Le Tour de Finance ‘FORUM’ 2014 – Italy
By Gareth Horsfall
This article is published on: 14th October 2014
Join us in San Ginesio (Le Marche)
and Barga (Tuscany)
The Tour de Finance 2014 is back for its autumn tour and this time we are visiting the East coast of Italy and returning to Tuscany.
Every year we bring a group of financial experts on the road in Italy to talk directly to expats about the financial considerations and concerns that they are facing.
We will be returning on:
23rd October – Palazzo Morichelli D’Altemps San Ginesio, Le Marche
24th October – Nr Bagni di Lucca at La Cantina delle Pianacce (Ghivizzano)
Arrival time: 10.30am for coffee, with start time at 11am. The Forum questions and answers is followed by a FREE buffet lunch, wine and an opportunity to meet your fellow expats.
What is the Forum?
No more powerpoint presentations and structured presentations!
The Forum events are designed to put the speakers on the spot and deliver the answers to the financial questions you need to know, rather than the information we think you should know.
You may be interested in knowing the answers to some of the following questions:
- What are the likely implications of being a resident or non resident and living in Italy?
- What are the benefits of being subject to Inheritance tax in Italy?
- What are the Italian tax rates that my income is subject to?
- With world financial markets rising and falling almost daily, how can I find a way to benefit from these movements without taking too much risk?
- How can I gain more interest on my savings when bank rates are so low?
- As the world economy limps on what can be done to make my money work better for me?
Questions will be asked for one hour before lunch so it is an opportunity to put the experts ‘on the spot’
The Panel of experts will include:
Richard Brown and Julian Hall:
BEST INVEST Leading UK Investment and financial planning firm with over £9 billion of assets under management.
Judith Ruddock:
STUDIO DEL GAIZO PICCHIONI Cross border tax specialists and commercialisti.
Andrew Lawford:
SEB LIFE INTERNATIONAL He will be facing questions about tax efficient savings vehicles for Italy and ways to potentially. reduce your Inheritance tax liabilties.
I hope you will register your attendance. And I hope that the FORUM event will avoid all the boredom of powerpoint presentations and make the morning much more interactive for you.
If you would like to register for this event then you can do so by sending your full contact details to info@spectrum-ifa.com or call Gareth Horsfall on 0039 333 6492356.
Planning to retire to France?
By Spectrum IFA
This article is published on: 13th October 2014
Retiring to France can be dream come true for many people. The thought of that ‘place in the sun’ motivates us to save as much as we can whilst we are working. If we can retire early – so much the better!
In the excitement of finding ‘la belle maison’ in ‘le beau village’, we really don’t want to think about some of the nasty things in life. I am referring to death and taxes. We can’t avoid these and so better to plan for the inevitable. Sadly, some people do not plan in advance and only realise this mistake when it is too late to turn the clock back. For example:
- Investments that are tax-free in your home country will not usually be tax-free in France. For example, UK cash ISAs and National Savings Investments, including premium bond winnings would be taxable in France. So too would dividends, even if held within a structure that is tax-efficient elsewhere. All of these will be subject to French income tax at your marginal rate (ranging from 0% to 45%) plus social contributions of 15.5%.
- Gains arising from the sale of shares and investment funds will be liable to capital gains tax. The taxable gain, after any applicable taper relief, will be added to other taxable income and taxed at your marginal rate plus social contributions.
- If you receive any cash sum from your retirement funds, for example, the Pension Commencement Lump Sum from UK pension funds, this would be taxed in France. The amount will be added to your other taxable income or under certain conditions, it can be taxed at a fixed rate of 7.5%. Furthermore, if France is responsible for the cost of your healthcare, you will also pay social contributions of 7.1%.
- Distributions that you receive from a trust would also be taxed in France and there is no distinction made between capital and income – even if you are the settlor of the trust.
As a resident in another country, it would be natural for you to take advantage of any tax-efficiency being offered in that jurisdiction, as far as you can reasonably afford. So it is logical that you would do the same in France.
Happily, France has its own range of tax-efficient savings and investments. However, some planning and realisation of existing investments is likely to be needed before you become French resident, if you wish to avoid paying unnecessary taxes after becoming French resident.
