Viewing posts categorised under: Italy

Have you made your ‘Folder’ ?

By Gareth Horsfall
This article is published on: 6th November 2022

06.11.22

I prefer to start an article on a positive note but unfortunately have to start with a sad event that happened recently in our lives. My wife’s grandmother died on the 8th October at the ripe old age of 94. She was very ill in the end and as it has been said many a time for people in her condition, that it was a blessing in the end. However, it is obviously a sad time for the family. I will remember her fondly. I knew her for 18 years and she was a very Southern Italian ‘Mamma’ type. Always keen for you to take more food from the table (resulting in my first few years in Italy coinciding with a 5 kg weight gain – I can’t blame it on her – my ‘golosità for good food was more to blame!). She was also a great support for my wife and I when my son was born and came to live with us for a period to help out in the house and provide much needed help at a tough time for all new parents. I also had a few run-in’s with her, but nothing serious. All in the name of a good healthy relationship. As I said, she will be sorely missed.

But as always, when a family member dies we are left with a number of bureaucratic and administrative hurdles which need to be dealt with. In Nonna’s case, there are various bank accounts, US social security and ‘succession’ issues which now have to be worked through. Hopefully it won’t be too complicated as Nonna had very little left in her name when she died.

This is not always the case and in fact my experience is that the deceased tend to leave quite a lot more bureaucratic matters than perhaps they would have wanted to, and certainly than the remaining family members would have wished for. But, we can make some preparations, in life, for the ‘inevitable’ and leave the best parting ‘gift’ possible for the remaining family members.

The following article is one which I wrote first back in April 2018 (https://spectrum-ifa.com/preparing-the-folder/) and since then I have shared it again on a few occasions. It seems appropriate to share it again with you now, especially since we are 4 years on since that date, we have all lived through Covid and faced with some interesting times ahead, so it would seem. (I have also made some updates to the original article to take account of changing technological developments). I hope you find it useful.

This type of article is never an easy one to write. Ensuring that your papers are in order in the event of your sudden death is incredibly important when living in another country. It will provide you with peace of mind that your loved ones will not have too much difficulty in administering your estate and your family will be eternally thankful that you did it for them.

The big problem is that as ‘stranieri’ we often have documents spread across multiple locations. The office, a house in another country, with family members and in that old box that no-one dares look in – papers that look like they came from the Victorian age in alot of cases. But whose job will it be to track all those down?

The purpose of this article is to outline a proven way of organizing ‘THE’ folder to minimise problems in the event of your death.

So what is ‘THE’ folder?
It is a single file (digital or physical – preferably both) where you keep all of your important personal and financial information together. It allows easy access to these documents in the event that you’re no longer around to help. It is really important to have it in place especially where one family member takes the lead with the family finances (typically one member of the household tends to dominate over money matters, but with the advent of shared technologies it is becoming more common to find that 2 or more family members are involved in the household finances). This includes paying bills, managing accounts and storing documents.

Is it worth the effort?
Yes, yes yes and yes. A time of loss can be stressful enough without having to try and piece together the deceased’s financial affairs. This can be a really difficult time. Don’t underestimate the kind of favour you will be doing to the executors of your estate if you have one place with all your financial and legal documents in an easy to understand format. You may not be around to hear their appreciation, but I can tell you, from experience, it will be eternal.

However, preparing ‘THE’ folder is much more than avoiding stress; if you leave behind an administrative nightmare you could delay access to inheritors’ access to funds and potentially cost a small fortune in legal fees.

According to an Independent financial adviser website in the UK (unbiased.co.uk – what is the probate process) the average time for probate to get settled is between 9 months and a year. In the USA the average time is also about a year. I also spoke to someone recently who confirmed that in their case it took over 1 year to deal with their parents’ estate.

So which is best…..physical or digital?
This comes down to personal preference, but I would always recommend both. Whether you choose to have a digital folder with all these documents in or not, you should at the very least have your documents scanned in case of fire or theft, and quite often companies will now accept scanned copies of documents instead of hard copies, if they can be certified or electronically signed.

With a digital file you can give access to a trusted individual who can access it in the event of your death. (Remember they will also get access during your life, so ensure they are a ‘trusted’ individual) A google file, for example, can be updated over time and which you and a family member have shared access to. This file can then be stored on your main computer, in the cloud or on an external hard drive. You can use a physical folder to keep all the same information together.

For what it’s worth, I decided to do both when building mine because my wife prefers paper and so is happier with hard copies of everything. I prefer digital. I have also shared the digital folder with some trusted family members.

So what should go in ‘THE’ folder?

Birth, marriage and divorce

Personal birth certificate
Marriage licence
Divorce papers
Birth certificate / adoption papers for minor children

Life insurance and retirement

Life insurance policy documents, including beneficiary nomination forms.
Details of any employer death in service benefits
Personal pension documents (including any beneficiary nomination forms)
Occupational / Final Salary pension details
Annuity documents
Details of any entitlements to state pensions

Bank accounts

List of bank account numbers with account numbers, login details and passwords
Details of any credit cards
Details of any safety deposit boxes

(see my comments on passwords below)

Assets

Property, land and cemetery deeds
Timeshare ownership
Proof of loans made
Vehicle ownership documents
Stock certificates, brokerage accounts, investment platform details and online investment account details
Details of holding of premium bonds, government bonds and investment bonds
Partnership and corporate operating/ownership agreements ( incl offshore companies)

The issue of which documents to throw away and which to keep is a common one. I always suggesting keeping everything if you are unsure
and then once a year with your financial adviser or legal professional have a clear out and keep the file tidy.

If you would like help from me then I can always be contacted on gareth.horsfall@spectrum-ifa.com

Liabilities

Mortgage details
Proof of debts owned

Details of gifts

Dates and amounts / values (potentially helpful when calculating inheritance tax liabilities

(A word of warning here! If your estate is likely to be subject to Italian succession law on your death. [This might mean that you have lived in Italy for 10 yrs + before your death, as an example], then any gifts which have not been fully notarised may still make part of your overall estate and be subject to the provisions of forced Italian succession law. i.e the donee may have to give the money back and it be distributed between the rightful heirs according to Italian law, ‘should’ the beneficiaries request the funds.

Notarising gifts would normally need to be done where the benefits outweigh the costs of the action itself.

(Bear in mind that you will need to pay the notary costs of approx 5% on the value of the gift, plus any taxes and one off fees for the gift)

Income sources

Making a list of all your sources of income, especially the ones which your family may not know about

Employer details

A copy of your most recent tax return or accounts

Monthly expenses (so they can be continued after death or accounts closed)

Utilities
Insurance
Rent / mortgage
Loans
Subscriptions / membership details

Email and social media account details

Essentials

Wills / Testaments + details of the legal firm that helped create it, if relevant
Instruction letter
Trust documents
Burial / Cremation wishes
A copy of a living will, should you have ‘end of life’ instructions that you want medical professionals to be aware of should you be unable to communicate these due to severe illness or disability

Contact details

List of names and contacts numbers for: financial adviser, doctor, lawyer/solicitor, accountant, insurance broker etc

How often should ‘THE’ folder be reviewed?
Firstly, it is sensible to note the date that it was last reviewed so that anyone using it has an idea of how up-to-date the details are.

Going forward, reviewing the file on an annual basis should be sufficient.

