Viewing posts categorised under: Italy

Rendita catastale

By Gareth Horsfall
This article is published on: 10th November 2015

10.11.15

I admit it! I have been confused for years about the rendita catastale. I have never been sure about its role in the economy and how it benefited the individual or economy. Until now! (Care of Bloomberg online)

So, the story goes something like this:

The rendita catastale represents the amount of ‘theoretical rent’ that a householder pays him/herself as a measure of economic consumption.

In other words:

If a householder owns their house outright, i.e no mortgage or other debt, then that person is actually a ‘imputed’ consumer and investor of the ‘invisible’ rent money that they would have received should they be renting a similar house. This money is then assumed to be spent and go back into the economy.

And this is considered a growing financial benefit that property owners enjoy from not having to pay rent.

So, whilst the financial crisis shrank the economy more than 8 percent and unemployment doubled in the seven years of the crisis, property, proportionately, made up more of the gross domestic product. The weighting of property in Italian GDP jumped 2.1% from 2007 despite falls in property prices and transactions. (which gives you an idea of how big the falls were in other parts of the economy).

And given that the financial benefit from housing, i.e the rendita catastale, is taking up a larger proportion of a property owners income, then it comes as no surprise that Renzi has recently promised to abolish IMU on the prima casa from 2016. This also seems to imply that Renzi realises that Italians homeowner spending habits are more important than foreign buyers as a means to sustain property prices.

The Italian economy strongly relies on home ownership. Just by residing either in debt free housing or paying no rent (living in family houses) or a paying a below-market rent, Italians contribute to more than 8 percent of the nation’s GDP, up from about 7 percent in 2007. In a country where more than 73 percent of the population live in owned residences, this is a valuable contribution to economic growth.

Disclaimer
The views expressed here are my own. They are not necessarily shared by The Spectrum IFA group or any other company named or implied. They are subject to change at any time based on market and other conditions. This is not an offer or solicitation for the purchase or sale of any security and should not be construed as such. References to specific securities or companies are for illustrative purposes only and are not intended to be, and should not be interpreted as recommendations to purchase or sell such securities.

Full exchange of financial account information is on the doorstep.

By Gareth Horsfall
This article is published on: 9th November 2015

09.11.15

I have written in previous articles about the fast approaching days when all financial information will be available to all tax authorities. In fact, my last piece on the subject explained that the OECD had signed up approximately 53 members countries and were working on a standardised format (Common Reporting Standard, CRS) with which to exchange financial information across borders.
This email expands on this subject as more information has now become available.

The CRS, formally the Standard for Automatic Exchange of Financial Account Information in Tax Matters, (SAEFAITM – this abbreviation just flows off the tongue!) seeks to establish a global methodology for the sharing amongst tax authorities of relevant data in relation to financial assets. The transparency created by the CRS is meant to be a deterrent to taxpayers use of offshore accounts and to non-declaration of assets in other states/countries.

So far 100 countries signed up and committed to implementing this Standard and it is ‘likely to’ become (Sorry! I meant, ‘will become’) the most powerful tool of tax authorities worldwide.

There are nearly 60 “early adopters”, (see list below) and for these countries the Automatic Exchange of Financial Account Information will commence from 2017 on an annual basis between participating countries in respect to their tax residents, and in certain cases domicile persons. But here is the catch….It will relate to all account information of 1 January 2016.

Reporting will have to be made by all individuals who own or control accounts in financial institutions either directly or through companies, trusts, foundations and in certain cases insurance policies.

Financial institutions include, but are not limited to, banks, collective investment vehicles, custodians and insurance companies.

Financial institutions in each country will basically collect and report information to their local tax authorities regarding their clients who are resident in another participating country.

And the local tax authorities automatically exchange this information on an annual basis with their counterparts in the other participating countries.

Account information to be reported will generally include
* account number
* account balances
* gross earnings in respect of any payments through the account, including but not limited to any investment income such as dividends or funds from insurance companies
* income earned from assets and sale profits from financial assets

The exact nature of information to be exchanged between each participating country must be defined in the intergovernmental agreement between the two countries, but I think we can safely expect that all European states and the USA will be sharing data in a standardised format.

The information on each reportable person generally includes:
* name
* address
* country of residence
* tax identification numbers
* place and date of birth

Financial institutions will also need to disclose not only the account holder but also any beneficial owners, controlling persons or even in certain cases “relevant persons” of entities and trusts.