I mentioned death above and as part of tax-efficient planning for retirement, inheritance planning should not be overlooked. France believes that assets should pass down the bloodline and children are ‘protected heirs’ and so are treated more favourably than surviving spouses. Therefore, action is needed to protect the survivor, but this could come at a cost to the children – particularly step-children – in terms of the potential inheritance tax bill for them.
Whilst there might be a certain amount of ‘freedom of choice’ for some expatriate French residents from August 2015, as a result of the introduction of the EU Succession Rules, this only concerns the possibility of being able to decide who you wish to leave your estate to and so will not get around the potential French inheritance tax bill, which for step-children would still be 60%. Therefore, inheritance planning is still needed and a good notaire can advise you on the options open to you relating to property.
For financial assets, fortunately there are easier solutions already existing and investing in assurance vie is the most popular choice for this purpose. Conveniently, this is also the solution for providing personal tax-efficiency for you. There is a range of French products available, as well as international versions. In the main, the international products are generally more suited to expatriates as a much wider choice of investment options is available (compared to the French equivalent), as well as a range of currency options (including Sterling, Euros and USDs).
Exchange rates should not be overlooked. Currently, we are living in an environment whereby, for example, the Sterling Euro exchange rate is strong and so people are feeling fairly relaxed about this. However, it does not seem to be so long ago since the rate was close to parity. Unless you transfer your pension benefits to a Qualifying Recognised Overseas Pension Scheme (QROPS) – which is too broad a subject to cover here – your pension income is always likely to be subject to exchange rate risk.
It is possible to have a UK State pension or US Social Security paid direct to your French bank account (and the exchange rate is usually very good), but this may not be the case for other pensions that you receive. Therefore, you should consider using a forex company, since these companies will usually give a better rate than banks.
It is very important to seek independent financial planning advice before making the move to France. A good adviser will be able to carry out a full financial review and identify any potential issues. This will give you the opportunity to take whatever action is necessary to avoid having to pay large amounts of tax to the French government, after becoming resident.
The above outline is provided for information purposes only and does not constitute advice or a recommendation from The Spectrum IFA Group to take any particular action on the subject of investment of financial assets or on the mitigation of taxes.
The Paris Business Lunch
By Spectrum IFA
This article is published on: 11th October 2014
Hosted by Jon Cooper from The Spectrum IFA Group, October’s business lunch was held on Wednesday 8th October at O’Sullivan’s Bar & resturant, Ave Franklin D Roosevelt.
The event was a huge success with 28 attendees from a broad range of Paris based organisations.
The lunch is a monthly networking event for English speaking business professionals and a great opportunity to promote your business and grow your network in a relaxed and friendly environment.
Our guest speaker, Charles Hamilton-Jones from KPMG gave a short talk on “Cross-border M&A – Opportunities and Challenges in the current economic climate”.
Feedback from the attendees was all extremely positive, with a constant flurry of business cards being exchanged. The food was superb and excellent value at only 35 euros per head for entrée, main course, café gourmand and 2 x glasses of wine.
The next Paris Business Lunch is scheduled for Wednesday 12th November. Email andrea@thebizlunch.com to reserve your place.
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Spectrum sponsors 23rd Swiss Classic British Car Show
By Spectrum IFA
This article is published on: 10th October 2014
Sunday 4th October was the 23rd Swiss Classic British Car Show in Morges, on the shores of Lake Geneva, Switzerland.
The Spectrum IFA Group has been a proud Main-Sponsor for several years and once again this years’ event was a real success with “shorts and tee-shirts” weather, which invariably seems to be the luck of this event!
Spectrum’s tie-in is partly because its two local advisers, Chris Eaborn and Robbin Davies, live nearby, are of British origin and both love classic cars. Also this is an event that has a huge economic impact on the town which is in the heart of the region where we have many clients.
The show itself was founded and has been run all of its 23 years by Keith Wynn, a British expatriate, and is a non-profit event with sponsorship paying solely for infrastructural costs such as posters and printing.