Online passwords
The issue of passwords has become infinitely more complicated in recent years because everything we access these days requires a password and it would be a full time job to document these and then keep them updated every time that one needed changing. There are now various Password Manager applications that you can buy to securely hold all your passwords. You can find some of the best HERE. However, if you are reluctant to use technology, which let’s face it could be hacked, then you are left needing to log all those passwords the old way…..writing them down!

And finally…
Be sure to tell someone about it. There is little point going to the effort of creating such a folder if know one knows of its existence or where to find it.

If you need help with putting your folder together or are unsure where to start then you can contact me for help on
gareth.horsfall@spectrum-ifa.com
or on my cell at +39 333 649 2356

Living in Italy

By Spectrum IFA
This article is published on: 24th September 2022

24.09.22

Italy’s parliamentary election 2022

I thought I would start this newsletter with a story of a recent trip to the market in Rome. As you will know, if you read this E-zine regularly, I go to the Mercato Trionfale for the weekly food shop. I like the experience, colours, sounds and chats in the market. I find that you also get a good idea of what is on people’s minds and how people are thinking in any moment. Obviously, the talk of the moment is not the Queen’s death (you may or may not be surprised to hear this) but of the upcoming elections in Italy. Both events are significant for women. Obviously, the Queen’s funeral is important because she seemed to be the glue that held the royal family and the Commonwealth together and we shall see how King Charles III gets on with that responsibility. Also, an equally important event is likely to be the election of Giorgia Meloni as first female prime minister of Italy.

Giorgia Meloni, for those of you in the know, is the leader of the Fratelli d’Italia party and is considered right wing. She is leading the polls with about 25% of the vote. Closely followed by the Partito Democratico (leftwing) with approx 21% of the vote. However, as is always the case in Italy, the parties need to form a coalition with smaller parties to gain a voting majority. Fratelli d’Italia have already announced their right-wing coalition with both la Lega (Salvini) and Forza Italia (Berlusconi). Together it is expected that they will garner about approx 45% of the vote. That is essentially a landslide in Italian politics and it is almost certain at this point that the ‘centrodestra’ coalition will be taking power shortly after the vote on 25th September.

The big worry for many is that Giorgia Meloni and Fratelli d’Italia have their roots planted in a fascist past and the feeling is that their policies will start to unravel years of democratic advancement in the name of equal rights and protection for women (which in Italy are still lacking in some many areas), gay rights, abortion rights etc. It was with all this in mind that I decided to follow Giorgia Meloni and Matteo Salvini on facebook this summer. To be honest, what I read wasn’t significantly alarming and to be fair to Giorgia Meloni she has dealt with all criticisms head on and opening encouraged discussion with her opposition, rather than just slurring them for being different. One particular instance was where someone got onto a stage when she was holding a rally and started a protest against her views on gay rights. She kindly invited the person to take the stage with her and explain their position so she could defend her own. Now, don’t get me wrong, I am no fan of Giorgia Meloni or any other right wing party in Italy but I would like to see more of this type of open discussion of differences of opinion and critical thinking rather than one side just spewing venom at the other because they have opposing views. Anyway, for someone who is a first-time voter in Italy (I gained citizenship in 2019 and so this is my first opportunity to vote in Italy) it has been an interesting journey so far. However, one other thing that piqued my interest, and I thought I would share with you here, is the centrodestra proposals to introduce a flat tax.

But, before I go into that, I will take you back to Mercato Trionfale for a moment. I wanted to tell you about the fact that I buy my eggs from the same stall, where oddly enough, he ONLY sells eggs! For as long as I have been going there (6 years) the eggs have been 35c for a ‘bio’ egg. After I arrived back from the summer break he apologised and explained that he needed to raise his prices. Now they are 40c a ‘bio’ egg. My initial reaction was whoooahh, an almost 15% increase in the price. But then I started to reflect on this whole inflation debate we have at the moment.

Quick thoughts on inflation
Obviously, prices’ rises are having a pretty big impact on our lives right now, and I don’t know about you, but I am anxiously awaiting my winter fuel bills this year. That aside, I was thinking that in the 6 years I have been buying eggs, this vendor has not increased his prices, not one cent.

In the financial planning world when I am looking at clients’ long term planning we always use a general rule of thumb of 3% inflation each year. Where do we get this figure from? Long term studies of inflation! Economists have looked at inflation over very long periods of time and established that bouts of inflation arrive in short periods, followed by periods of stable prices. If we think about the egg vendor and that he hasn’t increased his prices in 6 years, if he had done so using the 3% rule, then the price of his eggs should be more like 18% higher today than they were 6 years ago. This puts his 15% into context. Maybe we are not all that far off where we should be anyway. It’s just that when it arrives as a tsunami rather than a serious of small waves it tends to hurt a lot more.

My point is that prices’ rises are normal, and we have lived through an extended period of stability and low prices. With the significant debt creation events of the last 15 years (financial crisis 2008/2009 and more recently Covid), it is to be expected that inflation would return at least for a period of time, and even maybe rebalance to its long-term historic norm.

Flat Tax
OK, enough about inflation because I am sure that you are about as bored of hearing about it as I am. Important as it is, it doesn’t need ramming down our throats at every turn.

The talk of a flat tax rate of 15% has mainly been lauded by La Lega and Matteo Salvini; whilst the other parties have similar talk of flat taxes, there are some differences in the parties’ proposals. Let’s have a quick look at them here:

LA LEGA: A simple flat tax of 15% on all incomes. It has been calculated that this would blow a hole of approximately €50 billion euros in Italy’s public finances. Also, it is a highly unfair way of taxing people. Someone earning millions could get a 15% tax rate, in addition to someone earning €15000 a year. Clearly unequitable and favourable to the wealthier elements of society, not something I ever see coming to fruition.

FORZA ITALIA: A simple flat tax of 23% (equal to the lowest current band of income tax rates). It’s pretty much the same story as above, but instead would only blow a hole of €30 billion in the public purse!!

FRATELLI D’ITALIA: Their proposals, in my opinion, seem more do-able. Firstly, there is talk of introducing a ‘no-tax area’, which in other words would be a tax allowance on the first €120000 on income, extended to everyone. This would essentially model the UK style of taxation and is a model that I prefer. It favours the poorest in society and is a fair approach, in my opinion. However, that would come with a potential cleaning of the current system of detractions and deductions for medical expenses, vet’s bills etc. Who knows if the current system of bonuses for various home improvements will also be stripped back?

In addition, the idea is to a) (try not to laugh at this please) introduce an incremental flat tax system which will start at 15% (I have no idea what the difference is between progressive tax rates and incremental flat tax rates, but it sounds good) and then over time work towards a suitable flat tax rate, and b) tax income from properties and other financial assets at that flat tax rate of income tax .

Lastly, anyone who is currently working through a partita IVA ‘regime forfettario’ and is currently taxed at 15% up to income of €60000 pa, will have that ceiling raised to €100,000 pa.

There’s more!
Things do not stop there! One other interesting development is that according to an estimate in an article by Il Sole24Ore, Italians and Italian resident individuals have approx. €100 billion in assets and cash hidden in security boxes, either in Italy or abroad. I am not sure exactly how they come to this estimate and it certainly seems a large figure. The ‘centrodestra’ also sees this as another opportunity to try and bring these assets/cash home.

