If you live in France, the general impression you might have is of a country that is dragged down by strikes and protests, that the cost of living is soaring and the dream of retiring whilst still young is under threat. But it is not all bad news. If you have investments in France, or are planning to retire here, there are several reasons to be cheerful about the state of the country.
How is France doing?
By Richard McCreery
This article is published on: 17th May 2023
17.05.23
Despite fears of a possible recession, France’s GDP grew 0.2% in the latest quarter and was 0.8% higher than a year earlier – not exactly blowing the lights out but coping reasonably well with Eurozone interest rates that have risen to 3.75%. In fact, you can still get a 20-year mortgage in France and pay less than 3%, so the housing market is not coming under the same pressure as it is in some countries like the US, where a typical mortgage now costs 6.5%, or Sweden, where house prices have fallen sharply.
At 7.2%, France’s unemployment rate is around the lowest level it has been for several decades. The more people in work, the better. Inflation may be historically high at 5.9% but this is lower than the Eurozone average of 7% and considerably less painful than the UK’s 10.1% rate. We were very lucky that the government capped energy price rises at 4% last year and 15% this year.
Where France has more of a problem is its debt levels, partly because of that low retirement age but also because of the government’s generosity during the pandemic, although France is hardly alone in this. France’s government debt-to-GDP ratio has swelled from 97% in 2019 to 111% today. It is because France’s national debt has grown to almost 3 trillion Euros, and because it is so hard for the government to do anything about it without triggering widespread rioting, that the rating agency Fitch recently downgraded the country’s credit rating to AA- (outlook: Stable). This still leaves it slightly better off than the UK, whose outlook is Negative.
But President Macron is making efforts to build on France’s substantial industrial base, asking Elon Musk and other business leaders to invest in the country. In fact, according to accounting firm EY, France is the most attractive country in Europe for foreign investment and has been for four years in a row. It is also the home of LVMH, which recently became the 7th largest company in the world, worth more than half a trillion Dollars, as well as Kering (the owner of Gucci) and Hermès. French luxury goods companies are the European stock market equivalent of Big Tech stocks in the US, they seem to go from strength-to-strength and have powered the CAC 40 to a record high this year. French banks also seem to have come through the recent turmoil in the sector relatively unscathed.
France has a great standard of living, it is the world’s number one tourist destination and the economy is on a fairly sound footing. Taxes are high, but residents also have access to very tax efficient investment vehicles that can reduce exposure to income tax and inheritance tax, with the right planning and advice. There is a lot to be said for investing in the EU’s second largest economy. Despite the burning barricades on the nightly news, France is doing fine right now.
The Top Tips in Spain | May 2023
By Chris Burke
This article is published on: 15th May 2023
15.05.23
Summer is well on its way, lighter evenings and enjoyable temperatures are here for most and we will soon be commenting on how hot it is, I am sure!
For this month we shall be concentrating on the following topics:
- Driving licence swap now active
- UK investments/ISAs compared to Spanish options
- UK tax code changes – beware!
- State pension retirement options in Spain
Driving licence swap now active
From the 16th March 2023 the UK & Spain driving licence exchange, without the need to take a practical or theory driving test, is back at long last for those who are Spanish residents. From this date, as a resident you can legally drive in Spain on your UK driving licence, having 6 months to exchange.
You will also need to book a ‘Psicotecnico’ as I previously mentioned in my Newsletter and here is a link for the participating places to do this: Psicotecnico centres
So get your driving gloves back on and hit the Spanish roads! Be aware, this new exchange deal between the UK and Spain also means they will be sharing information on fines, speeding tickets and other incidents recorded (intoxication for example) so take note.
UK investments/ISAs compared to Spanish options
Many people who live in Spain are unclear or unaware of the difference between holding UK savings and investments compared to Spanish, and also what your options actually are here.
Unless you are on a specialist tax regime such as the Beckham Law, or potentially the new Digital Nomad Visa, Spain views UK savings and investments as non-Spanish compliant and therefore tax declarable/paid on any gains annually, EVEN if you do not access any of these monies. In the UK for example, normally the first advice any financial adviser will give their clients is to ‘max out’ their ISA and private pension contributions annually, as the tax saving alone makes this a great thing to do. However, once you become a Spanish tax resident these are not generally tax efficient and any gain on non pension related investments has to be declared and tax paid annually – therefore in many cases potentially nullifying the benefits of these.