There is no entry fee whatsoever for exhibitors or visitors and the approximate 1,500 car-entrants come from all over Europe to display British cars and motorbikes over 20 years old (or more recent “special interest vehicles”). There is everything from eccentric enthusiast’s cars to “priceless” classics, all of which are parked unattended along the closed off quays of Morges for the pleasure of the mingling crowds with no problems whatsoever and only the lightest of security needed.
The show attracts around 20,000 visitors and the economic impact on the town through fully booked hotels, restaurants etc. is conservatively estimated at over CHF 1’000’000 of additional revenue.
So, for The Spectrum IFA Group, it is a fantastic opportunity to support one of the best car events in Europe (and arguably the very best featuring British cars!) whilst contributing to an event that has a highly positive economic impact to the area and brings pleasure to thousands.
Chris and Robbin had an excellent day and met many clients and friends who also seemed to have a great time.
Cogs4Cancer Tribute Ride
By Spectrum IFA
This article is published on: 9th October 2014
The epic charity ride from Ancona in Italy to Antibes in France is getting close to the finish line.
The riders set off on Sunday in Ancona on their 850km ride to arrive in Antibes on Friday 10th October. The final leg of this ride starts in San Remo on Friday morning, stopping for a well earned break at Stars’N’Bars in Monaco, and then pushes on to the finish line arriving in Antibes at the IYCA.
The Tribute Ride is a chance for other riders to join the main group on this last 80km stretch and help raise even more funds for the cancer charities supported by Cogs4Cancer. The welcome champagne party is sponsored by FREEDOM MARITIME together with a wonderful array of hand crafted beers on offer from Colgans Brewery and The Spectrum IFA Group will be there to welcome all the riders home.
The riders are expected to arrive in Antibes at 16.00 and we encourage anyone in there area to come and support these heroic guys and girls on their final day.
The Spectrum IFA Group are the proud sponsors of Lee Mutch.
Below is a selection of photos from the ride.
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With care YOU prosper
By Spectrum IFA
This article is published on: 3rd October 2014
I’m getting an increasing number of calls from expats based here in France who are very worried and sometimes completely dismayed by the financial advice they have received elsewhere. Worried by the fact that their investments have decreased in value, and dismayed when they realise that they cannot even withdraw their money or cancel their polices, as parts of the investment are now in funds that have been suspended (that is no-one can either buy them or sell them).
Now I’m not looking to get into any legal wrangle with the company concerned, and it is only one company, but I think this is a suitable time to flag up what is happening in the hope that some of you will avoid falling into this situation in future. I will also add that I am prepared to ‘adopt’ clients in this situation, in order to ensure as fruitful an outcome for the client as possible.
What is happening is not illegal, but it could certainly be regarded as unethical. The clients concerned have either unwittingly or deliberately chosen to put their faith in an adviser who is not regulated in France. This is not illegal, because we are all part of the wonderful organisation that is Europe, and that frees Europeans to ply their trade in other countries within the Euro block. That freedom of trade is not, however, backed up by a freedom of regulation. If you live in France and have cause to complain about advice you have received, the French regulator will show no interest in your case if the adviser is not in his jurisdiction. You will be guided to seek help from the regulator in the country where the adviser is based, and hopefully regulated. Good luck.
There are two main problems that I am seeing at present. The first relates to the quality of funds in which the clients are invested. At The Spectrum IFA Group we have an investment team that spend many hours evaluating hundreds, if not thousands, of funds and produce a recommended list for clients to invest in. There are of course hundreds of thousands of funds available, and we can’t look at them all, so we do allow our clients to choose their own investments if they wish, thereby ignoring our recommendations. All we ask, in this instance, is that you sign a form to accept that the investment was your choice. There are many good funds out there, but there are also some bad ones. All of the (now) clients who have suffered in this way have been put into a single asset class which has had a disastrous time in the past eighteen months. Needless to say, none of the funds involved are on our recommended list.