Data protection is also going to be a very interesting issue and the OECD do say that information exchanged in this way, i.e through the common reporting standard, cannot be provided to other governmental institutions once shared. I have my doubts whether that will happen!

So what can we take from this? Well I think it is becoming more and more self explanatory. Big brother has finally arrived and there are no more hiding places. As I have been ‘preaching’ for many years now: if you are a resident in Italy and have still not arranged your financial affairs ‘in regola’ then you have about 2 months to do so until all financial information will become available to tax authorities: 1st January 2016.

I have found the key to living in Italy is knowing that there is a difference between tax reporting and tax planning. Your commercialista is there to help you report your taxes through the overly complicated tax reporting system in Italy. However they are not there to help and discuss ways to plan around the Italian tax system. That is where the role of the financial planner comes in and with the extensive knowledge I have built up over the 11 years I have been living and working in Italy, I can sometimes identify areas where you can save tax, increase incomes and restructure your affairs in a compliant manner, not always, but I am happy to give it a go!

So, if you would like to contact me about this then feel free to do so on gareth.horsfall@spectrum-ifa.com or on cell 3336492356.

If you are also interested to know who are the early adopting countries, then the list is below. You will note that Italy and the UK appear on that list. The USA does not because it has already commenced its own International tax reporting standard known as FATCA.

Early adopter countries – undertaking first AEI by 2017 in respect of 2016 information
Anguilla, Argentina, Austria, Barbados, Belgium, Bermuda, Bulgaria, British Virgin Islands, Cayman Islands, Chile, Colombia, Croatia, Curacao, Cyprus, Czech Republic, Denmark, Dominica, Estonia, Faroe Islands, Finland, France, Germany, Gibraltar, Greece, Greenland, Guernsey, Hungary, Iceland, India, Ireland, Isle of Man, Italy, Jersey, Korea, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Mauritius, Montserrat, Netherlands, Niue, Norway, Poland, Portugal, Romania, San Marino, Seychelles, Slovak Republic, Slovenia, South Africa, Spain, Sweden, Trinidad and Tobago, Turks and Caicos, Uruguay, United Kingdom.

Reflecting on Gains

By Gareth Horsfall
This article is published on: 12th July 2015

12.07.15

I was recently struck by the ‘musings’ of a fund manager based in London and his take on the world of global economics.

The funny thing is that what we read in the papers, online and listen to from so called experts can literally be taken with a piece of salt. It really doesn’t have a lot of value for the man in the street and it all just goes to prove that no one really knows what is going on. That includes Janet Yellen of the FED and Mario Draghi of the ECB. They seem to be playing a game of ‘trial and error’ to achieve the best short term outcome in the race to make consumers consume again and for economic growth to start apace once again. The indiscriminate use of quantitative easing has only served to push up the cost of asset prices (property, shares, Bonds). In fact it has taken all these 3 asset prices to new highs in recent months and so now might be time to look at reviewing your investments once again.

We, at The Spectrum IFA Group, have been, for some time, looking at the investment fund space, given that stock markets have been moving upwards for the last couple of years. This often signifies that volatile times are ahead.

We are now starting to look at the markets with a more negative stance and believe that it might be the right time to start taking profits from your funds that have made good capital gains during this time and secure those in a less volatile investment.

(For our clients who are using Rathbones Investment Managers and Tilney Best Invest Discretionary fund management services, profit taking and reinvestment will be being taken care of at a micro managed level on a day to day basis).

We, The Spectrum Group, have identified a range of Absolute return funds which are designed to protect capital in volatile markets. And in addition, we believe that cash and Gold will have great value in the next market meltdown.

Absolute return funds, whilst not perfect, aim to protect against market falls and can allow for reinvestment back into undervalued assets at the right time, such as equities, which may be valued considerably less in a crisis. We have to accept that despite Greece and other world worries, the markets could keep on advancing for some time to come (at least while quantitative easing continues from the ECB) and therefore to remain largely un-invested due to fear, could be to lose out on further capital protection opportunities. Absolute return funds offer the option to stay invested with reduced risk.

(A word of warning. Not all are made equal, and absolute return funds need to be carefully assessed to their exposure to underlying assets which may not serve to protect capital so well in volatile markets)
If you would like to know more about these funds, protected capital investments or other low volatility investments then you can contact me on gareth.horsfall@spectrum-ifa.com or on my cell 0039 3336492356.

And so onto the musings of a London based Fund Manager. This makes for interesting reading.

