against any type of competition to create the most advantageous fiscal regime for businesses or individuals, because countries, like Italy, that have a limited fiscal capacity would be disadvantaged and destined to lose”

From my point of view these are quite interesting words especially since Italy is now trailing other countries in the EU (Portugal) and the UK in pulling their fiscally advantageous tax regimes for high net worth individuals. So, is it only a matter of time before this flat tax regime is stopped altogether? I suspect it is.

Italy also has a flat tax regime for retirees moving to one of the southern regions in Italy. The possibility to pay a flat tax of 7% pa for a maximum of 10 years (with conditions!) Has this flat tax regime also got a ‘data di scadenza’? Only time will tell but certainly the direction would appear to be that preferential tax regimes are likely to have a limited shelf life, so if you are hoping to apply then it might be best to think about doing so sooner rather than later.

Other than this I didn’t really see anything other than the norm this summer. Financial markets have performed quite well this year to date, albeit more volatile in the summer months. I will be reporting more on that in further E-zines, but for now I wanted to share with you something I listened to on a podcast one day when I was ‘working the land’ one happy day in August. This topic rang true as we are now most of the way through a year when nearly 70% of the worlds population will have voted for new political leaders and the most important one is yet to come: the USA.

But I ask you to think about the following discussion I had with my mother in law recently when she explained to me that she had stopped buying goods from Amazon because she felt like she was funding big multinationals in their continued effort to destroy small businesses and making it harder for anyone else to compete in a fair market place. Whilst I admired her conviction, and actually agree with her 100%,I disagreed that Amazon were the actual proponents of this strategy and were in fact just a business trying to maximise profits and would use whatever legal methods (and probably use lobby groups as well) available to them to achieve that aim and if Amazon were in fact paying the same level of taxes and contributions as a small business owner then it would be much more likely that Amazon would have difficulty in continuing in its present form and small business / retail etc would perhaps thrive again. My point being that whilst purchasing less from Amazon will undoubtedly help your local businesses (and I do purchase more from local businesses than Amazon), it is unlikely to solve the wider problem as it is a political one which must be addressed.

American economy

So, whilst I was listening to this podcast there was a man called Lloyd Chapman speaking and he is the founder of the American Small Business League and had some pretty interesting things to say about small business in the USA.

I imagine that the facts and figures are roughly the same in the EU as those he quoted for the USA, but they did make me think twice about my own consumer patterns, which also leads us to our own investor behaviour.

So let me give you some of those interesting facts now.

How important are small businesses to the US economy?

* 99% of all US companies have less than 5 employees.
* 98% have less than 100 employees
* The average US company has just 10 employees.
* There are 33 million small businesses in the USA.
* Most of the innovation and R&D breakthroughs in the US come from small business.

These very same companies are responsible for over half the USA annual Gross domestic product, half of the private sector workforce, over 90% of the US exports and hence are responsible for over 98% of all new US jobs.

MOST AMERICANS WORK IN SMALL BUSINESSES

Bias of Government
Lloyd went on to point out that the federal government (and I would argue the European governments too) is all for big business. They introduced the small business act in 1953 which mandated that 23% of all federal contracts should go to small businesses, of which 5% would go to women owned businesses, 13% to businesses run by minority groups, and 5% to small businesses run and owned by Veterans. On this basis the small business act looks like the largest economic stimulus programme ever passed by Congress for the American people.

However, given that the majority of federal contracts are awarded to the Pentagon you would imagine that there would be a lot of auxiliary businesses providing services to the Pentagon itself, however, Lloyd explained that this is not the case and the small business act of 1953 has been largely repealed by the Pentagon over the last 20 years. In fact, the US government has, for the last 30 years, undergone a non-stop effort to close small business administration (local support offices for small businesses) and end all federal programmes for small businesses.

* Only 1% of businesses in the USA have over 500 employees
* But over 97% of federal spending goes to less than 1% of companies in the US.
* That 1% of federal spending has not created 1 NET new job in over 40 years (since the 1980’s) and dozens of these companies are not even paying taxes. The majority are Fortune 500 companies.

This is, in the words of Lloyd, a recipe for economic suicide.

