In this E-zine I am going to provide a brief summary of the taxes which mostly affect you and your lives in Italy. It is not an exhaustive list, but you can use this for reference or discussion tool with your commercialista if you need to.

There may be specific elements regarding your personal situation, but I shall discuss the most important ones hat might affect you. Throughout this article, I shall also describe the latest changes from the Legge di Bilancio which have now been introduced in 2024.

Summary of the main taxes that affect your life as a ‘straniero/a living in Italy
The first thing you need to remember, as a fiscally resident individual of Italy, is that you are subject to taxation on your worldwide earned and non-earned income: capital gains and assets (including property). It is your job to make sure that you report these to your commercialista each year to complete your tax return. But before you do it for the first time, a financial planning exercise can come always come in useful.
Fiscal residency generally means that you qualify under ‘1’ of the following criteria:

1. You are registered as a resident on the anagrafe
2. You spend more than 183 days a fiscal year ( calendar year) in Italy
3. You have your main business, social or family interests in the country

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

EMPLOYMENT

If you are employed or self employed then there are multiple options available, from partita iva, partita iva, regime forfettario, rientro di cervello, amongst others. I won’t go into details here as these really need to be looked at on a case by case basis, but needless to say that there are financial planning opportunities. If you are working, or intending to work, in Italy or if you have any questions in this area you can contact me on gareth.horsfall@spectrum-ifa.com

2024 Change: INBOUND WORKERS TAX REGIME
Regarding the inbound workers tax incentive. The previous tax regime was a 70 – 90% income tax (and social security contributions) deduction for a period of 5 years. This has been reduced to 50%, capped at an annual gross income of €600,000. The time spent as non-resident of Italy prior to applying has been increased to 3 years, (or 6 – 7 years if there is continuity in the employment relationship). However, Italian residency must now be retained for 4 years in Italy, whereas it was previously 2. They have also introduced a requirement for a high level of specialisation (degrees, masters etc) in the qualifications necessary for the job in question.

If you have paid tax already on that income, then a tax credit will be given for the tax paid in the country of origin (assuming that the country has a double taxation agreement with Italy). Any difference between the tax rates in the country of origin and Italy will have to be paid.

I often hear stories of people who are told by their commercialista that their state pension / social security pension is not taxable in Italy, and, more recently I have seen numerous videos on Youtube of individuals who also make this claim. This is absolutely NOT the case!! The UK state pension and US social security are 100% taxable in Italy. It is not excluded from the double taxation treaties and therefore must be declared in Italy. Failure to declare could mean fines and penalties.

2024 Change: NO TAX AREA
For some time now there has been what is know as a NO TAX AREA for someone receiving a pension in Italy (“pensioner” is defined as someone who is receiving official state benefits i.e., social security or state pension). No distinction is made between pensions being paid from abroad or within Italy.

From 2024 the NO TAX AREA has been increased to €8500 per annum.
It is important to understand that this is NOT an allowance i.e., an exclusion of income tax on the first €8500 for ALL pensioners. It is a tax credit system. If your total income (reddito complessivo) is €8500 or less then all the tax payable on your pension will be provided as a tax credit. HOWEVER, the more your total income, from all sources, increases over €8500, the more of the tax credit you lose. If your total income is €55000 or above you would not receive any tax credit.

GOVERNMENT DERIVED PENSIONS
It is a good idea to define what is meant by government paid pensions. The definition according to the Italy / UK / USA double taxation convention 1988 is, paid from:

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

This generally means civil servants of any kind and foreign office employees but would generally include teachers who have worked in a public school, health care workers, military personnel, police fire service etc. In these cases, the pension awarded is taxable only in the state in which it originates, and tax is generally deducted at source in that country of origin.

But there are some tax idiosyncrasies to look out for here. On the positive side, this income is not taken into account when calculating the tax on your other income sources in Italy, e.g. rental income, and it is not declared on your tax declaration in Italy.