The proposal here is not a ‘condono’ (a kind of write off of any previous tax liabilities for a one-off tax payment, as it has been used frequently in the past), but to reduce the taxes on assets/cash by 50% for a fixed time period, to allow people to repatriate their funds and in addition apply a sanction of just 5% on the amount. This could be quite an interesting idea and for a number of foreigners living in Italy who have still not regularised their financial affairs, it could be an opportunity to do so rather than using the current system of fines and penalties that are significantly higher. The prevailing argument from the other side is that if someone is not ‘in regola’ with their financial affairs in Italy, then no financial benefit should be offered. However, rather than spending years of taxpayers’ money trying to find these hidden assets and cash, is it better to offer an opportunity to regularise them for a one-off payment? Who knows? The important thing is to get the money under the watchful eye of the Agenzia delle Entrate, no matter how you go about it, or at least goes the logic.

Let’s just start admitting the reality
I think it’s OK to start talking about the fact that the ‘centrodestra’ coalition are going to be governing Italy very shortly, so we can watch and wait to see what happens. Firstly, we can wait and see whether the International financial markets will approve of this government, (I suspect they will not blink an eye in the face of bigger issues around the world). Secondly, whether the EU will start their hardball tactics with a coalition that are inherently EU sceptic and teetering on the edge of advocating an Italexit (even if that is unlikely due to the constitutional requirements of just arriving at a Referendum).

Whatever happens next, there are going to be changes afoot in Italy, and you never know, some might even be for the better. Only time will tell.

Responsible investing and ESG

By Andrew Lawford
This article is published on: 12th July 2022

12.07.22

Why things really aren’t that bad

It might seem rather strange for me to be writing an article with this title given everything that is currently going on in the world. In truth, however, I have been vaguely working on this for some months, and whilst in no way am I trying to downplay the difficult situation in Eastern Europe, I have no particular insights to share on the topic (apart from wishing that calmer heads will soon prevail), and I am quite sure everyone is receiving enough information about it already.

We have a natural tendency to focus on bad news for the simple reason that no newspaper ever appeared with the title: “Everything’s going well – not so much to report today”. This is not strictly true – the website Future Crunch offers a periodic newsletter dedicated to good news. It is the perfect complement to the diet of negativity that we receive from traditional news outlets.

I had assumed that I was fairly knowledgeable about the world around me and had an objective view of humanity’s current state of affairs. I was thoroughly disabused of this notion by Factfulness by Hans Rosling, one of the most eye-opening books I have ever read and which I thoroughly recommend to everyone.

However, if you have little time or inclination for reading, you can take the Gap Minder test here, which is based on the work done by Rosling. It won’t take long and I suggest you do it before reading the rest of this article.

So what is my point? We tend not to realise that improvements are so gradual as to be imperceptible to us, and this, combined with the fact that we don’t often receive information that challenges our negative stereotypes, leads to a bias towards negativity. It is interesting how much bad news is anecdotal and how much good news is statistical – but of course you wouldn’t want it to be the other way around!

Is a negative bias worthwhile as we consider challenges such as climate change? I don’t know, but I would say this: panic is not a strategy, and going from bad to slightly better (whilst creating incentives to improve continually) is something we should celebrate. This reflection is also relevant to the field of investments: almost all investment houses now make ESG (Environment, Social & Governance) considerations part of their “process”. Are these processes perfect? Certainly not, but it is a start, and some of the leaders are blazing a trail that others are bound to follow. Again, from bad to not-so-bad is still something to celebrate.

Download our guide to responsible investing and ESG

In Italy, it is easy to complain about the bureaucracy, but I have to admit that some things are getting better. For anyone doubting this, consider the advent of SPID (Sistema Pubblico di Identità Digitale), which acts basically as a digital gateway to any interaction with the public administration. It is a Substantial Headache to get set-up (capital letters intended), but once you have it working, it is very useful. Also, consider PEC (Posta Elettronica Certificata) – a sort of “registered e-mail”. For anyone who has spent time and money sending raccomandate from their local post office – and let’s face it, you haven’t really lived in Italy until you’ve had to send a raccomandata, you really should invest in a PEC. For 10 euros or so a year you can send as many digital raccomandate as you like from the comfort of your own home, and they have the same legal validity as their paper counterparts. All companies and state entities have to have a PEC, so they are a very effective way of making official communications.

Of course, this technological advancement has also been a way for the Agenzia to concentrate its tax-collecting efforts. They are no longer in the dark about your assets abroad, thanks to the mechanisms of CRS (Common Reporting Standards). Most people have now come to terms with this and are making the necessary declarations. If you or someone you know have been sitting on the fence – talk to me about the best way of sorting out your situation – the key being that you should do this before you receive any requests for clarification.

There are also a number of tax incentives that have been launched in recent years, favouring pensioners, digital nomads and even very wealthy people. I took the opportunity recently to speak to tax practitioner Judith Ruddock from Studio Del Gaizo Picchioni about a number of them (as well as other matters of interest for Italian residents) and have published a podcast which you can find on Apple Podcasts, Spotify, Google Podcasts or Stitcher.

Please also check out my other podcasts, available on
Spotify, Google Podcasts, Apple Podcasts and Stitcher.

Italian financial update

By Gareth Horsfall
This article is published on: 1st February 2022

01.02.22

Well, well, what a start to the year – it feels like a repeat of winter 2021. As I write I am actually down with Covid again. I first got it in March 2020, right at the start of the pandemic and I have it again now. It is nothing more than a dry throat, cold like symptoms and feeling quite tired, but still it’s a bit annoying to have caught it again, although I think that given the transmissibility of Omicron it was a question of ‘when’ rather than ‘if’ I would get it. Anyway, I am now on day six and feel much better. However, I have just learned that since I only tested positive on day three of my illness, I now have to do another seven days quarantine before I will get the green pass……aaahhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhh.

Anyway, I wasn’t writing to update you on my health, but actually to update you on the health of the financial markets at the moment and provide you with some tax updates.

For anyone who has been brave enough to look at their investment portfolio account balance in the last few weeks, you will have noticed that it has probably taken a turn for the worse. I am not talking crash-like turn for the worse, (remember March/April 2020!) but merely correction territory.

In short, equity markets have started to pull back from their highs in 2020 and 2021. I can’t say for sure when the correction will end, but from the information that I have been reading from various asset managers in the last few days there is confidence that markets will rebound in the first half of this year.

It is important to remember that corrections of this magnitude happen in more years than they don’t and rarely prevent equity markets from delivering positive returns during the year!

So what is going on?
Covid related supply problems for goods and services are the biggest concern right now, which is feeding into consumer prices: inflation (microchips, freight and energy are the biggest contributors). I have written about this in a previous E-zine and so won’t delve into too much detail here, but inflation is likely to play a big part in discussions around financial markets in the first half of this year, even though most economic indicators are predicting a quick return to form for the second half of the year.

One of the most important points is that with rising inflation, the central banks (mainly the Fed in the USA) do not start tightening monetary policy too quickly or harshly. There is no indication that they will take extreme measures in this regard and so companies will still have access to capital and will be able to invest. As long as company profits continue to grow and inflation does not start to spiral out of control then there should be a rebound, probably in the first half of the year.

Of course various themes will also continue to play out during the course of the year, namely: cloud computing, green buildings and construction and digital health and wellbeing. This provides us with well needed diversification in our portfolios. Big tech and smaller disrupting companies across many more sectors will play a big part in returns.

Inflation will likely cause some collateral damage along the way. Depending on how fast and high it moves, the biggest sector to be affected could be the residential housing market. It might cause a cooling down of the price rises we have seen in recent years, or may have a more long term and severe impact. A lot of that depends on whether this bout of inflation is ‘temporary’, and caused merely by Covid issues, or is ‘structural’ which means that it will be more bedded in for a long time.