There is approximately $3.6 TRILLION of government debt, in other words nearly a fifth of all global government debt that is now trading with a negative yield (basically you pay the Bond holder for the right to hold the Bond as an investment, rather than them paying you an interest payment to hold it) and yet money is still being invested in Bonds to the tune of roughly $16 BILLION – the highest investment in Bond funds on record going back to at least 2008.
€1.5trn of euro area government bonds over one-year maturity have negative yields, and yet Mario Draghi thinks if he can just get interest rates down a bit further, he can turn the European economy around.
The fact that the American stock market closed on highs recently would tell you the US economy is firing on all cylinders, and yet the Federal Reserve seems frightened to raise interest rates seven years in to the recovery.
In 2007, global debt of $142 TRILLION was enough to nearly blow the financial system to smithereens but, seven years later, global debt stands at $199 TRILLION, and nobody seems to believe this is such an issue.
This year British Telecom issued shares to buy EE for £12.5bn, a firm it previously owned before it spun it off in 2002 (a year in which it also issued shares).
You can now see another coffee shop from the window of nearly every coffee shop in London, and yet Costa Coffee owner Whitbread is valued at 25x earnings.
In 2009, General Motors emerged from government backed Chapter 11 with a final cost of the GM bailout to the US taxpayers of $12bn. A group of hedge funds have recently taken a stake in the company and have come up with the brilliant idea of GM gearing itself up again.
If there is any value left in the UK stock market it is certainly in the large-company part of the index and yet many fund managers have little exposure to this area.
As two thirds of the world might be close to deflation, oil demand has naturally dropped causing a fall in the price. However, most investment bank economists seem to think this fall in the oil price will lead to an increase in demand.
While bond yields, commodity prices, the Baltic Dry Index, and inflation expectations are all collapsing and suggest deflation could be an issue, equities continue to rise, suggesting it is not. Inflation on the way?
As the yield on corporate bonds of companies such as Nestlé and Royal Dutch Shell goes negative, money continues to flow in to corporate bond funds.

It is always good to have a contrarian opinion about markets. I hate reading the usual financial press which leads you to believe that which is probably in the interests of some large corporation/person and not our own (the conspiracy theorist in me).

Whilst we are on this topic, my own personal experience (and which could be of no merit whatsoever) is that when I first started out in this business I attended many seminars which were frequently attended by big fund managers, one of which was the then respected HSBC Bank. I have to admit that there were 3 occasions when they were marketing very specific investment funds in specific sectors which, very shortly afterwards, seemed to be the assets which were in crisis. Whether it was HSBC pushing something they wanted to dump at the top of a market or whether it was purely them following the crowd we will never know. What this has taught me is to never never follow the crowd!

All this is why at The Spectrum IFA group we have a fund selection committee who are constantly in touch with fund managers from the big investment houses that we work with (including HSBC). If you would like to read more about our selection criteria for our clients then you can do so Here.

A rough guide to submitting your tax information in Italy

By Gareth Horsfall
This article is published on: 8th July 2015

It is around June each year that your Italian tax bill should have been presented and been paid for. If it is more than you had expected then hopefully this article can explain some of the ‘how’ that came about and ‘what’ solutions are available.

One of the main questions I am asked on a regular basis is ‘what are my obligations in terms of declaring foreign income and assets in Italy?”.

Of course, your commercialista may be doing it for you, but what exactly are they reporting, or should they be reporting? With the help of Andrew Lawford at SEB Life International, I managed to go through the instructions on how to fill in an Italian tax return (interesting reading I can tell you).

What I want to look at in this article is how financial assets, (excluding property) i.e funds, managed portfolios at the bank or with an asset management group, ETF’s, shares, Bonds, Money market accounts etc should be declared properly in Italy.

Tax treatment of diversified financial assets.
The first, and most obvious point is that foreign investment income is taxed in Italy due to the principle of worldwide taxation. The basis of the Italian tax system. Once you have established residency in Italy, you must declare all of your income, wherever in the world it was produced.

Dividends and interest
Typically, an investment portfolio will produce periodic income in the form of dividends and interest, especially if you are looking to live from the income stream generated from the very same portfolio.

These need to be declared by converting any foreign currency amounts into euros at the exchange rates designated by the Banca d’Italia for the day the dividend or interest was paid.

The amounts received, duly converted into euros, are taxed at a rate of 20% (up to 30th June 2014) or 26% (from 1st July 2014 onwards).

The relevant section in the Modello Unico is the RM.