On the negative side, for those of you who are thinking of becoming citizens of Italy, these pensions are only taxed in the state of origin UNLESS you become a citizen of Italy, or are one already, in which case it becomes taxable. So for anyone thinking about cittadinanza, plan before you leap!

My final note on pensions is to say that ensuring that they are filed correctly on your tax return in Italy is essential. There are only various shades of grey when it comes to how to declare overseas pensions correctly. Speaking to the right experts might mean the difference between paying more tax than you need to.

INVESTMENT INCOME AND CAPITAL GAINS
As of 1st January 2017, interest from savings, income from investments in the form of dividends and other non-earned income payments stands unchanged at a flat tax rate of 26%. Realised capital gains are also taxed at the same rate of 26%.

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

BANK ACCOUNTS AND DEPOSITS

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

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

Happy New Year to everyone! I hope that you have had an enjoyable festive season and are feeling ready for 2024.

In keeping with the long tradition of Italian governments fiddling with tax rules, 2024 brings with it a number of changes, so let’s dive in and have a look at what to expect.

IRPEF marginal tax rates

For 2024 we will have only 3 marginal tax rates:

This abolishes the previous band from €15 – 28,000 which was taxed at 25%, which will result in a net saving for someone with an income of €28,000 of €260 per annum. Don’t get too excited though, because if you have an income above €50,000, the reduction in IRPEF rates is offset by the withdrawal of certain tax breaks, which could lead to you paying the same amount as before.

Residency rules
2024 introduces a modified formulation of the definition of tax residency, in particular through Art. 2 of the TUIR (the Italian tax code). Without getting too deeply into the details, the emphasis seems to have moved from a strict presumption based on whether you have, in fact, declared residency in your local municipality to one based more generally on your physical presence and an evolved conception of domicile. Not much will change for you if you live year round in Italy and are already used to filing tax returns, but if, for example, you have made a determination that you aren’t tax resident in Italy in spite of the fact that you spend a large amount of time here, it would be a good idea to review your position to make sure that it is (relatively) clear under the modified formulation. The changes also need to be considered in the light of any double tax agreements and, from what I have been reading, even the experts are confused about what all this will mean in practice. None of the above is helped by the fact that the Agenzia will not give an advance ruling on whether a given individual is tax resident or not – they will tell you what they think if they ever subject you to an audit!

Careful planning and prudence remain key to protecting your position, so do get in touch if you would like to discuss further, as I can provide an introduction to an experienced tax adviser as part of an overall review of your financial situation.

Inbound Workers Incentive
Those who took up residency before the end of 2023 can continue to use the previous rules, which are far more generous than the updated version, in force from the beginning of 2024.

The incentive currently available is reduced from the previous 70 – 90% income tax reduction to a 50% reduction, capped at an annual gross income of €600,000. The requirement for the time spent as non-resident of Italy prior to making use of the incentive has been increased to 3 years, (or 6 – 7 years if there is continuity in the employment relationship). There is also an increased requirement to maintain Italian residency for 4 years (previously 2), and a requirement for a high level of specialisation in the qualifications necessary for the job in question.

Given the growing complexity of the requirements, it is worth spending some time assessing your personal situation if you are considering making use of these incentives. It is also worth noting that the incentives do not apply to pension contributions, which may reduce considerably the value of the tax break for anyone not planning on being resident in Italy for the long-term.

It is worth reminding anyone making use of these incentives that they apply only to work income; any investments or passive income generated must be declared and taxed according to the ordinary rules. There are plenty of tax planning opportunities available for people transferring residency to Italy, so please do get in touch to discuss your own particular situation – it is never too early to start this process, as a number of potential tax efficiencies are lost if they are not put in motion before becoming Italian tax resident.

Increased IVIE (wealth tax applied to foreign real estate)
As if life wasn’t already tough enough for those owning property outside of Italy (and particularly outside of the EU), the IVIE rate goes up in 2024 from 0.76% to 1.06%, calculated either on the equivalent of the valore catastale (if the property is within the EU), or on the lower of cost or market value if it is outside the EU.