Most of the information I am getting from money managers is that it will be temporary and that things will return to normal much quicker than we expect (think a couple of years!), but I am not so sure. I think it may run a little longer. But regardless of who is right, we need to protect the money that we have. There are plenty of excellent investment opportunities out there whether we are living in an inflationary or non-inflationary environment. The money managers we work with are on top of these and we can rely on them to seek out those returns where possible.

If you are a client then all you need to know is that we have been planning for inflationary rises for some time and so despite the current correction in investment markets, you really have nothing to worry about.  

Tax matters – ‘residenza‘
During my Covid days sat at home in front of the computer, I receive a lot of pop-ups from various fiscal websites and from Sole24Ore (the Italian version of the Financial Times).

One that caught my eye the other day was an amendment to decreto Dl 146/2021, which clarified the fiscal treatment of the ‘family nucleus’ (nucleo familiare) who have established their residence (residenza) in two separate comuni.

The crux of this is that the courts ruled that two family members ‘cannot’ establish their residenze and claim 2 x prima case in the same nor different comuni.

This would seem to be a simple case of trying to avoid paying IMU on second (or third etc) properties. But the new law decreed that it would no longer be possible where members of the same family are living under the same roof. Apparently the law had not been clear enough…. until now.

I am mentioning this change in the law because it also has implications for people who may be registered in Italy as resident but may have a spouse who is claiming residency in another country. In my experience, the main reason for this is to try to save tax and whilst there may be some logic to it, where one member of the couple is working for a foreign company and maybe travelling to and from Italy rather than being permanently based here, it does still raise the question of how the fiscal authorities view the idea of the ‘nucleo familiare’ and what impact this has on our tax liabilities and where they lie. If spouses are registered as living in different places then there is some legal implication of separation and to benefit from any tax breaks, separation must be legally registered somewhere! If not, then the tax authorities will generally consider you as one family living under the same roof, hence both resident in Italy.

It raises some interesting questions, but might be a useful discussion point with your commercialista if you think you might fall into that net.

Contact me with your questions about 'residenza'

Fiscal treatment of Bitcoin
More and more people I meet are starting to dabble with the idea of buying some Bitcoin to add to their portfolio. I have been an investor for a few years, but my experience is not particularly a great one. It tends to go through phases of stratospheric prices rises and then complete collapse. As things currently stand I don’t see much value in the application of the buy and hold investment philosophy in relation to Bitcoin. It would appear to be something for the active trader, and then we are getting into speculative territory!

Anyway, the point of this article is to help you understand the fiscal treatment of Bitcoin in Italy, and to remind you that you will need to declare it in your tax return.

To understand the correct application for tax purposes, we need to remember that it is actually a currency and can be traded in much the same way as any other currency. In fact, since it is a registered currency (through the blockchain) then the Italian tax authorities treat it like any other bank account you might have. Hence, the tax treatment falls into that very simple law of €34.20 ‘bollo’ on any account that has an average annual balance of more than €5,000 in any tax year (less than €5,000, it does not need to be declared).

However, living in Italy would not be the same without some complications. This brings us back to the article that I wrote back in April 2021 on the same issue. Where you hold the value of Bitcoin (or any other currency) of more than €51,645.69 for a period of more than 7 days, any transfers of that currency into another from the 8th day would be considered speculative and capital gains tax would have to be calculated.

I wrote a long article on this subject, which you can read about here: spectrum-ifa.com/do-you-have-non-euro-based-cash-deposits/

For other questions, please contact me via the form below:

How do I deal with inflation?

By Andrew Lawford
This article is published on: 18th January 2022

18.01.22

“The only function of economic forecasting is to make astrology respectable”
JK Galbraith

This opening quotation might seem somewhat defeatist. Surely economic forecasting, given the importance of the economy’s performance on our investments, must be necessary. The problem is that in order to have a useful piece of information, that information must be both important and knowable. There is no doubting that the economy’s future performance is important information for us investors, but to what extent can we know it?

At the risk of using excessive quotations, there is a good story from Kenneth Arrow, who subsequently won a Nobel Prize in Economics in 1972, about his time analysing long-range weather forecasts in World War II. He came to the conclusion that there was no difference between the forecasts and pure chance, and communicated this finding to his superiors. The following is the memorable reply that he received: “The Commanding General is well aware that the forecasts are no good. However, he needs them for planning purposes.”

Which leads me on to inflation, without a doubt the economic piatto del giorno being served up in all current market analyses. Following a 2020 – 2021 in which it was decided, essentially on a global basis, to close down pretty much every non-essential activity and subsequently to apply massive amounts of government stimulus in the hopes of starting things back up again, we are finding a large number of anomalous economic effects. I imagine many people will have their own stories to tell, but my particular one is this: my son got to the point where he needed a new bicycle, having outgrown his previous one. A couple of years ago, this would have been as easy as going down to the local bike shop, choosing the model and swiping my credit card. This time, however, the bike shop told me that they hadn’t had a delivery of new bikes in two months due to logistics problems. They were, however, very happy to take my son’s old bike, a buyer for which was found in a matter of hours.

There have been plenty of variations on this theme in recent times, and it would appear that the process of economic restarting, with its attendant logistics issues, has fed into the current levels of inflation that are being reported. However, it seems unwise to extrapolate one observable trend and conclude that there is some inevitability about inflation remaining at its current high levels. This is the essential problem with economics: modelling extremely complicated systems such as economies is all but impossible: there are simply too many factors to take into consideration and the interactions between them all are unclear.

Contact me now with your questions

Of course, if we are investing, then it does seem like we have to take a view on macroeconomics and position ourselves accordingly. Financial newspapers exist to provide daily analysis of current trends and allow various experts to opine about their future path. There is little downside for those prepared to make forecasts: if they happen to be right about some particularly important phenomenon, they can trumpet for all time how they called the event. Their many incorrect calls, on the other hand, will be studiously forgotten about. If we extend this reasoning to well-known hedge fund managers, those who appear to have the Midas touch, we find ourselves subject to what is known as “survivorship bias”: for the few investors with truly long-term records, there are many others who have fallen by the wayside and whose investing results have been lost in the mists of time. This gives us the impression that there are gurus out there who know exactly what is going on in the economy, but it doesn’t correspond to the hard reality of investment: most truly successful investors don’t have a strong view on macroeconomic trends, because they understand that they are unknowable and that any market timing decisions based on forecasts are fraught with difficulty.

So if we can’t divine what is going to happen in the economy, can we know anything that is of use for protecting and growing our investments over the long-term? It turns out that the most important thing for investors is the mere fact of remaining invested. JPMorgan has shown that over the period from 1999 – 2018, the average return on the S&P500 index, the most important aggregate of US shares, was 5.6% p.a. However, your return would have been a paltry 2% p.a. if you had missed the 10 best days of that period, and you wouldn’t have made any money at all if you had missed the 20 best days. Keep in mind that those returns were produced notwithstanding several gut-wrenching market moves associated with the tech bubble bursting in 2000 (which led to three years of negative returns) and the financial crisis of 2008. If we zoom out even further, the annual returns for the US stock market in the post-war period have been positive in about 70% of the years. Those are odds that you want to take.

