Viewing posts categorised under: Italy

Gareth’s personal story of profit and loss

By Gareth Horsfall
This article is published on: 2nd September 2013

I am not sure when my interest in financial services, financial markets and investment, actually began. However, I think I can attribute it in some part to a time when my mother and father were investing in the famous UK clothing retailer, NEXT. I fondly recall the enthusiasm in our house when they purchased the shares for 9 pence, then quickly saw the price grow to 99p (before selling) and bagging a handsome profit in the process. I never knew how much they invested, but no matter, they must have made a reasonable profit. The fact that the shares then climbed to over £10 over the coming years was always a bone of contention, but that is just one of the risks of investing.

It was shortly after this that I decided to give investing a go myself and took advice from the family friend who advised my parents to buy shares in NEXT. I remember his ’stock pick’ to this day: Fulcrum Kitchens and Bathrooms. I charged in with both feet and purchased £350 worth of shares at 24p each. And then forgot about them. The next I knew I received a notice of the winding up of the company. The ordinary shareholders would receive zero after the sale. This was my first foray into the world of investing.

However, I wasn’t deterred. My next opportunity didn’t come until a few years later when my grandparents gifted £2000 each to my sister and I. This time I was less speculative and went along to the financial adviser at my bank at the time. He advised me to invest in a PEP (Personal Equity Plan) and place the money in a Balanced Managed fund. And then I forgot about it. It was some years before I would need the money (to clear some debts) and was surprised at the time to learn that the fund was now worth 50% more. An annual average return of 9%.

Years after this, when I had less money, after buying a house, I wanted to start investing again and so I started putting some money away into an ISA on a regular basis. And once again, I fell into one of the best known traps in the business. I thought I knew more than the experts. I invested my money in the tech boom shares around the year 2000. I don’t think this needs any explanation. I never recouped my losses, even years later, and I eventually switched the money into a highly speculative emerging market investment, which is where it remains today with the hope that one day it will regain its losses. This was another important lesson in my development to becoming a financial adviser.

Other factors also swayed my reasons for choosing this work and following my principles when dealing with people. My mother invested her life savings with a financial adviser who advised her, incorrectly, to invest her monies into technology shares around the year 2000. She suffered the same fate as me, but with more serious consequences given that she was a lot closer to retirement. I took over the management of her portfolio (at her request) a few years later. I decided then that people should benefit from what I did and that if I could not provide what a customer needed (in most cases, growth or income on their investments), then I should not be doing this work.

Experiences like these taught me a few lessons. Firstly, that well meaning friends can be detrimental to your wealth. That is not to say that they are always wrong, but quite often their advice can be skewed towards their own good and bad experiences and less towards a rational and objective view of an individual’s finances.

The second thing I learned was that I would only become a good financial adviser if I knew my work. I couldn’t expect to sit a few exams and be able to deliver good and safe advice for my customers. I had to understand my work, and so I committed to reading as much as I can. I still do so and, coupled with the experience I have acquired by investing through 2 of the worst stock market crashes in recent history, (2000 Tech boom and 2007/8 The Great recession), I feel I am better prepared to advise others who may not have access to the same information or experiences that I have.

Lastly, it was apparent that going to see a financial adviser was the wisest choice I made. I did not have complete control over these choices, but this turned out to be my best financial decision. So I can see the value in what I offer now, and see how I can be of use and real benefit to my customers

All in all, financial services are constantly changing. For expat finances, this is great news. The profession has changed for the better and serious professionals are filling the places of those who have left the industry or moved on. This has created an opportunity for me to deliver high quality financial advice to the Expat/English speaking market in Italy, a country which I have grown to love and where I wish to remain.

My aim is for the Spectrum IFA group to become the most trusted and recommended financial services group for Expats and the English speaking community throughout Italy.

If you would like to know more or speak with me, you can contact me on gareth.horsfall@spectrum-ifa.com, or call me on 0039 3336492356.

Tax on sale of inherited property in Italy

By Spectrum IFA
This article is published on: 20th June 2013

Did you know that the Capital Gains tax on the sale of inherited property for an Italian tax resident is ZERO.

If you were not already aware, the Italian government does not charge any capital gains taxes on any property which has been passed into your ownership through an inheritance. Something to shout about! And a nice financial planning tool as well.

Beware: International Financial Advisers operating in Italy!

By Spectrum IFA
This article is published on: 5th June 2013

It has been brought to my attention recently that there has been a sudden increase in the number of financial advisers looking to provide advice to expats in Italy, and a number of you have been telling me that you have been solicited with unwanted phone calls.

So here are some words of caution!

International advice firms that advise expats in various countries around the world are not new. We have been around for a long time. In The Spectrum IFA groups case, 10 years. Even longer if you take into account the experience of some of the advisers in the group. However, there has been one important development in this field in the last 5 – 10 years, in Europe and that is regulation. The EU have regulated this area of financial advice a lot more.

The outcome of this is whereas International financial advisory groups might have once offered a raft of offshore products to everyone, no matter where they live, each and every product must now be tailored to meet the individual requirements of the country in which the client is living, in this case Italy. An offshore product is often NOT suitable as they are blacklisted for Italian tax purposes (although they can be suitable in some cases) and detrimental tax treatment will apply. (I will write more about this on another blog post).