For many people, owning foreign property is simply a sign of the connection they maintain with their country of origin. However, unless you really do need a property in another country, it may ultimately be more trouble (and cost) than it is worth once you take into consideration the difficulty of managing property from afar and its tax treatment. Consider that financial assets, which are vastly easier to manage and can provide a tax-efficient income if set up correctly, are subject to a wealth tax that is more than 80% lower than the tax applied to real estate and can qualify for a 100% inheritance tax exemption. I can provide an objective financial analysis for anyone considering alternatives to their foreign property investments.

CFCs and holding companies
Controlled Foreign Companies (CFCs) have long been a difficult area and tend to get mixed up in the general issue of residency, given that foreign corporate entities can be classified as Italian residents in a similar way to individuals who may consider themselves to be non-resident for tax purposes. The Italian tax treatment of CFCs has hitherto based itself on a threshold level of taxation for the CFC in question: if it is taxed at less than 50% of the equivalent Italian tax, this will attract negative consequences. This threshold level has since been simplified to 15%, with further consideration being given to holding companies that may enjoy a participation exemption. This is a very complicated area, but suffice to say that reviewing any holdings you might have in foreign corporate entities, especially if these are controlling interests, should be part of your Italian financial planning. I can provide appropriate introductions to experts in this field as part of an overall review of your situation.

I have held off this subject for a while because in the finance industry we have been waiting for some figures to confirm what has to date been expected, but as yet could not be verified: slowing inflation figures.

This has now been demonstrated in 2 countries: The USA and the UK (and it is likely that the EU will follow suit)

On November 1st the Fed announced that inflation had slowed in the States slowing from 3.8% in August to 3.7% in November. This is a good signal that interest rate rises in the USA have had the desired effect on inflation and so they decided to keep policy rates on hold at 5.25-5.5%

The UK also announced more dramatic falls in inflation, from 6.7% in September to 4.6% in October. That’s quite the fall, and resulted in the same action from the Bank of England: interest rates will be kept on hold.

Not a lot of time left for savers and higher interest rates
As a result, anyone who is looking to pick up the best interest rates on their cash will more than likely need to act fast now. It is highly likely that we have reached the peak interest rate in the cycle and so the direction will more than likely be down from here. Remember that Central Banks have a 2% inflation target and whilst there is little chance of that happening (in my humble opinion!) for some time to come yet, they will quickly want to reduce interest rates to stimulate the home buying sector, making it cheaper for new borrowers and also to alleviate the pressure on existing borrowers with higher repayments, hence stimulating overall spending and avoiding deep recession.

That doesn’t bode well for savers who have been eyeing the delicious Burrata-esque interest rates on cash in the last year. The banks will very likely be ahead of the trend and start lowering their fixed term offers before the central bank rate falls. In fact we are already seeing that a number of fixed rate offers are being withdrawn.

Therefore, is it time to Invest rather than sitting on cash?
I think this has been the second most asked question of me in 2023.

I imagine that you think that my answer has always been to invest, given that this is the main service that I offer clients. However, you would be wrong! I have, on a number of occasions advised clients to seek out better deposit rates on cash. It all depends on circumstances. In general, anyone needing cash in the short term (1-2 years) would be advised to keep the required amount in cash to cover any bigger one-off expenses and the same would apply whether interest rates are at zero or 5%. However, my advice is, and has always been, that if you have a longer term horizon i.e you intend on living on a return from capital over the next 10 or 20 years, or even longer, then investing is the better option. Why? Because quite simply cash is a terrible way to hold capital long term and trying to time entry into the markets is an impossible task.

But I repeat this mantra often, so let me show you some great slides that I have received from Rathbones Investment managers recently which go a bit deeper into the understanding of why cash is a bad medium to long term option.