So what can you do?
Most people speak to their Spanish bank and aren’t given any financial advice as such in respect of their circumstances and, in many cases, are sold investments that are not really what they are looking for, nor, dare I say, are any good from what my clients tell me!
When they have been put off by this they start looking around for something similar to what they had before they moved to Spain, and that’s when they find and/or are recommended to me. In Spain, we have access to several flexible investment solutions backed by some of the UK’s largest and well-known institutions. These products are EU regulated and highly tax-efficient, in essence similar to a UK ISA. We start by looking at your overall situation, carefully understanding what you are looking to achieve – whether that be a retirement plan, mid-term investment or complete financial planning for the whole family, taking into account university fees, or perhaps FIRE (Financial Independence, Retire Early). As the years go by and your money grows we provide ongoing advice to make sure these are optimised, taking into account life events that occur along the way.
UK tax code changes – beware!
On the 10th April this year UK state pensions were increased to rise with inflation up to £203.85 a week (10.1% increase) as the government restarted the ‘triple lock’ agreement it had suspended for one year. For most people receiving their UK pensions this was very good news, however for some it has created another problem depending on other income and how they are set up for tax purposes.
When leaving the UK as a tax resident it is important to inform HMRC. If you don’t, once your income rises above your personal allowance of £12,570 (with the state pension annually now £10,600) you will be subject to income tax in the UK and taxed accordingly.
Worse than that, this hike in UK state pension income has seen many retired people have their tax code changed, wrongly it would seem, by HMRC. In one case I have seen they were being taxed 40% on their income above the personal allowance. If the tax they are taking doesn’t look right a simple phone call to HMRC seems to solve the problem.
If you have set yourself up correctly as a non UK tax resident, then the only UK income you should be taxed on is property rental income. Most other income should not be taxed in the UK, but declared and tax paid in the country where you are tax resident.
State pension retirement options in Spain
Below I have listed the different options when you retire in Spain claiming a state pension – one notable new change is that to qualify for ‘partial retirement’ (also known as active retirement) you can only use Spanish contributions – previously you could include contributions from the UK.
Ordinary Retirement
Retirement age in Spain starts at 65, however for most it is 66 years and 10 months and by 2027 the number of years of contributions to retirement needed will be 38.5 years.
Flexible Retirement
After you retire, you can combine receiving a part of your pension with part-time work (reducing your full working day down to 50%). Your pension is reduced proportionally.
Partial/Active Retirement
If you have not reached the legal retirement age, you can combine a part-time employment contract with receiving part of your retirement pension.
**Reminder – to qualify for the Spanish state pension in general you must have contributed for 15 years, of which two at least should fall within the 15 years immediately preceding the start of your entitlement.
If you would like any more information regarding any of the above, or to talk through your situation initially and receive expert, factual based advice, don’t hesitate to get in touch with Chris.
Financial update May 2023
By Katriona Murray-Platon
This article is published on: 10th May 2023
10.05.23
The tax season is fully underway and whilst those who are declaring for the first time by paper have until 22nd May to complete their returns and most other people in most departments have until early June to complete their tax return, many people want to get it done as soon as possible.
Now that all the forms are available (which can be downloaded here) we can have a clearer idea of how to declare.
If you have employed someone to do your tax return, the chances are you have already sent off all your information. However if you want to have a go at doing your own tax return, here are my top tips for this year!
Tips for your taxes
Everything is declarable, not everything will be taxable!
- Get all your information together. If you are using your SATR from the UK, make sure you decide which number you are using (April 22 or April 23) and stick to that method for UK based income. If you suddenly change and start taking the figures from your bank account then you will be double taxed on the first four months of the year. Collect all your statements, payslips, tax certificates together in the one place and note down the figures for all your sources of income and the exchange rate at the date of payment (or the annual average).