I should add as a proviso to the above that you need to have invested intelligently, and by that I mean choosing quality asset managers that are worthy, long-term stewards of your capital and who put your interests as clients before their own. It should, of course, be a given that financial professionals put their clients’ interests first, but the various scandals over the years have shown that one can never be complacent in this regard. My job as financial adviser is to help you to choose quality investments and to make sure that you understand the basic tenets of investment and stay with it for the long-term. If you’d like to discuss your own situation further, please don’t hesitate to get in touch for a free initial consultation.

With all of the above, I don’t mean to diminish the importance of inflation, but we need to keep it in its proper context: this isn’t a problem that has suddenly come out of the woodwork! It has been there all along, working quietly in the background to chisel away at your wealth. The graph below shows the effect of different levels of inflation over a number of time periods.

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It should be clear that even modest levels of inflation can prove very pernicious – taking the example of a 2% inflation rate over a 20 year period, you will find that prices have risen almost 50%, and so if your capacity for generating income hasn’t risen commensurately, you will find yourself dedicating ever more of your resources to the bare necessities, leaving you less money available for discretionary expenditure. We are told that we have lived through a couple of decades of very low inflation, but I distinctly remember the prices of milk, fuel and train travel (between where I live and Milan) when I arrived in Italy in 2004, and the inflation rate based on these basic goods and services is in the region of 2 – 3% p.a. over the period 2004 – present day (the official value is about 1.3% p.a.). There is no need to get into a debate about how inflation is calculated – I fully recognise that some goods (like consumer electronics) have improved and become cheaper over this period, but I buy fuel for my car far more frequently than I buy a smartphone.

The effects of inflation on your economic well being often become clear only after a long period of time, so the best idea is to work out a plan right from the start to make sure that your expenses are going to be sustainable in the long-term. Doing this can be quite difficult however, as you need to factor in variable investment returns, withdrawal rates and inflation in order to see how your plan is likely to play out. Investing for a positive real return (a real return is adjusted for the effects of inflation) over time relies on taking a long-term view and, as with choosing the right investments, my role as financial adviser is to help you understand all the variables and to find a sustainable path for the future. If you worry about inflation, then you are right to do so, but I can help you in finding ways to protect yourself from its worst effects.

Please also check out my latest podcast – dedicated to citizenship, visas and estate planning, available on Spotify, Google Podcasts, Apple Podcasts and Stitcher.

A Financial adviser in Italy

By Gareth Horsfall
This article is published on: 2nd January 2022

02.01.22

Being an adult in the financial services business

Immediately prior to joining The Spectrum IFA Group in 2010, I was in my 30th year and wanted to take a bold new direction in life. I was working for HSBC bank in Doncaster, Northern England, at the time, and thankfully the years there were good to me.

However, some things in life seem to change the way you think, permanently. My personal experience of this was during and after my international travels (backpacking ) in 1998/99, visiting S.E. Asia, Australasia and N. America. It was an experience that just wouldn’t leave me. After having grown up in England for the first 24 years of my life, where sunshine is a rare commodity, and then spending a year and a half in sunbaked, tropical and generally sunnier climes, on my return to England I set myself a goal: within 5 years I aimed to move abroad to a sunnier/warmer country.

During those 5 years after returning I had put my time to good use. I had retrained as a fully qualified UK financial adviser, worked on the front line of a bank call centre, worked as a sales agent for an insurance company and was a successful candidate for a financial planning manager role at HSBC bank.

But now, it was about 3 months before my self-imposed 5 year deadline and I still wasn’t anywhere near meeting my objective. Then, by pure luck, by word of mouth through some family connections (sounds very Italian!) I was approached by a local UK IFA firm (also in Doncaster) to be one of their advisers and to open up their first international office in Rome.

I can tell you that I didn’t need much convincing. It would be a commission only role, which was quite frightening as there would not be a fixed regular income. However, my urge to live somewhere warmer overcame everything and I jumped at the chance.

I had never been to Italy before, didn’t speak Italian and had no idea about the culture, quality or standard of life in the country. This was never more evident that in my first month of work in July 2004.

We were expected to dress to work, as we would in the UK, i.e. suit, shirt and tie. However, as anyone who has ever been to Rome in July will know, it is no place for a UK style heavy woollen suit, shirt and tie. In addition, I had to take public transport everywhere because I didn’t have the money to take taxis.

I still remember vividly the time when I was returning from an appointment with a 1km walk to the metro station. I was sweating so much that everyone was giving me a very wide berth. I assume that they just thought I was suffering from a deadly disease. This was my introduction to life in Italy. But I was also now experiencing the sun, beaches, mountains (I started skiing for the first time), countryside and not to forget the food! (I remember saying to my now wife when I first arrived in Italy that food was just fuel for me. That attitude soon changed when she served me my first mozzarella di bufala and introduced me to her family, who mainly originate from Southern Italy).

I lived the next 5 years in a kind of expat bubble, never making an attempt to learn the language and just focusing on my work with the same company, but at the same time becoming more disillusioned with what I saw as the future of the business and their ideas.

During those first 5 years I also split with my long term partner in the UK whom I owned a home with; never an easy thing to do. But, I also met my wife (Italian, but educated in the UK), got married in Ravello on the Amalfi coast and we tried to start a family.

Unfortunately, starting a family was not as easy as we would have liked. After a few years of trying we were told that the only route would be IVF and our hearts sank! It was a heart wrenching journey, but in the end we were lucky enough to be successful after only the second attempt (further attempts never brought more children our way) and we were blessed with a baby son.

However, as is often the case with IVF children, he was premature. Our son was born a month early, severely underweight and with serious health concerns. The next few months were some of the hardest of my life, not helped by the fact that my failure to learn the language was now coming back to haunt me. During a time when your child is at the most vulnerable point in their life, you would hope that as a parent you could communicate and understand the doctors. In my case I couldn’t and had to rely on family members to translate for me. This led to me swearing that I would never be in this situation again in Italy. The following 2 years were an eternal wall of worry, but thankfully he came through. We, my wife and I, were left with some collateral damage, but my son is now healthy and a great child. I am very proud of him.

I am not sure why, but during those 2 years, I also decided to jump ship to another company, and after 1 year with a firm which was destined to failure from the start, I ended up meeting Michael Lodhi, CEO of The Spectrum IFA Group, with a view to taking on a position in either Barcelona or Amsterdam, and travelling from Italy a few times a week.

The conversation (abbreviated here), over a meal and wine, went something like this :

ML> “Gareth, tell me about your work in Italy.”

G> “There is no infrastructure for foreigners living here, unlike France and Spain, no serious tax or financial planning service, people are looking for professionals but can’t find anyone. I think there is a business here but it will take a few years to build.”

ML> “Hmmmm…it seems like you know the market here in Italy. Why don’t you open, build and manage our first move into the Italian market?”

G> “Well that’s what I was really wanting – deal!”

And so that was my start with The Spectrum IFA Group. I now had an idea of what I wanted to build and how I wanted to do it and I had the support to do it the way I knew it should be done.

During that period, and much before, the English speaking community in Italy were mainly being contacted by cold call by firms that would trip in and out of the country to pick up a client here and there, but there was no permanent and serious presence. I had done cold calling myself in the past but I hated it as an approach to prospective clients. It is called COLD calling for a reason. So I decided to take a closer look at the stats behind it. I found (not surprisingly) that the success rate from cold calls to taking on a new client was about 1%, if you were good!