IN THE LONG TERM INVESTING IN EQUITIES HAS COMFORTABLY BEATEN CASH

RETURNS FROM CASH HAVE FAILED TO KEEP UP WITH INFLATION FOR LONGER PERIODS

EQUITIES ARE FORECASTED TO RETURN MORE THAN CASH OVER THE NEXT DECADE

In addition, someone I know who is a UK Independent financial advisor (thanks for sending this Chris!) sent me some other useful information which I want to share with you on the same topic.

So, does investing even make sense anymore?
First, it’s worth reminding ourselves that the laws of capitalism haven’t changed:

• Governments must pay higher returns than cash to borrow. Governments NEED to raise money through debt. It’s what keeps pensions paid and the lights on. If cash rates are at 5%, government bonds have to offer people MORE than that to tempt them out of the bank – even more so if they want them to lock it up for 10 years
• Companies must pay more than governments to borrow. Companies NEED to incentivise you to lend to them, rather than to the government … which means paying you more than the government does! If cash is at 5%, and government bonds are at 6% (say)… corporate debt must be higher (otherwise why take the risk?!)
• Equities have to offer the chance of being paid more than corporate bonds. Companies ALSO need to generate money for their shareholders (who are taking even more risk than their bondholders). Because if their shareholders could do better leaving their money in the bank … soon there’d be no shareholders. And the decision maker at a company knows that. Any new project requiring a cash investment will be judged against the bank rate. If a new project doesn’t have the potential to beat what the bank’s offering, why do it?

The bottom line is that cash sets the bar. Everything else then needs to jump over it.

Of course, it’s tempting to believe that today’s investment circumstances are unique. “This time it’s different!”. Inflation is high. Government debt levels have soared. Geopolitical hotspots are flaring up in Ukraine, the Middle East and Taiwan. Add to that the transformational developments in AI and the increasingly savage impact of climate change. But is it really different this time?

Look at the below chart. Between 1993 and 2007, interest rates averaged 5.35%. Government debt levels were rising sharply*. Geopolitical hotspots were flaring up in Yugoslavia, the Middle East and Russia. The internet was revolutionising society. In the face of all that, surely just staying in cash, at 5.25%, was best?

ABSOLUTELY NOT!

That higher cash bar created better jumpers. The FTSE 100 (with dividends reinvested) returned 8.1% annualised over that period.

The world continued to jump over the bar… and it will do in the next economic cycle too.

Markets are a forward looking mechanism
I will have a brief final word on this matter. I want to tell you a personal story.

In 2008 / 2009 my wife and I had some capital to invest, around €40,000. We had not had a lump sum of this nature to invest in our whole lives. We had mainly saved from income. At the time I had just finished Warren Buffets book ‘The snowball: Warren Buffet and the business of life’. I wanted to learn more from the great investors and understand what decisions they took to help them in their investing decisions so that I could be a better adviser for you, my clients. We just happened to have this capital now, which I knew needed investing for me and my family.

You may remember than 2008 /2009 was the height of the Financial Crisis and the financial markets and general global financial system were teetering on the brink of total collapse. It didn’t appear to be a good time to be investing. However, I knew what I needed to do.

I can only tell you that selecting the funds I wanted to purchase and then actually doing it was one of the hardest things I have ever done with money. It totally went against every grain of common sense in my body, given the state of the financial system at the time. (I was party to just how bad it was through our internal communications from fund managers and financial experts alike) Why invest when the world is in such bad shape? But, I didn’t let my heart rule out and instead went with my head.

What happened over the coming months was that the portfolio I had selected went down 20% in the next month and it left me wondering whether I had done the right thing or not. (and before you ask, I never told my wife about this until about 6 months later!) . But I stuck with the plan and 3 months after that the portfolio had bounced back and was in positive territory again.

Lessons learned

I learned 2 very important lessons from that experience:

1. You can’t time markets. So don’t even try. If you happen to have capital that you need to invest around the time when markets have fallen then it is going to be more or less the best time to get in. The valuations may go lower in the short term but in the medium to long term you are going to get the best valuations.

2.  Markets will bounce back before the economy does.  At the time I had invested,  and the valuations had increased, we were in the worst of that economic period.  The bounce came from some political decisions to stimulate the economy, but those decisions would take years before the results fed through to the general economy.