- You need to declare all your income on the main tax form (called the 2042), you will also need to put any foreign sourced income on the 2047 and you will need to declare all your non-French bank accounts on the 3916. If you are doing the return for the first time on paper you will need a paper copy of all these forms. You will also need the 2042 C form as that is where you will find boxes 8SH and 8SI that you must tick if you have an S1 so that social charges aren’t charged on your pensions and that the reduced rate of social charges of 7.5% as opposed to 17.2% are charged on any investment income.
- Healthcare: If you are declaring online you need to tick box 8SH and 8SI to inform the French authorities that you are covered for your healthcare by another system of the EU (including the UK).
- Bank accounts and assurance vies: If you are declaring online you need to tick box 8TT (for assurance vies) and 8UU (for bank accounts) in order to create the 3916 form which needs to be completed with the details of these accounts. If you are declaring on the paper form, these boxes are at the bottom of the main 2042 form. If you are declaring an assurance vie you will need to have the value (in euros) of the account as at 1st January 2022.
- Foreign sourced income must go on the 2047 form (the pink one). Most foreign pensions and salaries go in section 1 of this form but UK salaries, UK rental income, UK Government pensions, which are all declared in France but given a tax credit equivalent to the tax that would have been paid in France all have to go into Section 6 of this form in order to get the tax credit (box 8TK on the 2042 form).
- Don’t forget any charitable donations that you made in 2022. French based charities send you a tax certificate, so you can use this to enter the correct amount.
- Don’t forget the kids! The tax credit for child care costs for children under 6 (born after 1st January 2016) have increased from €2300 to €3500 per child and you get 50% of this amount. This is for expenses for a nanny (nounou), nursery, after school care and holiday club. If however your child is now over 6 but you still have someone to collect them from school, this is counted as a home help tax credit (see below).
- Tax credits for home help. If you have a gardener or cleaner or have had some other home help in 2022, and you haven’t already received the tax credit automatically, you can declare these amounts on the 2042 RICI form here You are allowed at tax credit of 50% of any expenses up to a maximum of €12,000.
Not everything has to be 100% accurate. If you get close to the deadline, just submit your tax return as it is, you can amend the tax return, without penalties, through the correction service which will open at the beginning of August.
If you have any questions please let me know by email but if you would rather speak to me about something, please do give me a call.
Tax time in France
By Peter Brooke
This article is published on: 9th May 2023
09.05.23
Its that time of year again….
The tax season is underway and whilst those who are declaring for the first time by paper have until 22nd May to complete their returns, most other people in most departments have until early June. Of course many people want to get it done as soon as possible. Now that all the forms are available, which can be downloaded here from the French Government website, you can have a clearer idea of how to declare.
If you have employed someone to do your tax return, the chances are you have already sent off all your information. However if you want to have a go at doing your own tax return, then here are some tips for this year!
First tip – I would highly recommend investing in the Income Tax Return guide from the Connexion magazine – which can be bought online here.
Please note that we, at Spectrum, are not accountants and do not complete tax returns for our clients, in fact I personally find the process as complicated as I am sure you do.
Hopefully some of these tips will help – of course if you do need help then I would recommend speaking to the team at French Tax Online who have a lot of information and experience with French Tax returns: https://www.frenchtaxonline.com/
Tips for your taxes
Everything is declarable, not everything will be taxable!