The second issue centres on a specific type of investment called a structured note. These are often complex derivative products, and the type of note that I am now seeing regularly, certainly falls into that category. So much so, that the product notes that accompany the investment clearly state that this is only for seasoned professional investors, who are willing to accept the potential for serious loss of capital. None of the people I’m taking to fall into that category. The structured note is an interesting concept, and not all of them are overly complicated. You may have seen me write about such a note in the past, and you may have seen such a product at our seminars, offering an excellent 12 month fixed deposit rate alongside a five year deposit where the reward is linked to the performance of the stock exchange index. Not exactly ‘Janet and John’ stuff, but I like to think that I can explain it completely to my clients. And I don’t use it unless I’m completely sure that the client also understands it. I don’t understand the notes I’m seeing recently, and I’m sure the client doesn’t either.
So why sell them? Simply because the companies that make up these products factor in an element of commission to the brokerage that sells the note to the end user, the client. Now I don’t know how closely you look at small print when you read articles from me or Daphne, but if you look at the bottom of this article you will see reference to our client charter at spectrum-ifa.com/spectrum-ifa-client-charter
If you have read the charter, or are just about to do so, you will see or have seen this:
Some investment funds or products within an Insurance policy may generate an additional initial commission. If this is the case, we undertake to rebate this commission to you (in full) by way of increased allocation.
Strangely (not), none of the new clients I’m speaking to seem to have benefitted from this principle. It seems clear to me that funds are being pedalled for the advisers benefit, not the clients. This is a very dangerous practice.
I must stress that no laws have been broken here, and no fraud has taken place. I sell a simple structured note, but I pass on the commission. I even have clients who are invested in the struggling asset class that we have been talking about, but only by their own choice, and for many months now that has been contra to our advice.
Be safe – use locally produced goods, and that includes financial advice.
If you have any questions on this, or any other subject, please don’t hesitate to contact me.
Cogs4Cancer – the count down is on
By Spectrum IFA
This article is published on: 30th September 2014
A team of riders are about to embark on the second Cogs4Cancer sponsored cycle ride. This incredible journey will take the 16 riders from Ancona on the east coast of Italy to Antibes in the south of France taking 6 days to complete the 825km.
The nominated charities are Cancer Research UK, Clinique Tzank in Mougins and the Children’s cancer unit at the Lenval Hospital in Nice.
The Spectrum IFA Group are proud to be sponsoring Lee Much and wish him, together with all the other participants every success.
The cycle ride is completely self-funded by the riders which means that 100% of the sponsorships money received goes direct to the charities concerned – YES 100%
Sustenance en-route will be provided by Gourmet Deliveries and the riders will be looked after during the event by sports therapists & masseuses Liz Wright and Chelsea Good providing post-ride care and with Marine Medical providing extensive medical kits and first aid support.
The riders can be followed in real-time on www.cogs4cancer.org thanks to the specialist satellite tracking devices provided by Yellowbrick.
The riders will be looked after during the event with sports therapists & masseuses Liz Wright and Chelsea Good providing post-ride care and with Marine Medical providing extensive medical kits and first aid support.
5th October – The Ride
- Day 1 Ancona to Forli – 156km
- Day 2 Forli to Empoli (via Florence) – 142KM
- Day 3 Empoli to La Spezia (Via Lucca and Viareggio)146KM
- Day 4 La Spezia to Arenzano – 134KM
- Day 5 Arenzano to San Remo – 123KM
- Day 6 San Remo to Antibes – 81KM -The Tribute Ride- including Stars n Bars lunch
- 10 October – Champagne welcome home at 16.30 on IYCA by Gourmet Deliveries – sponsored by Freedom Maritime
- 11 October – Party at The Royal Beach Antibes 16.00 until 01.00 €20 per person, kids free. Featuring Superstar DJ Shaun Hughes who is cycling from Ibiza to take part!
We’ve had some great support over the past few months from many people and would like to thank everyone involved – including Rihanna!
For further information on this epic journey and to donate please visit www.cogs4cancer.org
Spanish Tax Reforms
By John Hayward
This article is published on: 29th September 2014
The latest news we have, is that there are likely to be significant cuts in income tax in the election year of 2015. The average reduction in Spanish income tax will be 12.5%, and 72% of those earning up to €24,000 will be as much as 23.5% better off, according to the Hacienda. In addition, the bands of tax are being reduced to 5 from 7.