It wasn’t long after when someone challenged me about how I was going to build the business in Italy if I wasn’t going to cold call. I turned the question around and asked: if cold calling brings, let’s say, a 5% success rate and you focus on this as your main way to contact clients, what exactly do you do with the other 95% who refuse the call? I explained that this was where I would be focusing my energies, and I did.

I estimate it took me 2-3 years of holding conferences around Italy, meet-ups with anyone of interest, writing numerous articles for magazines and websites and continuing my own E-zine newsletter, doing drop in financial planning clinics, speaking with numerous commercialisti and lawyers and spending hours in the car covering 100,000s km. All the time making the commitment that unless I was doing a 2 or 3 day event then I would return home to my wife and son at the end of every day, no matter what time I got home.

I didn’t think much about it at the time, but when I look back, I realise just how much I achieved in a short space of time and boy oh boy I learned some lessons in the meantime. I often say to people who contact me with a view to moving to Italy, “you don’t need to worry about making loads of mistakes because I have made them all for you, and paid the price already. If you follow the necessary steps I have laid out, your chances of running into trouble with the tax authorities are very small indeed”. I paid dearly for not taking the right advice in my first years of incorporation in Italy, and not understanding clearly what professionals had told me.

But, after the personal and work struggles of those years, things started to get easier. My name was now being passed on to friends and family members, my online content was, and still is, being discovered and my commitment to staying away from cold calling and building a strong online presence started reaping rewards. I had finally built the foundations of the business that I had always wanted.

The following years are much like anyone else’s, I imagine, as we advance through our 30s and into our 40s. The aches after the gym visits take a little longer to go away and the now infrequent evenings out on the wine take days of detox to recover from. But the life lessons, places I have seen, people I have met, knowledge of my business and life experiences seem to, in a beautiful way, replace all those things that you can no longer do. It feels like there is a natural cycle of renewal and replacement taking place.

My life is now more Italian than I ever would have imagined. After years of making no effort to learn the language, the birth of my son and the experience with the doctors gave me the impetus to ‘get my finger out’ (as we say in Yorkshire) and learn it. Whilst I am far from fluent I can live a comfortable and enjoyable life in Italy now, and learning the language made a huge difference with building relationships and friendships.

And it goes without saying that I no longer consider ‘food as fuel’. After finding out that my wife is a terrible cook, I took on the role of cook in the house. I learnt from my Italian family and found out that I am not as bad as I had thought.

Finally, one more point is worthy of note here: the UK’s decision to leave the EU. This created a bit of an existential crisis for me. It brought into question where my heart now belonged. I had never intended to, nor ever would turn my back on the country of my birth, but the subsequent years of campaigning to protect UK citizens’ rights in Italy and the UK’s hard-line stance on exit convinced me to apply for Italian citizenship. It was awarded in 2019. I am glad I have it.

Every time I look at my passport I realise just how much I am now connected to this ‘Bel Paese’, my business and my clients who are as fortunate to also live this amazing life as I am.

Inflation in Italy

By Gareth Horsfall
This article is published on: 8th December 2021

08.12.21

I don’t think this E-zine can go by without writing about inflation and the impact that Covid has had on the rising cost of goods and services. I don’t know about you but I am starting to see prices rise in Rome, particularly around food. I was shocked to find pears in the supermarket at €5.49kg the other day. Also, when I travelled to the UK at the end of October car hire prices were through the roof, partly fuelled by Brexit I imagine, but crazily expensive. I was also talking to a friend who owns a company making the sun curtains that you see on balconies and terraces in Italian cities. She was telling me that their raw material prices had risen 30% in the last few months. Lastly, there is the impetus of all these housing bonuses at the moment which means that both tradespeople and building materials are in short supply, and when things are in short supply, prices only go one way!

In the US there has been a lot of rhetoric about a ‘transitionary inflation’ which will pass once the world’s supply chain gets back to normal after Covid, when goods and to some degree services as well will start to circulate as they did pre-pandemic. But, I think it is plain for all to see that this is now going to be a bit longer than we first suspected. Even if Omicron turns out to be a much weaker variant and have very little impact on our health, government intervention in trying to stem the infection rate could mean that further travel restrictions are on the cards.

This all has the effect of making it more difficult for raw materials to find their way to factories, production of goods themselves (nothing gets made when people are at home), distribution, administration, shipping etc. The list goes on.

When you bring everything together it means that supply side issues are likely to remain for some time and that has had an effect already.   I was talking to someone at Prudential International last week and they were telling me that their indicators were showing a 6% inflation rate in the UK and 4% in Europe. The general rate in the USA likely to be much higher, into double digits.

This has a serious effect on our savings and for any eagle eyed observer, you may have noticed that your government (Italy or otherwise), even faced with these inflation figures have not started to raise their central bank rates yet. Why?

The answer is very simple. Inflation erodes savings but it also erodes debt and since 2008, what have most governments around the world been creating copious amounts of? ….you got it, debt! So, if they can hold interest rates low for as long as possible, whilst getting a 6% annualised reduction in their debt, then that is good for them. But it is horrendous for savers and people on fixed incomes!  

I always give the example of a table that is worth €1000 today. At a 6% annual inflation rate it will cost €1060 next year. If my savings have been squandering away in a bank account at 0.5% interest, then my €1000 is now worth only €1005. My money is no longer worth what it was last year and my ability to purchase the same amount of goods and services has diminished considerably. Imagine if that were not a table but a prescription drug?

Inflation is a serious issue for many people and there is a simple way to calculate the compounding effect of this over time: The Rule of 72. Simply divide 72 by the rate of inflation and you will find out how many years it will take to halve the value of your savings. At 6%, your €1000 will be worth €500 in just 12 years. Frightening given how quickly inflation can take off and difficult it can be to bring it under control.

Don’t get caught out! Where you can, invest for the long term. I understand it comes with risks, but the long term risk of not having enough money to pay for a retirement, schooling for children, or even healthcare expenses is significantly more problematic.

And on that happy note, I am going to leave you for this E-zine. I am sure that you are all now starting to think about your 2022 tax return and how you can use those €s worth of tax savings! But, before you do that, run out and order your turkey before the prices rise too high.

As always, if you would like to speak to me about any of these issues you can contact me on gareth.horsfall@spectrum-ifa.com or message/phone me on my cell +39 3336492356.

Income Tax Brackets Italy 2022

By Gareth Horsfall
This article is published on: 7th December 2021

07.12.21

Well, it’s the moment that we have all been waiting for. The announcement was made on the 25th November. The new income tax bracket bands (IRPEF) from 2022. Unfortunately, I have to report that they really are not going to make a big difference to most people, but some savings might be available.

I know I mentioned in one of my previous E-zines that there was also talk of a possible allowance being introduced as well, but this area is still being debated. The talk is that an allowance will not be forthcoming for everyone, but that they will merely extend or enlarge the current no-tax area. This is not the same as an allowance which everyone would receive regardless of their income; instead it is offered to those with lower incomes, in different classifications. At present the no-tax areas apply as follows:

For employed workers: €8145pa
Pensioners: €8130pa (this increases for the over 75s to €9000pa)
Self employed workers: €4800pa

** You would not be taxed at all if you were earning / receiving income equating to those figures exactly. However, the more that your total income increases over these figures, the more of the no-tax area that you lose. Hence distinguishing this from a tax allowance. It is more like a means-tested benefit ***

Remember that Italy also has its highly complex system of detractions and deductions which can help to reduce your overall tax bill further. This, with the changes made in the income tax rates, will also be under review, but I suspect it will still remain in some shape or form for the future. The complication here is always knowing what you are eligible to deduct and how. To keep on top of the current system of deductions and detractions, you almost need to make it a full time job, from tax deductions for installing a water filtration system in the house, to veterinary bills and expenses. Anyway, more on that as and when I know more myself.