If you would like to discuss anything about this article with me, then please do get in touch on gareth.horsfall@spectrum-ifa.com or message/call me on +39 3336492356

It was great to recently do an interview with Michelle Smith from Real Expats Living in Italy Youtube channel.   We talked about my work, life and living in ‘Il bel Paese’.  Great fun.  I wish her all the best with the channel and hope it helps people already living in or thinking about moving to Italy. 

Thinking about making the move to Italy? Wondering if it’s all sunshine, wine, and pizza? From the moment you step foot in Italy, you’ll be captivated by its rich history, breathtaking landscapes, and vibrant culture. But beneath the surface, there are challenges and realities that may surprise you. Michelle, is an expat living in Italy, and provides an unfiltered look at what it’s really like to live, work, and thrive in this beautiful country.

This isn’t your typical travel channel or glossy brochure. It’s a no-holds-barred exploration of the highs and lows of expat life in Italy. Discover the unvarnished truth, helping you make an informed decision about your own Italian adventure.

I am back in the office after Le Tour de Finance dates last week in Abruzzo and Marche…..and I learned something interesting from the people that came along!

It was great to be getting out of the office again and going and touring the country with our financial experts. I have to admit that the organisation of the events is a bit stressful: finding and negotiating with the venue, finding the right people to come and speak and then dealing with the logistics over the 2 days. But, in the end, it is not just good for work, but I really enjoy being able to be to be out and about, visit new parts of Italy and meet new people and speak with old, alike.

These Le Tour de Finance events were all about the ladies!

I had deliberately invited only female speakers to get another perspective on the world of finance this time and although I can’t exactly put my finger on what was different, the atmosphere was different in some way. Exactly what I can’t say, but something for sure. So, I will put that down as a success!

I did mention above that I learned something from the people that came along. There was a difference in the focus of people’s attention this time. Normally it has been primarily focussed on Italian taxation and the financial planning in Italy, but this time the majority of the questions and queries during the talk and after over lunch, were centered around the investment markets and the future outlook for investors. I guess that shouldn’t have taken me by surprise given the state of world geopolitics, but it was interesting to note and helps me to focus in these E-zines and my other articles.

However, this E.zine is not designed to provide you with a long interpretation of what was said on the day. Instead I managed to find the time to interview the speakers and here are the videos, in full.

If you also have questions about financial markets, investing and how world geopolitical events affect your money then you might find the interview with Joy Callender and Lorraine Reddaway from RBC Brewin Dolphin very interesting. We have inserted some slides into the videos which provide visual aids to what we are saying.

First interview with RBC Brewin Dolphin asset managers.

Second interview with Stefania Falcone at Currencies Direct where we have a chat about exchanging currencies and the difference between them and Wise.

And the last video with Judith Ruddock of Studio del Gaizo Picchioni where we talk about the Agenzia delle Entrate, common tax mistakes for residents of Italy and what to watch out for.

I am rushing this E-zine out to you after travelling for the last 2 weeks, because there are some important developments in La Legge di Bilancio 2024 which may affect you.

Not since 2014 and the new tax laws introduced by Mario Monti have I seen such big changes in the tax system in Italy. Georgia Meloni’s government have clearly taken a leaf from that book and have introduced a raft of new tax law changes which have recently been announced in La Legge di Bilancio 2024. (These have not been passed yet, but it is highly likely that they will be voted on before year end!).

THE MOST IMPORTANT OF WHICH, FOR MY CLIENTS, IS AN INCREASE ON THE WEALTH TAX ON OVERSEAS PROPERTY!!!

Below I explain a few of the changes and which groups of people they might affect.

“Those who plan do better than those who do not plan, even should they rarely stick to their plan!”

1. Wealth tax on overseas property will increase from 0.76% to 1.06%.pa
On an average overseas property taxable value of GBP300,000 or USD300,000, the tax will rise by 900 a year!