Love, life and financial planning in Italy

By Andrew Lawford
This article is published on: 1st August 2024

01.08.24

A quick question for all Italian residents (whether you are DOC Italians or foreigners who have moved here):

Have you thought about your family situation and how Italian family law might apply to it?

The answer for many people appears to be “not really”, which may present something of a problem considering the legal consequences of various family scenarios. Italy used to be fairly simple in this regard, in that you were either married or you weren’t. If you were married, the situation was fairly clear, and if you weren’t, your “family” situation might have been somewhat tenuous.

I will explain better below, but first a brief disclaimer: this is a complicated field and each individual situation may lead to a different outcome. This article is intended to highlight some of the issues you may face but it cannot be relied upon as legal advice – I can help you to understand your own situation with the assistance of my network of legal and tax professionals. I am also not particularly concerned here with the dynamics of the legal relationship between parents and children – my focus here is on the status of the couple.

Italy has long had “forced heirship” rules which establish certain family ties that have the right to receive a given percentage of a deceased person’s estate. For simple family situations with uncomplicated assets, this may even mean that it is superfluous to make a will, because the intestacy laws already offer an adequate solution. However, “simple family situations” are now something of an exception to the rule. You might think, for example, that being in a de facto relationship qualifies as simple, given how the treatment of this type of relationship has evolved in many foreign jurisdictions to the point where there is little functional difference compared with marriage. Not so in Italy.

financial planning in Italy

Italy is somewhat more traditionalist in its approach to family life and I don’t think it is an exaggeration to say that it has been dragged kicking and screaming into recognising modern family situations and, in particular, same-sex couples, who until relatively recently had no means of making their relationships official (de facto heterosexual couples did, of course, have the option of getting married – a right that same-sex couples continue to be denied).

Italy being Italy, the modern iteration of family law is complicated and requires action by a couple in order for there to be any kind of recognition of their status. Let’s take a closer look:

Marriage
For better or worse, marriage is still the gold standard of the family relationship in Italy. For reasons that will become clear below, there is no equivalent structure that confers the same level of family rights, some of which are as follows:
• automatic recognition of heirship for each spouse;
• right of the surviving spouse to continue living in the family home, even if that home was 100% owned by the deceased spouse;
• possibility to receive any Italian surviving spouse pension (pensione di reversibilità);
• possibility to enquire as to medical status of one’s spouse;
• reduced inheritance taxes for assets passing between spouses;
• possibility of child adoption.

Unione Civile
One tier below marriage is the Unione Civile, a possibility that has existed since 2016 and which allows two members of the same sex to declare themselves a couple in a similar fashion to a civil wedding ceremony. This confers most of the rights of married couples, but does not allow them to adopt children. Initially, it was intended for the Unione Civile to be available to all couples, but in the final instance it was reserved for same-sex couples. I’m not sure of the reason for this decision, but I imagine it has something to do with not wanting to undermine the concept of marriage, which remains an important topic for certain political factions.

Conviventi di fatto
Below the Unione Civile is the registered de facto couple (conviventi di fatto). This possibility is open to all couples but needs to be registered in your local comune – you will then have a residency certificate which attests to the status of your relationship. The benefits of registering as a de facto couple are essentially that the surviving partner has the right to inhabit the family home, but only for a maximum of 5 years. You certainly don’t automatically become your partner’s heir and there is no concept of family property (although you can stipulate in advance how to deal with your relationship property in the event of a separation). If you contrast this with the effects of marriage above, it becomes clear that this type of relationship isn’t equivalent to marriage in any legal sense.

Unregistered de facto relationships
The unregistered de facto couple, even if they have been together for decades, might as well not exist from a legal perspective, especially if the partners die intestate.

Forced heirship and foreigners
The issue of forced heirship needs a bit more explanation: it specifies certain individuals who cannot be excluded from your estate: spouses (even if legally separated), children and (in the absence of these first two categories) parents have a right to receive a given percentage of your estate. You will also always have a free portion of your estate that can be left to whomever you choose. The fact of forced heirship does not prohibit you from making a will leaving everything to the local dog shelter, but it does mean that these protected categories of people will be able to challenge your testamentary dispositions. For people without a spouse, children or parents, forced heirship is not a problem as the free portion of your estate is 100%, but you must of course make a will in order to guarantee that your desired heirs benefit under your estate.