***You should declare the net amount received (after withholding taxes) and pay the 20/26% income tax on that. The amount which should be taxed is commonly called the “netto frontiera”.***

Capital Gains
Capital Gains are taxed at the same rates as dividends and interest income (see above), but with the complication that the amount of the capital gain must include the variation in foreign currency over the holding period.

So, what does that mean? As an example, if a fund was purchased on 1st March 2010 and sold on 15th November 2014, it will be necessary to have both the purchase and sale prices (information you will need to provide to your commercialista) and to convert these into euros at the exchange rates for those days (as established by the Banca d’Italia).

This gets relatively complicated when you have a portfolio of assets that are managed by you, the bank or an asset manager and multiple trades have taken place over the year. Checking annual statements to find purchase costs for every trade can become quite onerous. In addition there may have been corporate actions, such as share splits, demergers, capital returns etc, which compound the issue.

Where partial sales and purchases have occurred, the LIFO (Last-In-First-Out) principal needs to be applied.

It is also the case that when you become a resident in Italy you cannot simply use the value of the investments on the day when you arrive and become tax resident, you must use the historical cost from when the asset was bought for the purposes of capital gains tax. (This actually makes a lot of sense if you think about it, because it would mean disposing of any historical tax liability when moving countries and a lot more people would move if it were possible).

The relevant section in the Modello Unico is the RT

Foreign Asset Declarations and IVAFE
The fun really starts in the Italian tax return when the Quadro RW is contemplated. This section has more to do with a monitoring requirement than it does to do with taxes, although the changes brought in for the 2013 tax year mean that the Quadro RW is also used for calculating the foreign assets tax (IVAFE), which is currently due in the amount of 0.20% on the year end market value (with a difference for bank accounts, which are generally taxed at a flat rate of 34.20 euros).

The Quadro RW requires the Italian resident with foreign assets to declare their value each year; this doesn’t sound too bad, as you would think that you would only have to list your assets at year end as per the statements provided by your bank or broker. However, the Quadro RW actually requires you to declare exactly for what portion of the tax year you have held each asset and then to apply the foreign assets tax on that basis.

e.g. calculate the number of days the asset was held for in the year and then pay 0.20% on a pro rata basis. Once again this becomes onerous with multiple trades in the year.

***And unfortunately an end of year tax statement will not provide you with the information needed to accurately complete the tax return. You would need to go back through a year’s worth of trading statements to identify book cost and when they were traded. ***

WHAT I THE SOLUTION TO THIS HEADACHE?

Very simply, it’s the humble Italian compliant Investment Bond. It allows you to do everything you want to do without the fuss. All of the tax is worked out for you, your asset manager can make as many trades as he needs without immediate liability to tax and there is no need to track movements of money in the portfolio or declare when dividends and interest were paid. In addition, when monies are withdrawn from the Bond and a tax liability is incurred then the tax is paid at source on your behalf.

There isn’t even a need to declare the portfolio, trades, interest payments or anything else to your commercialista each year.

Life couldn’t be simpler

If you have found collating your tax information a little ‘heavy’ this year, or you think you may not have been submitting the right information based on what you have read above, and youwould like to make financial life in Italy a bit easier then contact me directly by the link below or fill in the contact form.

Does my foreign Will cover my Italian property on my death?

By Gareth Horsfall
This article is published on: 2nd July 2015

In May I held a joint event nr Lucca, with a firm of Anglo/Italian lawyers called Studio Legale Internazionale Gaglione. They are a firm I met whilst in London presenting at The Place in the Sun event. I was impressed by their knowledge but more importantly their long term view of the Italian legal profession and their moves to proactively model their business accordingly.

This swayed me into giving them a chance to present at a joint event and I have to say that it went very well indeed. All the participants gave excellent reviews for the speakers and hopefully the issue of preparing a will, or not, for these Italian property owners became a little more understandable.

In an effort to provide you with the information I thought I would write a summary. However the event itself was far too detailed and technical to give a full synopsis of the morning, but here are the highlights:

Should I make an Italian Last will and Testament as an Italian property owner or is it covered by the will in my home country?

Well the simple answer is that the will ‘might’ be covered by your home country will. But as is always the case in legal matters the situation is not exactly that straight forward.

Let’s take the 3 types of Italian will to start with.

1. THE HANDWRITTEN WILL (also known as the holographic will)

Key Points

It must be 100% handwritten
It must be signed and dated

A handwritten will is as simple as that. However, there are things to be careful of which were explained.

* The hologrpahic will is very easy to do, but just a bit too easy. If somebody contests it, this may lead to court proceedings in which the handwriting has to be examined for authenticity.