Taxes on savings are also being reduced over the next 2 years, to the levels we saw in 2011. In addition, there are other tax benefits for families and small and medium-sized companies
Full details can be found by visiting this link to the Hacienda´s website http://bit.ly/1yDs915.
These are proposals at this stage and are subject to possible changes before the end of the year. However, it is clear that there will be changes.
As a guide, here are the existing rates and the proposed new rates.
In the meantime, if you would like ideas of how to reduce Spanish Income and Savings Tax, look at ways of increasing your income in a low-risk environment, or you would simply like to review your overall financial position, contact me below.
Tax Residency in Italy
By Gareth Horsfall
This article is published on: 22nd September 2014
Tax Residency is always one of those issues that raises it head in batches, from time to time.
So, I thought I should clarify the matter again.
Residency determines where you may or may not be located for tax purposes.
The notion that you can be resident in Italy but pay tax elsewhere is an outdated notion and one that should be forgotten.
RESIDENCY IS A MATTER OF FACT AND NOT ONE OF CHOICE.
Here are the facts as determined by Section 2 of the Italian Income Tax Code:
An individual is considered resident for tax purposes in Italy if, for most of the calendar year (183 days), you are:
* registered with the Registry of the Resident Population (Anagrafe).
* resident or domiciled in the territory of the Italian state, as defined by Section 43 of the Italian Civil code.
And, according to Section 43 of the Italian Civil code:
* Your place of residence is the place where you, the individual, have your habitual abode.
* your place of domicile is your principal place of business and social/family interests.
Employment income is considered ‘produced’ in Italy if the work activity (i.e. business) is performed on Italian territory (this also means internet activity that is carried out in Italy, even if the focus of the internet activity is in another country).
Italy has been quite vocal about trying to clamp down on people who are claiming residency in Italy (and using public services) but not submitting tax returns, and also those who are operating business activities in Italy but claiming residency for themselves, or the business, elsewhere.
In reality it would be hard for the authorities to track them down, but with the open exchange of information agreements between Italy, UK, Germany, France, Spain and now the USA, it is hard to imagine how computers will not, before long, be merely churning out lists of wrongdoers every week.
The better way is to plan your way around your residency and your respective tax authorities.
Make sure you get your residency options right first time. By this, I mean talk to the people who understand these issues, plan carefully in advance of taking residency in Italy or elsewhere and, ensure that you take advantage of the tax breaks available to you. Failing to do so can create burdensome Italian administrative headaches after the event.
In any case, we should remember the words of Benjamin Franklin who once said
“An ounce of prevention is worth a pound of cure”.
If you have any questions regarding your own residency or if you would like to try and plan your way around your residency in a more tax efficient manner then you can contact me.
Are you a resident in Italy and what taxes apply to you?
By Gareth Horsfall
This article is published on: 18th September 2014
Tax List
Not a week goes by these days, where I am not contacted by someone who has a question about their residency in Italy, and what that means for them fiscally. Either by people who are about to move to Italy or others who have already been living here for some time and want to become ‘in regola’.
The conversation then naturally flows into the minutiae of exactly what are the taxes that need to be paid in Italy.
So, following on from last week’s E-zine about residency and how it is actually defined, I thought I would write and explain those pesky taxes that apply to expats who have income being paid and/or assets held in other countries. I will repeat this towards the end of the year when some of you may be finalising your tax positions for 2014, but it may act as a good guide for those who are thinking about, or in the process of, doing something about their Italian tax returns for 2014.
Where to start?
Well, firstly I start by confirming that, as a resident in Italy, you are subject to taxation on your worldwide assets and income (with some exceptions). That means that if you are a resident in Italy (see my blog post RESIDENT EVIL for details of residency), then you are required to declare your assets and income, wherever they might be located or generated in the world.