If you are foreign, you may be able to insert a choice of law clause in order to allow your estate to be dealt with under the rules of your home country. However, the rules around this are somewhat complicated and you will need specialised legal advice to make sure you get it right.

Inheritance tax (IHT) & Gift tax in Spain

Don’t forget about inheritance taxes
You should also be aware that any inheritance tax exemptions accorded to spouses are unavailable to de facto partners, so under current rules assets left to a de facto partner would be taxed at 8% of their value (against 4% with a €1 million exemption for spouses).

Living Wills
Whilst we’re on the subject of inheritance and wills, another curious area that has evolved over the years is that pertaining to the expression of one’s desires when it comes to medical treatment. There have been some high profile and saddening cases of the medical profession in a pitched battle with the family members of someone who has had the misfortune of ending up in an irreversible comatose state.

If you would like to make clear your desired level of treatment in such a case, you can do so by using a living will (known in Italian as a DAT – Disposizione Anticipata di Trattamento). My wife and I tried to make living wills when we first married, but our notary refused to help us given the uncertain legal context at the time. The situation is now clearer, so we are in the process of sorting these out. If anyone is interested in how this ends up working in practice, send me an e-mail and I’ll be happy to help.

Where to from here?
If any of the above has struck a chord, then please do get in touch. Aside from helping to find a qualified professional to assist with your will, a general review of your assets and associated holding structures will ensure that you pay the least amount of tax possible during your life, whilst also directing your assets to the right people when you pass away. In particular, paying inheritance taxes in Italy is, for most people, a choice rather than an obligation, as they can legally be reduced to a bare minimum through intelligent estate planning.

British living in Italy

By Gareth Horsfall
This article is published on: 8th July 2024

08.07.24

In this E-zine I will keep things brief because house work is still ongoing from my end (hopefully completed by the end of July and moving into the new place on the 5th of August). The photo below was taken down the road from the property near a vineyard.

British living in Italy

I know many of you already own properties near views very much like this one, or see equally beautiful sunsets, but I thought I would share this as my excitement builds!

Anyway, not wanting to burden you too much with my own personal matter, I came across a few things recently which I thought should be communicated to the British contingent amongst the readers of this article.

The first is an important announcement for anyone who is over 80 years old and a recipient of the UK state pension!
The Department of Work and Pensions is checking to make sure that everyone is still eligible to receive UK state pension benefits, and therefore requires that anyone over 80 years old, of any nationality, and who is drawing a UK state pension, complete a form and have a witness sign it before sending it back signed, in the post!. This is called a life certificate. This is a routine process with which the DWP update their records. (If you have already done this, then you do not need to do it again!)

The number of submitted life certificates so far is lower than the DWP expected and so it has extended its deadline to the 31st of July 2024.

** If the certificate is not provided, it could lead to suspension of UK state pension benefits **

If anyone over the age of 80 and receiving UK state pension benefits has not received a letter explaining this, or has not updated their address details, then the link to do so is here:
https://www.gov.uk/international-pension-centre

Anyone receiving or about to receive UK state pension benefits UNDER the age 80 will be contacted towards the end of this year, therefore you may like to check that the DWP have the correct address on file for you by using the same link above.

Please feel free to share this information if you feel anyone might be affected or just to spread the word.

Brexit

Brexit – for the Italians it’s all wrapped up!
The next bit of news came from the Agenzia delle Entrate recently. Specifically their notifications page on the telegram app.. They regularly post the latest decisions taken re: specific cases submitted to them (intepelli) and also the latest announcements re: tax and various other bureaucratic measures.

The Italian government has taken the decision to close the ‘Punti Assistenza’ for both foreign investors looking to invest in Italy and also the ‘Info Brexit’ points of assistance. The reason for such a move is that they say they are rarely used. They go on to say, regarding the punto ‘Info Brexit’, that since the UK left the customs union, the Agenzia delle Entrate has provided clarification regarding most issues and hence is closing the Brexit information point.This may or may not be the case, but, certainly, questions remain and it looks like the Facebook citizens group ‘Beyond Brexit’ will be the last bastion of information regarding Brexit issues in the end. I would imagine that the UK Embassy will also be providing little to no support moving forward.