* This type of will could be lost, burnt, destroyed or stolen very easily and therefore it is wise to have more than one original. A possibility is to give one or more originals to the heirs.

* Any new will made after the date of the previous makes the oldest version invalid. Therefore, if you update the will it is wise to destroy old copies.

* You can add codicil’s (amendments) to this type of will, but it is preferential to add the wording on the same document in your own handwriting. Adding on separate sheets of paper can cause confusion and questions over the validity of the additions.

* NO witnesses are required

* No legal wording is required

* And lastly, and very importantly it is much better if the will is written in Italian. Roberta Moretti pointed out that a UK will (as an example) would stand in Italy for a UK domiciled individual. However a UK will is made under UK law and it could cause some impracticalities when trying to apply it in Italy. The biggest question of course is the cost of making a will in Italian, but the cost of having a UK will translated and made public through an Italian notary would far outstrip the cost of making an Italian will in the first place. And at approx €500 + for an Italian will (the cost rises depending on complexity of circumstances) then it is probably worth it.

2. A PUBLIC WILL
This is a will that is made in front of a notary public in Italy. You will require 2 witnesses and have to pay taxes on the will (approx €200 + Notary fees)

* This type of will would not normally be used where you expect multiple changes to your will during your lifetime as each change requires payment of the relevant taxes. In addition, each change must be witnessed.

* If you were to make a handwritten will after making a Public will then the Notary would ultimately have to define which was the last will made after the public one. More complications which cost time for the beneficiaries of your estate and money to pay the notary and taxes

* If the testator (you) does not speak Italian, the Notary will need two Witnesses who speak English to make sure that the testator is aware of what the notary reports on the will.

3. A SECRET WILL
This is a very uncommon and rarely used will, even by Italians. But it can be typed and written by a third person and 2 witnesses are required.

The notary keeps the will in an envelope and the contents are not disclosed.

This is so rarely used in Italy that it is only worth a quick mention, but it was explained that this might be used in those circumstances where a small community have an interest in knowing the wishes of someone in a village and therefore that person wants to keep those wishes secret.

Those are the 3 types of will and some interesting points that came out of the discussion.

SUCCESSION RULES
The rules of forced succession in Italy are always an issue that cause confusion. These rules apply on your Italian property when you die only if the beneficiaries live in Italy.

* If the beneficiary is NOT resident in Italy then the rules of forced heirship do not apply to them. I,e the property/asset can be distributed in whichever way you wish. (assuming that the laws of the country in which they live do not apply forced heirship rules).

* Of course, if there are beneficiaries who live in Italy and those that live in another country then Italian law regarding the Italian resident beneficaires will apply first.

* Whatever is written in the will can be challenged by a resident or NON resident beneficiary of an Italian asset (it depends on the reason of the challenge). This is worth consideration if you have family members in Italy and overseas. Also remember that forced heirship rules spread as far as nieces and nephews.

* Family members who you have no further contact with can claim on your estate. (i.e non divorced spouses or estranged family members)

* You have 10 years to challenge a will.

So what can you gain from this information? The general upshot of the meeting was that Italian law is too complicated to leave to chance. Although you may be able to apply your foreign will to your Italian asset, it is likely, depending on your circumstances, that the executors/ beneficiaries of your estate/ property will have to jump through hoops to try and sort matters out which could have been dealt with before.

IN BRIEF:
Make sure you seek the correct legal advice and plan your estate carefully.

I learnt a lot from the meeting and am going to now get my affairs in order as a result. If you would like an introduction to Roberta or Giuseppe at Studio Legale Internazionale Gaglione then just send me a quick message and I can introduce you to them.

The Spectrum IFA Group at ‘A Place in the Sun Live’ Olympia, London 8th – 10th May 2015

By Spectrum IFA
This article is published on: 30th April 2015

The Spectrum IFA Group have two stands at next weekend’s “A Place in the Sun Live” at the Olympia, London. This event is the UK’s largest and best attended overseas property exhibition, attracting thousands of serious overseas property hunters who are there to avail of the perfect opportunity to meet the experts face-to-face.

The Spectrum IFA Group stands are located in two of the most popular dedicated feature areas – The French Property Village and the Italian Property Pavilion. Together with the teams from Spain and the Spectrum specialist International Mortgage Division.

Each show welcomes over 6,000 visitors and 120 exhibitors showcasing worldwide properties to suit any budget.