2. Affitti Brevi – cedolare secca – tax to increase from 21% to 26%
If you rent out a property in Italy for short terms rentals (less than 30 days), and you are not registered as a company, then you have the option of applying the ‘cedolare secca’, which is a sort of preferential forfeit rate of tax (expenses non deductible) of 21%. This will rise to 26% from January 2024.

3. Proposed Tax Band changes for 2024

4. Non-EU citizens resident in Italy! will have to pay an annual contribution of €2000 to access the Italian health service.
(The contribution will not have to be paid for foreign students with a permesso di soggiorno or similar)

This is a huge development, because any non-EU citizen resident in Italy (US persons and now Brit’s) who is currently paying for access to the Italian health service is assessed based on a certain level of ‘reddito complessivo’ (total income).

You can access that info from the Minstero della Salute website on the link below:

https://www.salute.gov.it/imgs/C_17_pagineAree_2522_listaFile_itemName_0_file.pdf

If you are a non-EU citizen living in Italy, and maybe paying the minimum of €387,34 a year, then this could be a significant rise of nearly €1600 a year!

(Interestingly if you have a high income level and are assessed on the maximum under the current criteria, then €2000 a year would be a quite sizeable discount – assuming the reddito complessivo calculation is no longer valid).

Here are the categories of people who would need to pay.

1. Students or equivalent who are in Italy for a period of less than 3 months.
2. Holders of the permesso di soggiorno for ‘residenza elettiva‘ !!! who don’t have any form of work.
3. Persons of religious institutions.
4. Diplomatic and consular personnel of foreign representations in Italy. (excluding staff with an Italian work contract)
5. Employees of International organisations operating in Italy. (presumably United Nations et al)
6. Foreigners who work for International organisations operating in Italy. (not on Italian contracts)
7. Foreigners who participate in voluntary programmes
8. Parents, over 65 years old, who have or will move to Italy to be with family members, after 5th November 2008.
9. All other excluded categories.

***  Notable is the category of anyone applying for ‘residenza elettiva’.  This will affect alot of UK and US citizens who may currently be applying to become resident in Italy under the residenza elettiva category.*** 

*****Interesting exclusion from the list. *****

One notable category of people missing from the list is Brit’s who were registered in Italy before Brexit and therefore have acquired EU rights as per the EU/UK withdrawal agreement, also retired Brit’s with the right to reciprocal healthcare in Italy under the S1 arrangement. It remains to be seen whether they would be expected to pay or not. (I would think not!) My suspicion is that no one has even thought about this category of individuals and so, like many pieces of Italian legislation, it is first introduced then clarified over time. My thinking is that this one will have to be taken up by the British Embassy and the remaining UK citizen rights lobby groups, for clarification.

The new text relating to the definition of residency and domicile is as follows:

“Il comma 2 dell’articolo 2 del Testo Unico delle Imposte sui redditi, approvato con decreto del Presidente della Repubblica del 22 dicembre 1986, n. 917 è sostituito dal seguente: “2. Ai fini delle imposte sui redditi si considerano residenti le persone che per la maggior parte del periodo d’imposta, considerando anche le frazioni di giorno, hanno il domicilio o la residenza nel territorio dello Stato ovvero che sono ivi presenti. Ai fini dell’applicazione della presente disposizione, per domicilio si intende il luogo in cui si sviluppano, in via principale, le relazioni personali e familiari della persona. Salvo prova contraria, si presumono altresì residenti le persone iscritte per la maggior parte del periodo di imposta nelle anagrafi della popolazione residente.”

Let’s anlayse the important differences below:

1. Change in the definition of domicile:

In Italian law it currently reads as:

“the place of your principal place of work or interests”

The new definition will be connected to your personal status and read as follows:

“the place where the person’s personal and family relationships mainly develop”

This could be significant for anyone who previously may have claimed working abroad as a criteria for not being resident, whilst their main family relationships were still in Italy.