If you want to read the communication from the Agenzia delle Entrate, you can do so at the following link:

https://www.agenziaentrate.gov.it/portale/documents/20143/6193290/Provvedimento+Deskdel+26+giugno+2024.pdf/d860fa81-1922-866b-97ae-91f86b9a073a

Confirmation of EU permanent residence
Charlotte Oliver, of Oliver and Partners legal firm in Rome, also put out a recent communication from the Ministero dell’Interno which has issued guidance to the Comune in relation to British citizens resident in Italy since before 31.12.2020 which marks the end of the Brexit transition period. The Circolare confirms that British citizens are still entitled to obtain a certificate of permanent residence from the Anagrafe (“attestazione di soggiorno permanente“).

In other words, as guaranteed by the UK-EU Withdrawal Agreement, British citizens continue to have the right to obtain a permanent residence certificate (as provided for in the EU Freedom of Movement Directive and article 16 of Italian Law no. 30/2007). British citizens are entitled to this certificate after 5 years of regular and continuous residence in Italy, registered with the Comune, even if part of those 5 years were after Brexit.

You can see Charlotte’s communication and the MInstero documents on her website, at the following link: https://www.oliverpartners.it/confirmation-of-permanent-residence-for-british-citizens/

Sterling revival

A Sterling revival?
A nice piece written by Evelyn Partners, one of our asset management partners, was sent through to me on the 28th of June. It may interest you as it describes a possible revival in Sterling’s fortunes.

Some of you might remember the heady days of GBP:EUR (just after the launch of the EUR in 1999 and the uncertainty at the time) at €1.752 reached on the 3rd of May 2000. But, you may also be surprised to know that over the EUR’s 20 year history, the GBP:EUR exchange rate has averaged €.1.33. The lowest, €1.08, reached on 30th of December 2008 (financial crisis – right after the global crash) .

Due to Brexit and the political uncertainty, the average GBP:EUR exchange rate over the last decade has now fallen to €1.20.

So, why the potential revival?
Well, it may not surprise you to learn that it is all about the UK elections, the Labour win and the disastrous time under the Conservatives. (Theresa May, Covid lockdowns, rising energy prices and Liz Truss’s short-lived government).

It would seem that Labour is very likely to try and realign the interests of the UK with its nearest neighbours and Labour may try and negotiate new agreements with the EU to ease trade and the share of technology and other areas. The EU may be interested in the UK’s military equipment and intelligence capabilities, given the ongoing events in Ukraine. The UK may also decide to align with the EU market on food and agricultural products, which may maintain smooth customs arrangements for import and export, but it might be a sticking point because it may mean that the UK becomes a rule taker again rather than rule maker.

Also, the longer the UK remains non-aligned with the EU, the more its businesses are adapting to other foreign markets. The US is now the UK’s biggest customer regarding service led businesses. In reality, though, the service sector is unlikely to interest the EU anyway, because they are able to continue to take away valuable services based businesses from areas which had previously been monopolised by the UK.

This may all be rather positive for the GBP: EUR exchange rate of course, but a lot depends on to what degree Labour will be able to negotiate closer ties to the EU, without breaking the Brexit red lines.

If you are interested in the wider article, you can find it at the link below:

https://www.evelyn.com/insights-and-events/insights/get-ready-for-a-sterling-revival-under-labour/

I have for years now been advising clients to retain any GBP holdings in the currency and invest likewise. It is my long term view that a single country like the UK, will have the ability to develop its markets and economy more dynamically and quicker than a bloc of 27 states who need approval from each (in most cases) to make decisions for the bloc. I am not anti EU by any means, but the political environment in the EU is such that it does not bode well for long-term economic stimulus and development. This will always be a drag on the EUR versus other currencies, and particularly now with the situation in Ukraine and long term inflationary pressures. That all being said the UK will need to go through some soul searching to determine it’s future direction, which may or may not lead to a Sterling revival.