Visitors will receive a free copy of the A Place in the Sun magazine and Show Guide and also have the opportunity to hear from and meet the stars, Amanda, Jasmine, Jonnie and Laura, and even choose to take part in a screen test for the chance to appear on the next series of A Place in the Sun.

The aim to provide you with everything you need under one roof and hope that by the time you leave the show you feel more equipped for your search and may have even found your perfect property abroad.

To book FREE tickets to the 2015 Olympia, London event on the 8th – 10th May 2015, please click here.

Le Tour de Finance 2015

By Spectrum IFA
This article is published on: 26th March 2015

After a very successful string of events during 2014, Le Tour de Finance is back and has started its spring series.

The events in 2014 were a huge success, with large numbers attending all the events with fact filled sessions followed by an opportunity for an informal questions and answers session over complimentary refreshments and a buffet. The initial events in 2015 have been even better! The first events have been held in truly spectacular surroundings in Les caves, de la Maison Ackerman, near Saumur, the Château Colbert in Maulevrier, Pays de la Loire.and at the Chateau de Javarzay, Chef Boutonne, Deux Sevres

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The relaxed and open forums are a chance to expand your knowledge of personal finance as an expat resident in France. The panel of speakers are experts in their respective fields and are on-hand to answer questions you may have about protecting and strengthening your personal financial situation while a resident in France.

The spring events are continuing throughout April in Spain and Italy:

Spain:

Barcelona – 14th April
Sitges – 15th April
Denia – 16th April

Italy:

Castiglione del Lago – 20th April
San Gineso – 21st April

The Spectrum IFA Group is an European leader in professional personal financial advice and will be covering subjects such as; QROPS, pensions, tax advice, investments and wealth management, healthcare, and mortgages.

Le Tour de Finance is an excellent and relaxed forum in which you can get those important questions answered, plus mingle in a pleasant and relaxed atmosphere with other expat residents whilst enjoying a buffet lunch.

All of Le Tour de Finance events are very popular so we therefore recommend you to book well in advance using the form below:

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Le Tour de Finance, Case Study Sessions in Italy

By Gareth Horsfall
This article is published on: 25th March 2015

25.03.15

CASTIGLIONE DEL LAGO – 20TH APRIL

SAN GINESIO – 21ST APRIL

For those of you who know me well you will be aware that I am always a little preoccupied with our Tour de Finance events and that I am always keen to make sure the audience is not bored to tears with dull presentations. I don’t always get it right and have made some presentation mistakes in the past but improved on those in the ‘Forum’ events over the last 2 years.

Now I am ready to take our Tour de Finance events to another level and start to show you how to use all the tax, residency and financial information that I have been writing about and presenting for some time.

With that in mind, I have decided to make this spring the Tour de Finance 2015
‘CASE STUDY SESSIONS’.

Since 2012 and the introduction of the raft of tax and financial changes in Italy, a new norm of financial planning has evolved. In the ‘CASE STUDY SESSIONS’ I would like to show you how we can all fit into that new norm and make living in Italy that little bit easier.

As usual the events will be FREE open question and answer events. We will also return with our preferred team of experts who will be on hand to answer questions.

If you are interested in attending these events then they are going to be held on the following days and in the following places:

Castiglione del Lago (Umbria)

Monday 20th April
Michele & Co – Pastisserie

San Ginesio (Le Marche)

Tuesday 21st April
Palazzo Morichelli D’Altemps

The events will open for arrival at 10.30am and start at 11am promptly. The session will end at approx 1pm. A FREE buffet with wine and water will be served afterwards where you will have a chance to speak with the experts directly and have a chance to meet your friends and acquaintances.

DUE TO LARGE NUMBERS AT SOME PREVIOUS EVENTS NUMBERS WILL BE LIMITED TO A MAXIMUM OF 25 PEOPLE SO WE HAVE THE TIME TO ANSWER QUESTIONS SUFFICIENTLY DURING THE MORNING.

GARETH HORSFALL (THAT’S ME) , THE SPECTRUM IFA GROUP (ITALY)
Presenting the Case Studies and the best way to plan around the Italian tax system.

ROB WALKER, INVESTMENT DIRECTOR
RATHBONES INVESTMENT MANAGEMENT UK.
Rob will be talking about financial marketss. Greece, the EU, USA and the markets to watch in the coming months and years and how they may all affect us in the near future.

ANDREW LAWFORD,
SEB LIFE INTERNATIONAL.
Andrew will explain the tax benefits of the Life Assurance Investment Bond as a tax efficient vehicle in Italy, what are it’s uses and what purpose it serves.