2. Fractions of days.
If you are someone who has to count your days in and out of the country to maintain non-residency or residency alike, then you will likely need to count fractional days in Italy as well. i.e any time spent in the country in any one day will be counted as a full day for residency purposes.

3. Assumed residenza for anyone registered at the anagrafe for the majority of the fiscal period (calendar year)
Again, this is an important development for anyone who is registered as resident at the anagrafe, has a carta d’identità and certificati di residenza, but is claiming fiscal residency in another tax jurisdiction.

It is clear from these changes that the Italian government is tightening up the rules around residenza and closing those loopholes which many people have used to get around ‘residenza fiscale’ whilst retaining the benefits of being registered as a resident in the anagrafe,

I have been banging on that drum for a long time now. If you are registered as a resident in Italy for the majority of the calendar year then by definition you are also considered fiscally resident as well. Whilst the definitions allowed for people to get around the law, it seems that this will become much harder.

How all this will be put into action is anyone’s guess, but it might be prudent to think that once the laws are refined, then the authorities can use existing information to further investigate matters that have already come to their attention but they have been unable to act on due to the loopholes in the system.

Therefore, the advice is simple:

If you think that anything above might affect you then do some financial planning before it is too late!

It’s been a horrible 2 years (almost) in investment markets. Let’s just be honest. If markets don’t pick up in Quarter 4 of 2023 then we will have been in for 2 pretty rubbish years. It’s tough to say it from someone (me) who is invested in ‘investing’ and using the markets to protect money from inflation.

I know it’s the only way to protect our hard earned capital from the ravages of prices increases, but after 2 years of markets not going anywhere it is a tough job to convince anyone that this is still the best way to protect capital.

Until 2022 you could have almost been forgiven for wondering what inflation was. We hadn’t really seen the effects of inflation for the last 20 years, and now it’s back with a bang. Right at the moment of global political instability and war. The perfect storm!

Since Feb 2022 the markets reacted to the events between Russia and Ukraine and since then, with the onset of price increases for, just about, everything we buy, global stock markets are still trading under their highs of 2021.

Why not cash instead?
If you are someone sitting on cash, you might be cautious about investing and who can blame you? Everything around the world looks unstable and putting money in cash might earn you 5% in US CD’s, 4% in € and potentially 6% in GBP. Even though these interest rates are trailing the real rise in the cost of goods and services, you can’t be blamed for looking for some certainty in an uncertain world.

A woman’s view on the world
It is for this reason that I invited Joy Callendar of Brewin Dolphin  (https://www.brewin.ie/our-people/joy-callender)  to come and speak at our events in Abruzzo and Marche on the 17th and 18th October, respectively.

I wanted to invite a female Investment Manager this time as women have a different perspective on investing than men.  Women are shown in numerous studies to be less aggressive and less impetuous than men in their investment decision making.   This is good for me, because I will get time to hear what Joy has to say to you, but also I will get time to speak with her during the time travelling to each place and in the evenings.   I myself want to hear how someone, like Joy, is going to help us navigate these rocky waters.

It is without a doubt that Joy will advocate investment as a mean to inflation protect your money and tell us that cash is, long term, a bad way to protect our real long term spending power of our money (because it is). But what about the short to medium term: is it a good idea to invest in cash now and wait until markets start to recover?  Or can we invest in areas which are less volatile?  Can Brewin Dolphin keep money in high interest bearing funds/investments with minimal risk and time the right moment to get into the markets for us?  Can they just move in and out of areas at the right time to maximise returns?

There are so many questions that I want the answers to.

Brewin Dolphin and many other asset management firms want to get out and talk directly to people, rather than being solely based online, as they see the value in talking to people directly.  They have a budget for working with companies like us who can provide an audience for them.  They have services for residents in Italy and also are SEC licensed for services to US persons living in Italy.  (Of course they love a few days out of the office in rural Italy as well) .

I am planning more events around Italy in the spring of 2024 (some with a different theme) and would welcome any recommendations if you think you might know a group of people who might want to listen to investment/tax planning experts for your life in Italy.   Don’t hesitate to let me know.