Long-term productivity figures seem to imply that GBP:EUR should be at a natural rate of around 1.2 to 1.25 but that does not take into account political cycles and significant economic events such as Brexit. Markets like stability and until that returns sterling will probably still be in for a volatile ride.

I will be back with more information, musings and ideas when we are installed in the new home, after August 5th, but if in the meantime you would like to discuss any tax or financial planning related issues in Italy then please don’t hesitate to contact me as I will working through the summer. 

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Moving to pastures new

By Gareth Horsfall
This article is published on: 3rd June 2024

03.06.24

You might be wondering why I have started this E-zine with one of my favourite quotes? Well, you may or may not know that I have been living in central Rome for the last 20 years of my life, between Trastevere, Campo dei Fiori, the Pantheon and for the past 8 years in Prati. I feel like I have been living a real Roman Holiday!! This is also my 50th year on this planet (how time flies) and I will be celebrating my birthday at the end of July.

Rome

Some of you may know that I whilst I do love Rome, I have become a bit of a moaning bore about the city of late. The tourism since 2019, and especially after Covid, has gone crazy. The city has always been pretty disorganised and dirty (the lack of respect for the city drives me mad!) but I have put up with it because I get to live in Rome!

However, in the last few years I have been yearning to get out into pastures new, somewhere with greenery and birds tweeting in the morning rather than the sound of traffic and wheely trolley tourism (a term coined by a client recently, one which made me laugh a lot because it’s so true – thanks Bec!).

There was always the possibility of moving out of the direct centre of Rome, in a more quieter area, but the areas we would like to go are either too expensive or badly connected and so choosing to lead a life stuck in traffic or up to my eyes in debt didn’t seem so appealing.

But the city angst was always about me rather than my family. My wife is a self confessed city girl and she can’t imagine a life without cinemas, theatres, restaurants and bars on the doorstep. My son, at 14 years old might have trouble if he were to relocate from Rome, but he is finishing terza media this summer and so Heraclitus might be right with the timing.

I had actually told my wife a few years ago that I could see myself living in Rome until I reached the age of 55, and when Alexander turned 18, then I would need to move out of the city and into the countryside somewhere. She wasn’t convinced back then to which I replied, ‘well that’s OK. You can have a small place in the city and I will have a small one somewhere quieter and we can meet up in the middle’. That’s been a kind of running joke because we did actually try and make a break for it just after Covid when we found 2 properties we liked in and around Cortona and made offers on each, only to be rather disappointingly used to bump up offers for other prospective buyers.

Anyway, that put us off the move and it worked quite well because my son enrolled in a school in Rome and my wife got a job at the Chicago Loyola University of Rome as the lead psychologist/wellness person.

However, my dreams of living outside Rome did not quell and I found that Facebook has loads of properties in the country for sale if you join enough groups and click enough links. The power of social media being that when it knows what you are interested in it just starts firing lots of options at you. The ones I liked I would send to my wife who, I joked would, in a very ‘Tinder dating’ kind of way ( not that I have ever used Tinder I might add !) swipe right for no and swipe left for yes. In about 2 years I don’t think there was even one left swipe but there was engagement and that was the thing.

buying house in Italy

Fast forward to Thursday 9th May 2024 and I finally achieved my goal and in fact we signed the ‘rogito‘ on a house in Amelia, Umbria ;about an hour north of Rome on the motorway. A property which is independent (no more condominio problems) and is surrounded by its own olive grove and fruit trees.

I have to recount the story about the olive trees though! I have never held great aspirations to do the raccolta delle olive although I can’t deny that having your own olive oil must be a great thing, I have to admit it looks like a lot of hard work. So, the property we bought, with 140 olive trees, seemed attractive because the owner had an agreement with a local coperativa who tended the land, did the tree cutting and did the raccolta but took half the oil and gave you the other half.

Now, that sounded like my kind of arrangement! Then 2 weeks out from the rogito we were told that the coperativa no longer want to do it because they have enough land to deal with already.

So Oct/Nov 2024 could be an interesting time! That being said if you are looking for oil you know where to find it!

From under the olive tree

One of the old ‘secolari‘ olive trees on the land, probably a few hundred years old.