JUDITH RUDDOCK,
STUDIO DEL GAIZO PICCHIONI (COMMERCIALISTA)
She will be on hand to explain the finer workings of the Italian tax system.

PLEASE BOOK YOUR PLACE EARLY TO CONFIRM YOUR SEAT!!!

If you would like more information on how to get to the venues or to register for this FREE EVENT you can email GARETH.HORSFALL@SPECTRUM-IFA.COM leaving your full contact details or call me on 3336492356, or use the form below.

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Residency and Tax Residency in Italy

By Gareth Horsfall
This article is published on: 24th March 2015

2012 was a turning point in Italian politics and the way that we, as expats, live and could continue to live in Italy. It was the start of the New Norm (as I like to call it).

It started with the moment when Berlusconi was ousted as Premier and was swiftly followed by the non-elected Mario Monti. What was once accepted as the norm suddenly went under the spotlight. This was seen most dramatically in new tax legislation imposed on domestic and foreign assets and incomes and the sudden drive to track down and prosecute tax offenders.

There was no longer the option to live between two residencies, but the subject became much more matter of fact (see rules below for details)

It made a lot of expats question what their Italian residency meant since residency, by definition, means you are subject to Italian tax law. For some the additional financial burden was unaffordable. For the majority it was period of consolidation, understanding their tax reporting liabilities and looking at ways that they could plan more effectively to live in the country in which they wished to remain.

It is at this point that you may need to ask yourself the question:

What are the rules determined by Italian authorities in relation to being a resident or not?

Well, the law is clear, as follows:

An individual is considered resident for tax purposes if, for most of the calendar year (i.e. 183 days) he/she is:

* registered with the Registry of the Resident Population (Anagrafe)

* or has his/her residence or his/her domicile in the territory of the Italian state, as defined by Section 43 of the Italian Civil code.

According to Section 43 of the Italian Civil Code:

* The place of residence is taken to be the place where the individual has habitual abode.
* The place of domicile is taken to be individual’s principal place of business and interests.

In fact, residency has never been a choice. It has always been a matter of fact and a tax agency would always see it that way. If you spend the majority of time in Italy then you will be deemed tax resident as defined by the rules above.

Obvious problems occur when well-meaning estate agents suggest that you purchase your house in Italy as a resident to pay the lower VAT rate of 2% on the value of the property, versus 9% as a non-resident. But this in itself then determines that a tax return is required. If you then decide that non residency is preferable there is the question of having to pay back the difference.

The key, as always, is in the planning.

If you are a holiday home owner then you should rarely take residency if your clear intention is to maintain your principal residence elsewhere.

But if you want to enjoy Italy all year round and pay the lower rate of VAT on the property purchase, benefit from the good health care system, be able to buy a car here (non-residents cannot purchase a car legally in Italy), and benefit from lower utility rates then residence is required and certain legal obligations apply.

As I always say, you will pay more tax by living in Italy versus other Northern European countries and the USA. How can we expect to pay the same for all this sunshine?!! But a rural life, for example, should see your costs fall and maybe, like me, you are searching for the lifestyle that Italy offers.

Despite all this and having lived in Italy for years, I can tell you that there are tax-reduction and financial planning strategies that can lighten the burden somewhat. I should know! I was the naive foreigner who moved to Italy looking for ‘La Dolce Vita’ and didn’t pay much attention to the complicated financial and legal systems here. I failed to plan adequately and have had to pay the tax man for it. But failure to plan sharpened my senses and I now aim to help others not to fall into the same traps.

Income Tax Rates in Italy

By Gareth Horsfall
This article is published on: 23rd March 2015

You may wonder what is so significant about the number 28000 in Italy. Well, I will enlighten you in a moment.

The majority of expats I meet who decide to relocate to Italy are either Northern European or from Anglo Saxon’ countries (certainly those of you reading this E-zine) searching for some hot weather or wishing to sample the Mediterranean lifestyle. Whatever the motivations, it doesn’t really matter! Money-matters are the purpose of this E-zine.

It is often the case (but not always) that countries in the North of Europe and the USA have financial systems which encourage saving in tax-incentivised pensions, in savings or in retirement plans. Equally they often have preferential tax rates to encourage businesses/entrepreneurs to prosper in their early years when revenues are lower. The simple idea being that if you are incentivised to make provision for yourself and/or invest back into your business, then you will be less of a burden on the state in the future. Selling a business can also act as a kind of pseudo retirement plan in itself. This means that you lock a large part of your life savings into schemes/businesses which will provide you with an income later on in life. This would seem to be a sensible strategy for both government and individuals.