1. Get organised first – have all your information together before you start. If you are using your Self Assessment Tax Return from the UK, make sure you decide which number you are using (April 22 or April 23) and stick to that method for UK based income. If you suddenly change and start taking the figures from your bank account then you will be double taxed on the first four months of the year. Collect all your statements, payslips, tax certificates together in the one place and note down the figures for all your sources of income and the exchange rate at the date of payment (or the annual average)
2.You must declare ALL of your worldwide income. French income is declared on the main tax form (called the 2042) and put any foreign sourced income on the 2047 form. You need to declare all of your non-French bank accounts on the 3916 form. If you are doing the return for the first time on paper you will need a paper copy of all these forms
You will also need the 2042 C form as that is where you will find boxes 8SH and 8SI that you must tick if you have an S1 certificate so that social charges aren’t charged on your pensions and that the reduced rate of social charges of 7.5% as opposed to 17.2% are charged on any investment income
All of the forms can be downloaded here from the French Government website
3. Healthcare: If you are declaring online you need to tick box 8SH and 8SI to inform the French authorities that you are covered for your healthcare by another system of the EU (including the UK)
4. Foreign Bank accounts and Assurance Vie (AV): If you are declaring online you need to tick box 8TT (for Dublin or Luxembourg AV) and 8UU (for non French bank accounts) in order to create the 3916 form which needs to be completed with the details of these accounts. If you are declaring on the paper form, these boxes are at the bottom of the main 2042 form. If you are declaring an assurance vie you will need to have the value (in euros) of the account as at 1st January 2022, you should receive statements from your AV provider with this information during April and May each year
5. Foreign sourced income must go on the 2047 form (the pink one). Most foreign pensions and salaries go in section 1 of this form but UK salaries, UK rental income, UK Government pensions, which are all declared in France but given a tax credit equivalent to the tax that would have been paid in France all have to go into Section 6 of this form in order to get the tax credit (box 8TK on the 2042 form)
6. Don’t forget any charitable donations that you made in 2022. French based charities send you a tax certificate, so you can use this to enter the correct amount
7. Don’t forget the kids! The tax credit for child care costs for children under 6 (born after 1st January 2016) have increased from €2300 to €3500 per child and you get 50% of this amount. This is for expenses for a nanny (nounou), nursery, after school care and holiday club. If however your child is now over 6 but you still have someone to collect them from school, this is counted as a home help tax credit (see next point)
8. Tax credits for home help. If you have a gardener or cleaner or have had some other home help in 2022, and you haven’t already received the tax credit automatically, you can declare these amounts on the 2042 RICI form here You are allowed at tax credit of 50% of any expenses up to a maximum of €12,000
IMPORTANT
Not everything has to be 100% accurate.
If you get close to the deadline, just submit your tax return as it is, you can amend the tax return, without penalties, through the correction service which will open at the beginning of August.
Currency… all hail to the Euro
If you are receiving income in any currency other than Euros you need to convert it to Euros for your declaration.
You should use the exchange rate on the day the you received the income into your account and daily rates are available here:
If you don’t have access to the accurate data it is possible to use an average rate for the year which is shown in the Connexion guide as £1 = €1.158
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A tax haven called Andalucia
By Charles Hutchinson
This article is published on: 24th April 2023
24.04.23
In recent years, the debate surrounding wealth tax has gained significant attention, especially in the context of Spain’s Andalucia region. Andalucia is one of the most populous regions of Spain and has a strong agricultural and tourism-based economy. In September 2022, the Andalucian government announced the abolition of wealth tax.
The decision to abolish wealth tax in Andalucia was based on the regional government’s belief that it was an unfair tax and discouraged investment and economic growth in the region. The tax was seen as a deterrent for high-net-worth individuals (HNWIs) and business owners, who were seen as crucial for job creation and economic stimulation.
However, critics of the decision argued that wealth tax was an important source of revenue for the government and helped to reduce inequality in the region. They argued that the abolition of wealth tax would only benefit the rich and widen the gap between the rich and poor in Andalucia.
To address these concerns and also that it was unfair to all other autonomous regions (except Madrid which also scrapped wealth tax), the Federal government introduced a new tax called solidarity tax. Solidarity tax is a progressive tax that aims to reduce inequality and generate revenue for the government. It is applied to all autonomous regions. If a region has no wealth tax, then the solidarity tax is applied. If, however, a region already has wealth tax in place, then the solidarity tax is removed. The tax is based on a sliding scale, starting with HNW individuals with assets of €3m and above. There are three bands, the lowest rate being 1.7% which rises to 3.5% on assets worth €10m and above.
The introduction of solidarity tax was seen as a positive step by many, as it addressed concerns about inequality and raised much-needed revenue for the government. However, some critics argued that the tax was not enough to make up for the loss of revenue from the abolition of wealth tax. However, it has allowed many to escape wealth tax on assets under €3m, especially if those assets are held jointly. This is seen as attractive by many resident expatriates as it mitigates the impact of wealth tax (in effect there is no wealth tax for a couple on assets below €6m).