For now, let’s concentrate on the fact that income tax rates have now been reviewed and subsequently will change for 2022.

Entrepreneurial progress?
I think that back in 2019, maybe earlier, I wrote an E-zine bemoaning the fact that Italy’s tax system was cutting off the opportunity for entrepreneurs and small business owners to go to the next level and start to create the next generation of SMEs (small to medium sized businesses), purely because of its taxation and ‘contributi’ system. My bug bear was that as soon as your income went over €28000 then Italy imposed a taxation of 38% on income earned, until total income exceeded €55000, when the tax rate increased again. This, in addition to the high level of social security contributions, was the equivalent of asking someone to run a marathon but chopping them off at the knees before they started, and as the marathon progressed (if they could even make it that far) then would start to chop more of the leg off as they progressed. Hence, why would you even start?

(I am exaggerating a little because for some years now there has been a tax regime for self employed people earning up to €65000pa where they can pay just 15% income tax per annum, but without the opportunity to offset any business expenses. Most small business people I know are on this regime, which is great, but what if you can, or want to, earn more than €65000pa and take your business to the next level?)

These were always the bigger questions. Well, thankfully, Sig. Draghi has used the cloak of Covid (or more likely the cloak of a serious amount of funding from the EU) to do something about this and has made changes to the income tax rates. However, let’s have a look at the current system of taxation before we look at the new.   IRPEF as things currently stand is charged as follows:

€0 – €15,000	23%
€15001 – €28000	27%
€28001 – €55000	38%
€55001 – €75000	41%
€75000+	43%

The biggest leap here being the move from 27% to 38% after €28000pa   In the shake up, we now go from 5 bands to 4 and the bands have been widened as follows:

€0 – €15000	remains at 23%
€15001 – €28000	will now go from 27% to 25%
€28000 – €55000	will fall from 38% to 35%

And the biggest change here is that from €55000 pa the rate will pass straight to 43%

What can be learnt from this?
I think the lesson from this change is very simple. One which I think fits into current world thinking. The individual earning more (in this case €55000pa) is now going to pay more tax and those on lower than €55000pa incomes, in Italy, are going to be incentivised to spend more with lower taxes. It’s not a stupid strategy in all honestly because people with less income will naturally spend the extra cash that is available to them. Those with higher incomes will normally siphon off surplus income into reserves (investments/pensions etc).
So, all in all Italy is doing what a lot of countries already do. And we are told that this is just ‘stage 1’ of the reformed income tax regime (essentially to get something over the line before the end of 2021), but more reforms are pending from 2022 onwards. As my classic phrase goes ‘I wait to be amazed!’.

  Summary
That all being said, for a lot of people it will mean some tax savings, especially those with income between €15000 and €55000. The full saving in these tax brackets will be €1070pa. Not to be sniffed at as the cost of utilities and food has increased substantially in the last year. For anyone else, you are not really going to see much change at all, and I suspect the system of detractions and deductions will continue for now to help anyone reduce their income tax liabilities even further. In Italy, it would seem, things happen piece meal and over a longish period of time. No one politician or political party really has the political clout to push such sweeping reforms as might be needed and get them put into place, even Mario Draghi. However, the ability to push through smaller reforms which make a big difference over time seems to be more the status quo. As usual, we bumble along and react to things as they happen and continue to enjoy the life that Italy affords us.

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Do I need a different Will as an expat living in Italy?

By Gareth Horsfall
This article is published on: 24th November 2021

24.11.21

Here I am again after a recent trip to the UK. I am pretty sure the whole affair of travelling internationally with a family during Covid restrictions has taken 10 years off my life. What a nightmare! The evening before we flew to the UK I spent 5 hours in front of the computer trying to work out which forms were needed, for when, and which Covid tests would be required, and when. We also had to spend approx £150 on Covid tests to travel. I have spoken to many people who have had a similar experience. The whole process was not aided by the fact that we were diverted through Barcelona because the direct flight to London had been cancelled, and even transitioning means that the necessary Covid protocols must be adhered to in the transiting country as well. Despite the administrative and logistical headache of planning all this pre-journey, the actual trip itself went well.

So, after surviving that experience and deciding not to travel outside Italian borders again until it starts to eventually settle down, I got called to another meeting in Barcelona in December. I will have to go through it all over again!

Anyway, after all that I thought I would write about something which is ordinarily outside my field of expertise in this Ezine: making a will. I haven’t touched on this subject for some time, but recently we have teamed up with another International lawyer called Jessica Zama of Buckles solicitors. She is British/Italian and is well versed in the world of whether to make a will in Italy or not, and not just for Brits. I asked her to write a piece that I could share with you about the importance of making a will in Italy when you have assets in the country, i.e. a property in most cases, which I have copied below.

However, before I get into that I wanted to write about a couple of other things which may come in useful if you need to travel, post-Brexit banking arrangements in the UK and a new Italian website that might come in handy.

Travel Insurance
I myself used to have travel insurance through a UK firm, pre Covid, pre-Brexit. This firm no longer offers insurance to EU resident individuals due to Brexit so before my trip to the UK I needed to shop around to find a cost effective option. Unfortunately, it was quite difficult to find a solution that wasn’t going to cost the earth. The usual Italian market suspects (Generali, Allianz, Zurich, Unipol) etc were rather more than I wanted to pay. However, on doing some research I stumbled into my favourite comparison website: facile.it It was there that I discovered that they were offering travel insurance packages from a French firm ‘InterMutuelles Assistance’.

One of my colleagues in France informed me that MAIF, MACIF and MATMUT are big French insurers and this firm is a part of the group, so likely to be a solid firm.

The French company is merely using its European license to passport its services into other EU states, in much the way that the UK firm I used to buy travel insurance from used to do. So, I wanted to communicate that there are lower cost more competitive options in the market place. This is by no means the only option and I would urge you to do your own research if you require travel insurance, but if you are interested you can find them under their brand in Italy:
https://www.traveleasy.it/

UK banking arrangements
A lot of my clients who are UK account holders with Natwest have now received a letter informing them that likely action to close their account will take place before the end of 2021, as a result of Brexit, and the fact that Italy has been very clear (as early as April 2020. See document HERE) that they do not want non-Italian, non-EU financial firms, advisories, or intermediaries operating on Italian soil or for Italian resident individuals. Italy, along with the Netherlands, seem to have the most strict measures in place, and it would appear that in both cases accounts of clients of Natwest are now being shut down, if they haven’t done so already.

This obviously leads to the question, what can you do for continuation of banking services in GBP? Thankfully in the last few years with the development of the Fintech industry, a myriad of options have arisen. The most popular seems to be Wise (formerly Transferwise) who are offering not just currency exchange services, but different currency accounts through which you can move money. Wise are not a bank, so you may be restricted on exactly what you can do and who can send money to that account, but it does work for some. I myself use Fineco bank in Italy and they provide current account holders with EUR, GBP and USD accounts, to which money can be sent, and then moving money between one and the other does not attract any currency conversion costs. There are also a number of online banks and services offering these options and so you shouldn’t be short of options.