The problem we have is that when you move to Italy, there are few incentives to prepare for your future in the same way. In fact, the Government takes control of the majority of your life savings (either through INPS or other mandatory pension contributions) under which you have little or no control. In addition, there are few non-taxable income allowances which have the effect of reducing disposable income for individuals and reducing capital available for reinvestment just when a business needs it the most (more on tax rates in a moment).

My interpretation of this mechanism (I am sure there are much more complex political and social issues at hand here but I am merely trying to simplify elements of the system which affect you and I) is that by locking future savings into Government controlled systems, ie. INPS, the Government can charge income tax on these monies as “earned income” in the future and hence the Government provides itself with a guaranteed income stream on which it can calculate future spending plans (dubiously…. one might add)!

Which brings me on to income tax rates in Italy and the significance of 28000…

For expats in Italy, income tax is mainly applied to the following incomes:

Gross income from employment
Gross Pension income in Italy and from overseas
Net rental income from overseas property
72% of dividends from Ltd. Company ownership

Now, in my experience, a lot of expats living in Italy have a property in their home country which they are renting out, have income from pensions or employment in their country of origin and, in some cases (but not many), are taking dividends from a Limited company which they may own abroad.

The financial planning issue here is that when all of these are added together they can often start to breach the higher levels of income tax (IRPEF) in Italy. The rates being as follow:

EUR	0 – 15,000	23%
EUR	15,001 – 28,000	27%
EUR	28,001 – 55,000	38%

And so on…

And here lies the significance of 28000 in Italy.

The average income tax rate on income below €28,000 per annum GROSS is approximately 25%. This would seem reasonable but there are no non-taxable income tax allowances and so therefore tax starts from Euro Number 1. Once you start to breach the 28,000 EUR GROSS band and enter the more punishing 38% income tax band (if you add on regional taxes and others), then you are realistically into 40-42% on income over EUR 28,000 p.a.

So what is the solution?

Well, once again it all comes down to the planning.

The first and most obvious solution is to spread your income. Where possible, spread your income as a couple – for example, putting houses into joint names and spreading the income tax burden. By spreading the income you are moving a part of it into a partner’s tax bracket. If one of you has a lower taxable income than the other, then it makes sense to utilise some of the lower earning partner’s income tax bands.

Also, think about how you might be able to release money from pensions. As a resident in the UK, you can withdraw 25% of a pension plan tax free. It makes sense to do that before you move. That same withdrawal as a tax resident in Italy would be considered taxable income and added to your other incomes in that year.

In the UK (from April 2015) and in the USA you may be able to cash in some or all of your retirement plan. This particular scenario might be more complicated if there is a tax charge involved, but if you are serious about planning to reduce tax liabilities in Italy, then taking a lower tax charge in your home country before you move might be better than being subject to higher ongoing income tax rates in Italy (This would need serious consideration before a decision were made, but it could be a possibility).

And lastly, move as much of your money to unearned income sources, ie. income from directly held investments/savings. In this way you are subject to a flat tax of only 26% on the capital gains and/or the income from those investments.

As a general rule if you can split a couples’ income, generate income from investments (not from retirement plans), and some from property rental you can bring your overall tax rate down to approximately 26-30%. A level which I think is more acceptable to most (a lot depends on your income requirements as well).

Of course, I have simplified the situation here and everyone’s circumstances are different, but the methodology is the same. How can you take advantage of the lowest tax rates possible by restructuring and spreading your finances to make them more effective in Italy?

Which brings me nicely back to my initial point: The magic number is EUR28,000.

Italy does not, presently, seem to incentivise its residents to invest in long term retirement savings plans (in fact, in the Legge di Stabilita 2015 they are discussing taxing them even more!) and so a move to Italy breaks with Anglo Saxon/Northern European mentality, when thinking about how to plan for the future. Some of the best laid long-term plans can be scuppered when those decisions include a move to another country with a financial system based on totally different principles and systems.

If you plan on waiting for tax reductions or the EU to force changes, you could be waiting a long time. Planning your way around the system/s seems to be the optimum choice rather than waiting for the Government to do anything about it for you.

If you are already a resident in Italy and want to plan more effectively or are considering moving and wondering how you might plan things before you arrive, you can contact me directly on Tel: +39 333 649 2356, or please use the form below.