Thankfully I made friends with the neighbour who is a farmer and he told me not to worry as he knows loads of people he can ask who will help out.

I love the countryside already!

On the subject of olive trees they have also given me a great opportunity for work. I had decided in 2024 that I was going to start doing more video content and just putting out short video content of subjects that come up regularly and which I could talk about quickly and then upload to either Youtube / Instagram or other social media platforms. One of my issues with doing these videos is that I like to be out of the house when I do them. I hate just sitting in front of the computer and doing a video, instead I prefer to be out in the open space and talk, walk, stand…whatever takes my fancy.

From under the olive tree

But, I have one slight handicap: for some reason I just can’t seem to do my videos when I have people looking over my shoulder or listening in!

I like a bit of peace and quiet (I would make a rubbish influencer!).

But, the olive trees have now given me the best back drop ever (they also don’t talk, although they may listen!) and I will be relaunching my videos with this following logo.

So, as per most properties in rural Italy it needs some work and is currently undergoing building and ripristino work. Structurally the property is sound and so it just needs bathrooms doing, walls painting and bringing up to date as it was last renovated in the 1990’s, that being said it does hide a magical jewel. It’s own very private, yet consecrated catholic chapel.

We are told that underneath the more modern exterior of the house there  is an old church from the 1600/1700’s which the local monks used to pass by and pay penitence at the windows of the chapel. The knee imprints can still be seen in the travertino stone underneath the windows. A beautiful story to uncover in time.

Lastly, the exciting thing for me is the land that comes with the house.   Finally some green!  No more staring at cement and tourists.  I must say that although I do love Rome (resident population 2.8 million, expected tourist numbers in 2024 -19 million, expected tourist numbers in 2025 [Giubileo Vaticano] – 35 million), based on these kind of numbers it seems to be the right moment to go.

Of course our Italian friends are horrified and jealous at the same time.   They admitted that they would be petrified to live outside the city.  That living in amongst the neanderthals, ogres and in the great unknown which they only visit en-mass on Sundays when they want some fresh air and when everyone else is going – safety in numbers – is a big no-no.   Yet, some of them have openly wish they had done it themselves and they would have loved to try a similar life.   For us, its probably not a forever place, although I am sure it will grow on us and we will never want to leave but we understand that life throws curveballs at you and never say never.   For now, its a long term project to bring the land back into the shape and for me to save 4 old ‘secolari’ olive trees which I discovered the other day all covered in ivy and with other plants growing all around them.

I know this E-zine is a little bit off my usual subject but I wanted to write to explain why I have not written an E-zine in the last month or so and to share this journey and excitment with you.  Getting the bank to agree a mortgage and then agreeing terms with the ex-owner was, as it always is in Italy, a stressful task.   I am now following workmen which is equally stressful but I am determined to keep an eye on them like a hawk, and hopefully learn a few things in the meantime.  And so we can move in July, when planned.

It goes without saying that once set up fully (probably after the summer) that you are more than welcome to visit and see the place for yourself if you are down this way, meet for work purposes or just to pop in and say hello.  I would be more than happy to see you there.   I will be with my new fast Starlink internet connection and so be connected although in the blissful countryside, for those who can’t make it in person but who would still like to hook up online.

For now, I hope you enjoy the fotos and I will be in touch again soon with more financial and tax planning ideas for your life in Italy, and small updates on the state of the house.

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

Tax deductions in Italy

By Gareth Horsfall
This article is published on: 8th April 2024

08.04.24

I hope you had a good Easter and didn’t eat too much. I took a break with the family to go and visit some friends in a Hotel on Lago di Garda during the Easter period. We had a great time even though it rained every day that we were there. That being said I got to see a few nice towns and learn a few new things.

We stayed just outside Bardolino, but also visited briefly Lasize. Lasize, I discovered, was the first comune in Italy. Apparently the King of Lasize in 983 a.c decided to concede the management of the town to the local civil authority, an interesting fact, I thought. We also visited Sirmione, which I know of because of the vials of sulphuric water which we used to put in a nebulizer for my son when he was a baby to clear his airways during the period of the winter cold.