The only problem
There is however one area which may still cause an issue if your UK account is closed down. UK direct debits. I myself have not been contacted yet to close my First Direct account in the UK, but should it happen it would cause a very big problem as I have a number of insurances which I took out years ago in the UK that provide protection for me and my family. However, they only accept payment through direct debit on a UK account. Should my banking services be pulled I may find myself losing my insurance. You may find yourself in a similar situation with UK direct debits. In this situation, there really is not a lot you can do about it, I am afraid.

But moving on from banking arrangements, I want to now lead into the idea of making a will in Italy. It still surprises me how many people have not done so yet. I understand it is one of those ‘to do’ list items, but the truth of the matter is that it shouldn’t be. It should be a priority item. To die, leaving an asset such as a property in Italy, without clear instructions as to how you want this asset to be treated, could create all sorts of complications for your family and/or beneficiaries. I made my will a few years ago now and whilst it probably needs updating again, I know that I have a valid Italian will in place in the event of my death.

So without further ado I am passing to the words of Jessica Zama, who wrote the following piece, and which I hope spurs you into making your own will if you have not already done so.

A very useful Italian website
From the 15th November a new Italian government website has been launched called ‘Anagrafe Nazionale Popolazione Residente’ https://www.anagrafenazionale.interno.it/servizi-al-cittadino/ (ANPR for short). It allows every Italian resident the ability to download all those certificates which traditionally you had to take an appointment at the comune, to attain. As anyone who has lived in Italy long enough, at some point or another you will need one of the certificates, mentioned below, and since they only have a 6 monthly validity the fact that you can now easily download them online is fantastic. Other services do exist, which I have used myself to avoid queuing at the comune offices, but they do charge a pretty penny for the service. For the moment they are also free of charge through this website, and it is expected that this will be the case until the end of 2022, at which point you may be expected to pay just the ‘bollo’ at the point of download. The certificates include:

Anagrafico di nascita;
Anagrafico di matrimonio;
di Cittadinanza;
di Esistenza in vita;
di Residenza;
di Stato civile;
di Stato di famiglia;
di Stato di famiglia e di stato civile;
di Residenza in convivenza;
di Stato di famiglia con rapporti di parentela;
di Stato libero;
Anagrafico di Unione Civile;
di Contratto di Convivenza.

To enter in the website you will need a SPID or Carta d’Identità Elettronica.

Protecting your Italian assets – where there’s a will, there’s a way

If you hold assets located in Italy, it’s important to obtain legal advice to draw up a will that covers them, regardless of whether or not you live there.

There are several reasons for doing this. If you have any specific wishes relating to the distribution of your Italian assets following your death then you need to put them in writing, in a will that is considered legally valid in Italy. If you do not have a valid will in place, your Italian estate will pass to the beneficiaries set by Italian law (in most cases the spouse and children).

The validity of your will in Italy is crucial, particularly if it is drafted and/or signed abroad and is to cover all your Italian assets, both present and future. For example, if you were to specify in your Italian will that you wish to leave a specific property in Italy to your wife, but this is then sold during your lifetime, your Italian will would not cover the proceeds of sale held in an Italian bank account.

Your will must also take into consideration the Italian inheritance laws and succession procedures. In Italy certain relatives, such as the spouse and children, have a right to a percentage of the deceased’s estate regardless of the terms of the will. This is known as forced heirship and it must be taken into consideration when drafting a will relating to Italian assets, as it can somewhat limit your testamentary freedom.

However, there may be the possibility to avoid this restriction by electing for the law of your country of nationality to apply to the will and the succession (thereby allowing for more freedom in disposing of your assets) although you would need legal advice on whether this can be applied in your case and how to draft your will so that the Italian forced heirship rules are avoided.

It is also important to consider the wording of the will and the legal terminology used within. A will signed in another country may potentially cover all your worldwide assets, including your Italian assets, but its wording may cause issues regarding the administration of your Italian estate in the future. Therefore, once again it’s important to obtain legal advice on this subject.

When you also have a separate will which covers your assets in another country (even if this will excludes Italian assets), it’s important that your lawyer checks to ensure that there are no conflicts between the two wills which could render one or both invalid and thereby potentially leave your assets exposed in both countries.

Holiday rental owners in Italy

By Gareth Horsfall
This article is published on: 29th October 2021

29.10.21

It would seem that governments really do exploit disruptive / destructive events to tighten the tax net on citizens and this has, once again, been used effectively during Covid.

This time it is the turn of the short-term rental market (I assume short-term means anything up to a month in duration)

The Italian government is about to launch a platform to collect relevant information on ALL activity, across Italy, involved in short-term lodgings / holiday lets. The objective being to create a clear map, across the country, of who is involved in this activity.

Everyone who is involved in short-term rental will be required to register with the platform and will be provided with an identification code specifically for their activity. This code will need to be quoted on every advert for a rental where a rental is advertised on a ‘homes 4 rental’ style website, with the local estate agent or on social media. Failure to quote the number will generate a fine of between €500 and €5000 for every advert where the code is not listed. The fine will be doubled for a repeat offence!

Some regions, such as Lombardia, already have this system in place. They operate the Cir (codice identificativo regionale). This information is automatically communicated to the comune in which the short-term rental is located. If a region does not operate the system, owners will now be required to register on the national platform and obtain the identification code this way. The information gathered will be passed back to the respective comuni.

The legislation for the platform is set to pass within the next few weeks and then will go into force 90 days after the publication in the Gazzetta Ufficiale. The specific date to list the identification code will be communicated at this time.

Just one more bureaucratic hurdle
This is clearly another administrative burden that rental property owners are going to have to jump through in the search for income and/or profit from property rental.

The government are trying to weed out the ‘in nero’ rentals that have clogged the market in the years preceding Covid, particularly in the cities. These have changed the landscape of the cities so much that palazzi (much like the one I live and work from in Rome) are now full of apartments catering to foreign holidaymakers, rather than people who live and work in Rome. It is the same story around the world in big cities.
In the Italian government’s favour, a lot of these rentals are undeclared for taxation purposes and try to fly under the radar, but it’s difficult to see how an identification code requirement will flush them out.

Many of the people I know who are involved in this activity are unlikely to be affected as they are conforming to local and national requirements already. However, occasionally I do get contacted by people who have a home in Italy and are renting it out to holidaymakers on overseas holiday rental websites and running all the earnings through a foreign bank account, with the assumption that they do not need to therefore declare anything in Italy. Obviously, this is wrong and my advice, as always, would be to ensure that you are meeting the various fiscal and administrative requirements in Italy.

If you own a property in Italy and generate any income from it, then it must be declared to the Italian authorities first! The Agenzia delle Entrate do regularly troll through holiday rental websites and cross reference against tax returns.

Oh, and if you are in any doubt. ‘I didn’t know’ is never an excuse, so get informed!

I hope you found this article useful. I am still waiting on the latest structural tax changes to be announced shortly. There is lots of press flying around about what and how things will be changed. At time of writing the only thing we know is that the ‘catasto’ on properties is being slightly changed and the partita IVA forfettario regime will be phased out within the next 2 years. For the rest I am still waiting. I will let you know as soon as I do.

In the meantime, if you would like to speak to me about your financial plans for life in Italy, if you would like to simply know if your money will last as long as you and/or if you are concerned about ensuring you will have enough money for all your different life stages and expenses, then do get in touch. I am happy to help. You can contact me on gareth.horsfall@spectrum-ifa.com or on cell +39 3336492356.

My initial consultations are free and there is no obligation to discuss things further, if you so wish.