In the meantime, if you want some answers to any investment, currency exchange or tax planning questions then please register to come along to the events below.  Oct 17th in Abruzzo and Oct 18th Marche.

These events will NOT be a lecture or usual seminar,but, instead, a PANEL style approach.

The panel of experts will be open to questions and answers from any member/s of the audience and be available to listen to your concerns, worries and comments and hopefully provide some concrete and helpful information. 

I am keen to put these experts on the spot and get the answers we want and to really make them work for their money, and I need your help to do that!!

Living in Italy always feels like a great privilege for me. I never expected that a ‘lad’ from Yorkshire would be having the opportunity to live the life I now do. Of course, it comes with it’s issues and there are many people who, every year, also make the decision to want to come and live in ‘Il bel paese‘.

However, as I have found out this year, there are those who also get refused this opportunity when they have applied for ‘residenza elettiva’. (elective residence in which you demonstrate to the Italian ‘Consolato Generale d’Italia’, that you have the financial resources, now and in the future, to be able to live your life in Italy without becoming a burden on the Italian state). There are certain criteria which you must meet, such as minimum income levels and financial independence.

Since Brexit, of course, many UK citizens who previously only had to trot off to their local comune and register as residents in Italy, under their EU citizen rights, are now subject to much stricter assessment of their financial affiars before a visa will be granted to enter the country and life begin in Italy.

Over the years I have met many people (US citizens mainly) who have been through the elective residence process and managed to get the necessary visa to come and live in Italy. I also learned that many managed to do so without meeting the strictest financial requirements. Instead with some help and understanding of the types of accounts they held in the US they were able to assist the consulate in assessing their application, at which point the elective residency was granted.

The people I have met this year (all Brits) who have been refused the elective residency visa were refused due to failure to strictly adhere to the rules. (Strict adherence to rules not being something that Italians are famous for).

This is quite sad to see because, firstly it could be said that the British citizen might be treated unfairly due to Brexit. There is no evidence to suggest this. It is merely a hunch, but one which is shared with a few other professionals with whom I have been in touch about this. Secondly, there are certainly the rules, but interpretation is everything and as you will see from reply from the Consolato below, certain assumptions have been made by the assessor regarding this specific application which could be argued to be true and fair, but would still not affect this persons ability to live comfortably in Italy without being a burden on the state. (I can attest to this as I conducted an initial financial planning exercise with them) It would seem the absolute letter of the law is being applied here when in fact merely the extracted statement below from the legislation itself gives a significant amount of discretion to the assessor.

‘Il visto per residenza elettiva potrà essere esteso anche al coniuge convivente, ai figli minori o maggiorenni se conviventi e a carico e ai propri genitori, qualora le condizioni finanziarie suddette siano sufficienti a garantire il mantenimento di tutti i soggetti interessati.’

The point to this E-zine is to say that this application was likely refused because the application was not prepared with the help of an Italian professional (lawyer and commercialista) who could a) interpret the foreign held accounts for the assessor/s and explain how they function and b) provide a signed and certified overview that would be seen by the Italian authorities as more credible than merely statements from the applicant themselves.

I hope that if you, or someone you know is going through or about to go through the elective residence process then you can pass this E-zine and message to them. Take professional advice (lawyer and /or a commercialista) before submitting the application. Once granted then financial planning is also critical.

The applicant mentioned in the letter text below is being contested directly with the Consolato Generale d’Italia, now with legal help, but this could take up to 2 years. It might have been avoided ( possibly not) if professional help had been sought at the start.

Please feel free to pass the E-zine onto anyone you may know who this affect or of whom it might be interest to. The more we spread the word the less likely mishaps and refusals will occur in the future.

If you would like to discuss this or any other content I have posted online, or merely to discuss your financial situation for life in Italy, then please do not hesitate to get in touch:
Tel: +393336492356 or gareth.horsfall@spectrum-ifa.com
I would be happy to try and help where I can.