Lastly, we visited a place called the Vittoriale degli Italiani, just outside the town of Salò. (https://www.vittoriale.it/). Salò was the last fascist town in the whole of Italy and the Vittoriale appears to be a tribute to that fact. It was, also, the home of the poet and soldier Gabriele D’Annunzio and a tribute to his heroism during World War I.

I can say that I am not a big fan of fascism, but it was very interesting to visit and certainly an unexpected and eye opening trip down Italy’s recent past. All of this whilst I started the book ‘The General and his Labyrinth’ by Gabriel Garcia Marquez, about Simòn Bolivar and reflections on the end of his life after the liberation of South America from the Spanish.(I think I may need another holiday after all these cultural learnings!)

Anyway, talking of fascism, it leads me nicely onto the subject of today’s E.zine: Tax and tax deductions!

I am not sure if tax authorities can be considered as fascist but certainly they fit the description in many ways:
‘An ideology and movement, centralized autocracy, militarism, forcible suppression of opposition, belief in a natural social hierarchy’

Joking aside, they do tend to operate with an iron fist and as I have mentioned on many occasions it is imperative that incomes and assets etc are declared properly and within the right time. That being said, in Italy we do get the possibility to utilise the system of detracting and deductions from income which can sometimes help to reduce our overall tax burden each year.

In this E-zine I will summarise the main ones (please be mindful of the fact that there are specific details related to each category and so I would recommend you check the link to the CAF at the bottom of the email if you are interested in any specific area).

Also please note that if you are on a forfettario tax regime in Italy, ie. 100K flat tax, 7% pensionato or partita IVA forfettario etc, then it will NOT be possible to deduct any of these expenses from your income!

taxes in Italy

But without further ado, here is the list of deductions which you might be interested in:

Medical expenses of any type: (generic, specialists, surgical, pharmacy, etc) can deduct at 19% of the total annual cost which exceeds the excess/deductible of €129,11. You need to add all your expenses together and deduct the €129,11, 19% of the final amount can be used against tax; if the cumulative amounts do not exceed the €129,11 then no deduction is allowed.

In the expenses calculation you may also include those which have been reimbursed by insurances (personal or corporate).

If your annual expenses exceed €15493,71 it is possible to spread the deduction over 4 years in equal parts.
(The deduction system, without limit of the amount over €129,11 would apply for anyone with special assistance needs e.g. car accident victim).
(Expenses of family members who are ‘a carico’ also qualify).

To use the deductions system, you must be in possession of the relevant documentation that certifies the expenditure i.e. invoice, receipt, quietanza etc. Your receipt should always show the nature of the medicine / treatment and include your codice fiscale.

***When you buy something at the farmacia with your tessera sanitaria, and it is a qualified medicine, then it is automatically registered with the Agenzia delle Entrate. This does not mean that you no longer need the ‘scontrini’. Your commercialista is required to ask for the evidence of purchase to match up with the payments received by the AdE***

Mortgage Interest relief

Mortgage Interest relief:

For a mortgage on a ‘prima casa’, 19% of the annual mortgage interest and relevant charges, up to a maximum of €4000, can be used as a deduction. Prima casa is defined as the house where you or your family permanently reside. The individual using the detraction needs to be both the ‘intestatario del mutuo’ and owner of the property.

19% on the costs of the real estate agent when buying a prima casa (or rights linked to real estate such as ‘usofrutto’): for an expense of no more than €1000. i.e. max detraction €190, the expense must have been paid by the person requesting the detraction and confirmed as such in the contract of purchase.

Insurance premiums:
19% on the total costs of insurance policies ( Italian and overseas), as detailed below:

  • Maximum total annual premium of €530 for life and accident, and non self-sufficiency type policies
  • For insurance contracts covering death and permanent disability and long term care, the maximum premium total is €1291,14
  • For insurance contracts covering individuals with serious disabilities, on risk of death, the maximum premium total is €750

Schooling (non university):
Nursery, primary or secondary school (private or public school) a maximum of €800 expenditure on which the 19% will be calculated i.e. max amount detraction €152 pa.