Thank fully most groups now offer the right products for the respective country in which the client lives but there are still some risks in working with groups and more importantly individuals who do not have the correct tax status in Italy.

Firstly, you need to ensure that the group with whom you are working is correctly regulated in Italy. They should be registered either with ISVAP or the CONSOB, and/or have ‘passports’ from another European country to do business in Italy. Thankfully most do and so this is the least concerning area.

My biggest concern is that of the advisers themselves. Quite often advisers will live and work in Italy but without actually becoming resident here and without submitting tax declarations. This is worrying. Should you do business with these people and they are subsequently investigated by the Guardia di Finanza then I can see no other option than them leaving the country and leaving you high and dry.

At the Spectrum IFA Group it is important for us to understand exactly what our clients are going through and so we are all required to be resident in the countries in which we work, which means tax declarations.

As more and more groups decide to come to Italy and work with expats, expat financial advisers will come under more and more scrutiny to ensure that we have our own personal tax affairs in order. If not then it is problematic for the adviser but even more so for the client who is left wondering why their adviser cannot return to Italy.

I am all for good healthy competition that drives standards up and creates innovation in the market, but bad practice does not bode well for the reputation of a financial profession which has had its fair share of scandal in recent times.

My advice is always to ask the question to whom you are working with: Are you resident and paying tax in Italy?, ask to see their carta d’identita, and ask for evidence of F24 if required (to evidence that they pay their taxes). Don’t forget evidence of registration in Italy and do enough research in advance.

The Spectrum IFA group has a branch in Italy and is fully registered with ISVAP and the Camera di Commercio. (P.Iva 12418981002)

Top Tax Tips for Expats in Italy

By Gareth Horsfall
This article is published on: 4th March 2013

Here are my top tax tips for living or moving to Italy.

1. Beware of the DIY approach.
Always discuss your tax situation with an experienced and knowledgeable commercialista. Taxes in Italy are not that much different to other countries around Europe and you might be surprised at just how littel you have to pay. The DIY’ers rarely find the tax breaks and end up paying more than they need to.

2. A Tax Residence of choice does not work.
Just because you are spending 3 months of the year in the UK does not mean you automatically qualify for UK residency when in fact you are actually spending more of your time in Italy. The double tax treaty will not cover you in this case.

3. Don’t think you can hide.
If you an Italian tax resident (i.e you spend more than 183 day here a year), then the Guardia di Finanza can find you. There is always a paper trial, utility bills, mobile phone records, airline tickets, credit card and bank statements, as well as visual evidence from neighbours, gardeners, cleaners etc. It is much better to be ‘in regola’ and know that the knock on the door is highly unlikely.

4. Beware the UK 90 day rule.
Quite a few people I meet try to claim UK residency because they go back to the UK for at least 90 days a year out of the last 3 years. This is not a law and is ignored by the courts. The Italian tax authorities would swiftly brush this aside as an excuse if they were trying to determine tax residency in Italy or not.

5. Don’t rely on a double taxation treaty to protect you.
A double taxation treaty is merely a statement saying that you cannot be a tax resident of 2 countries at the same time. So, you have to be resident in at least one country in any one year. The Italian’s will quite quickly assume that you are Italian tax resident if there are any signs of regular/permanent establishment in the country.

6. Be very wary of trying to be non resident anywhere.
If you are claiming to be a non tax resident anywhere then you could misunderstand the rules of the countries that you are living in. It is possible but most countries will deem you to be tax resident even if you spend less than 6 months of the year in the country. They just find it hard to accept that you can be non resident anywhere.

7. Don’t forget to register your presence.
Some people move to Italy and then decide not to report that they are living there and try and live under the radar. It is illegal to NOT complete tax returns and and a criminal offence in Italy. Even if you are paying tax on pensions in other countries, have assets overseas or income from other sources, the tax code in Italy states that as a tax resident you are liable to taxation on your worldwide income and assets. However you might get some Double tax treaty relief’s from Italy for paying taxes in another country already.

8. Tax favoured investments in one country do not necessarily apply in Italy.
The classic example is the UK Individual Savings Account. (ISA). It is not recognised as a tax free account in Italy and is therefore taxed on income and capital gains. You might need to re-examine all your old investments and replace then with tax efficient investment for Italy (namely the Life assurance Investment Bond).

9. Watch out for tax free lump sums from pensions
The UK pension system allows a 25% lump sum pension payment on retirement. In Italy that lump sum is taxable and therefore it might be advisable to take it before you leave for the country. You might also consider moving the pension fund to a QROPS ( Qualified Recognised Overseas pension Scheme). This means you can put the pension outside the UK tax system, avoid having to buy an annuity and potentially avoid the 55% charge on the fund at death.

10. Don’t be worried about tax planning in Italy.
Life in Italy is great. Taxes are not that different to those in other European countries. If you plan early enough and do things properly you will not pay that much more than if you were a UK resident. I often tell clients that for a few hundred euros more, it really is not worth taking the risk.