TAX ON INCOME
If you are in receipt of a pension income, for example, and it is being paid from a private pension provider overseas or a state pension, then that income has to be declared on your Italian tax return (nb. different rules apply to Government service pensions, where tax is generally deducted at source in the country of origin and there is no further requirement to report the income in Italy). If tax is deducted at source in the country of origin, the income must still be declared again in Italy. A tax credit will be given for the amount of tax paid in the country of origin (assuming that country has a double taxation agreement with Italy), but any difference between the tax rates in the country of origin and Italy will have to be paid.
It is a similar picture for income, generated from employment. This is a slightly more complicated issue that depends on many factors and, therefore, I shall not dwell on it here. If you have any questions in this area you can contact me on the details at the bottom of this page.
INVESTMENT INCOME AND CAPITAL GAINS
This is one area where Italy excels above other countries, in that its system of calculation is very simple. As of 1st July 2014, interest from savings, income from investments in the form of dividends and other income payments are taxed at a flat 26%. Capital gains tax is the same rate of 26%.
** Interest from Italian Government Bonds and Government Bonds from ‘white list’ countries is still taxed at 12.5% rather than 26%, as detailed above. This is another quirk of Italian tax law as this means it is more convenient, from a tax position, to invest in Government Bonds in Pakistan or Kazakhstan, than it is to buy corporate Bonds from Italian corporate giants ENI or Unicredit. **
PROPERTY OVERSEAS
Property which is located overseas is taxed in 2 ways. Firstly, there is the tax on the income and, secondly, a tax on the value of the property itself.
- Income from property overseas.
Unlike rental property located in Italy, which is taxed at the rate of approx 23% depending on what kind of rental you operate, overseas income from property is added to your other income for the year and taxed at your highest rate of income tax.
There is one advantage to this, in that tax in the country of origin has to be applied to the income in the first instance. Therefore, the net income (after expenses) in the country of origin is added to your other income in Italy for the year. This can be quite useful if the property/ies are investment properties, the expenses are high, the country of origin allows multiple deductions and the net income position is low. However, as I have written before, if you are reliant on the income to live on, then a high net income position (before declaration in Italy) can result in a much lower net amount (after Italian tax) depending on the amount of other income you receive each year. Once your total income for the year moves above €28,000 you enter into the punishing 38% tax bracket in Italy.
This can prove to be a tax INEFFICIENT income-stream for those hoping to live in Italy by relying on income from property overseas.
- The other tax is on the value of the property itself, which is 0.76% of the value.
However, value must be defined in this instance. For EU based properties, the value is the Italian cadastral equivalent. In the UK (the area I am most familiar with), that would be the council tax value NOT the market value. You will find that the market value will, in most cases, be more than the cadastral equivalent value.
In properties located outside the EU, the value for tax purposes is defined as the market value of the property ONLY where evidence cannot be provided of the purchase value of the property, in which case this would be used instead.
TAXES ON ASSETS
It would not be right that other assets escaped Scot free! (Talking of Scots, it will be interesting to see how the markets react tomorrow to the possible Independence vote of Scotland. I will be watching and reporting on events depending on the outcome)
BANK ACCOUNTS AND DEPOSITS
A very simple to understand and acceptable €34.20 per annum is applied to each bank account or deposit account that you own overseas with an ‘average’ balance of €10,000 in it, each calendar year. This includes fixed deposits, current accounts, short term cash deposits, CD’s etc. The charge is the equivalent of the ‘bollo’ which is applied to all Italian bank accounts each year.
Lastly, we have the charge on other foreign-owned assets (IVAFE). This covers shares, bonds, funds, portfolio assets or most other types of assets that you may hold. The tax on these is 0.2% per annum, based on the valuation as of 31st December.
This guide is only meant to be a broad outline of the taxes that affect most expats. It is not a full tax list and does not take into account personal circusmstances. It is intended to be a guideline to help you make the right decisions. My experience over the last 4 years has been, in most cases, that expats will end up paying more by being resident in Italy (which most seem to accept as OK) but, there are often a number of financial planning opportunities, to generate capital in more effective ways, that people are NOT taking advantage of.
If we haven’t discussed these already or if you would like an initial chat to discover whether any of those opportunities are open to you then you can contact me on the email address below or I can be reached on cell: 333 6492356. There are no fees for consultations.