Private university education costs:

Nord Centro Sud e Isole
Area Medica €3,900 €3,100 €2,900
Area Sanitaria €3,900 €2,900 €2,700
Area Umanistico-Sociale €3,700 €2,900 €2,600
Area Tecnico-Scientifica €3,200 €2,800 €2,500

There are other conditions, such as how close the family home is to the university which the student is attending, so it’s worth checking out the rules. The above table gives a rough idea of the kind of amounts that can be deducted depending on where the university is located in Italy.

Funeral expenses:
19% of maximum annual expenditure €1550 i.e. (maximum detraction of €294.50).
The invoice needs to be in the name of the person making the payment and paid via traceable means (not cash). Equally the name on the invoice must have a direct family relationship to the deceased.

Sporting activities for children aged between 5 and 18 years old:
19% on a maximum spend of €210pa i.e.€40 detraction .

Veterinary bills:
19% on annual expenditure between €129,11 and €387,84 i.e €49 – 19% of €258pa.
The deduction is for the person listed on the fattura and does not have to be the owner of the animal, therefore, for a couple it makes sense that you both pay at least once if you have significant veterinary bills for the year.

Cost of rent (based on income):
a maximum of €300 if your income is below €15493,71 and €150 if your income is between €15493,71 and €30987,41.
There are differences for those who are renting from an organisation rather than private individual, under 35’s, people who transfer their residence to another comune more than 100kms from their current home and also students who study at a university away from comune of residence. Check details with your commercialista if you think they might apply to you.

Costs of public transport:
as of the 1st Jan 2018 it is possible to detract 19% of the costs of an ‘abbonamento’ for local, regional and interregional public transport, up to a maximum spend of €250. This limit also applies to the family, if there are more than 1 ‘abbonamenti’ but cumulatively no more than €250 in total.

home improvements

Bonus for construction work on your home:
I won’t go into detail here as the terms seems to change regularly. However, you can obtain details by doing a google search or speaking with a geometra /architetto etc…

Bonus ristrutturazione: 50% on a maximum spend of €96000 deductible from income over 10 years.

Bonus risparmio energetico: 65% deductible from income over 10 years depending on the type of work you are doing

Sismabonus: 50% on maximum spend of €96000 deductible over 5 years if you live in seismic area

Superbonus: see link below for details:

  • Bonus mobili e elettrodomestici: 50% on a maximum spend of €5000, deductible from income over 10 years (only available until 31st Dec 2024)
  • Bonus Verde: 50% on maximum spend deductible over 10 years (only available until 31st Dec 2024)
  • Bonus barriere architettoniche: 75% the maximum depends on the type of work being performed (only available until 31st Dec 2025)

If you think you might be eligible for any of the bonuses named above, please check the details and do sufficient research or take professional advice before starting work to ensure that you are eligible for the deductions.

Pension deduction

Pension deduction:
you can deduct from total income the contributions you make to a personal pension plan (previdenza complementare), in any calendar year, up to a maximum of €5164.57.

These are the main ones which apply to most people, if you want the full list then you can refer to the CAF website (from where I took the details) as it provides a good resource. The link is HERE

It would appear as though my timing was off slightly regarding my last E-zine, specifically in relation to the payment of the €2000 voluntary contribution to the Italian healthcare system. Two people contacted me to say that the UK Embassy website updated their website about 12 hours before my E-zine was released which I had not yet seen. The text was as follows:

Italian healthcare system

As is often the case with communications of this sort it often throws up more questions than answers and so I will wait for further clarification on the issue, but at the very least, I think it can be assumed that any Brit registered in Italy before 1st January 2021 will not be paying any more than they were before for access to the health service in Italy.

Rome Business Lunch

Don’t forget the Rome Business Lunch!

April 12th at 13.00
Ristorante Amedeo  – nr Roma Termini
⬅️ Click on the logo below for full details.

The lunch is open to anyone, and is more about connecting people than just ‘touting for business’. People from all walks of life come along, from UN retirees, yoga teachers, online networkers, lawyers, real estate agents, English teachers, and people who just want to connect and make friends. So, if you are in Rome and would like to come along then please do so. Just please give us a few advance days notice so we can book you a place.

If you have any questions about any of these issues and how they apply to you and your financial situation, or if you think that you might be paying more tax 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

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