In the case of Andalucia, the abolition of wealth tax and introduction of solidarity tax highlights the ongoing debate about the role of taxation in reducing inequality and promoting economic growth. While some argue that wealth tax is an important tool for reducing inequality, others argue that it discourages investment and entrepreneurship. What is clear is that it is part of a concerted move to make the region attractive to those who would stimulate economic growth. For example, inheritance tax has been removed and capital gains tax scrapped on all first homeowners over the age of 65. Income tax is being lowered by at least 4% and water tax has also been abolished. All of which represents a strategic move to lure back permanently those who had moved away, including to nearby Portugal for example. Ten of the top 20 wealth tax payers in 2019 left Andalucia in 2020, resulting in a loss of income for the region of nearly 18 million Euros (3.5 m in wealth tax and 14m in personal income tax).
The Spectrum IFA Group is committed to helping expatriates navigate their way through the taxation minefield. Our disciplined financial advice process ensures that valuable planning opportunities are fully utilised, for optimal tax efficiency on assets, income, investments and, eventually, inheritance for your beneficiaries. By doing so, we can demonstrate, perhaps surprisingly to some, that Andalucia truly is a tax haven, not just in Spain but in a wider European context.
Whether you are planning to move here or are already a full time or part time resident, please contact me for a no fee and no obligation chat – perhaps over a coffee?
Protecting your investments during the Ukraine conflict and beyond
By Charles Hutchinson
This article is published on: 18th April 2023
18.04.23
The ongoing Ukraine conflict has had a significant impact on global financial markets and the value of investments. While it is difficult to predict the exact outcome and duration of the conflict, there are several strategies investors can employ to protect their investments during this uncertain period. Here are some suggestions:
1. Diversify your portfolio: One of the most important strategies for protecting your investments during a period of geopolitical uncertainty is to diversify your portfolio. By investing in a variety of asset classes such as stocks, bonds, commodities, and real estate, you can spread your risk and reduce the impact of any one investment being affected by the conflict.
2. Avoid investments in affected regions: If you are concerned about the impact of this conflict on your investments, it may be wise to avoid investing in companies or industries that are directly impacted. For example, companies that do business in Ukraine or Russia, or companies that rely heavily on imports or exports from these regions, may be more vulnerable to a serious and sustained downturn.
3. Consider safe-haven assets: During times of geopolitical uncertainty, investors often flock to so-called “safe-haven” assets such as gold, US Treasuries, and the Swiss franc. These assets are generally considered to be less risky than other investments and, depending on wider market conditions, can provide a hedge against volatility.
4. Keep an eye on news and developments: It is important to stay informed about developments which may affect financial markets. By keeping a close eye on political and economic news, investors can make informed decisions about their investments and, if necessary, adjust their portfolios accordingly. Note that becoming overly reactive to short term events will usually be counter-productive, but staying informed will also often present valuable opportunities for tactical portfolio adjustments.
5. Take a long-term view: While it can be tempting to react to fluctuations in the financial markets, it is important to remember that successful investing almost always relies on patience and taking a long-term view. Rather than trying to pre-empt short term market direction, it is often more prudent to focus on your long-term investment strategy and stick to your plan.
6. Consult with a suitably experienced financial adviser: If you are uncertain about how to best protect your investments, it may be helpful to consult us. A professional adviser can help you navigate the complexities of the financial markets and provide personalised advice based on your individual goals and risk tolerance.
Points 1 to 4 above are actually the responsibility of the fund managers whom we select for their prowess, long term performance and consistency. It is their job to navigate your investments through uncertain times. Point 5 is vital and it is important to remember the adage “It’s not timing the market, but time in the market, which matters”.
In conclusion, the ongoing conflict in Ukraine presents a challenging environment for investors, but there are strategies that can be employed to protect investments. By diversifying your portfolio, avoiding investments in affected regions, focusing on safe-haven assets, staying informed about the latest developments, considering the long-term and consulting with a financial adviser, you can help protect your investments during this uncertain period.
Spectrum sponsors the Malta Flag Football League
By Jozef Spiteri
This article is published on: 18th April 2023
18.04.23
Between December 2022 and March 2023, the inaugural season of the Malta Flag Football League was held which saw four teams battle it out for the title. One of the teams participating was our very own Tigné Tigers. The other teams taking part were the Balluta Ballers, Simpl Lords and Enteractive Kings.
During the regular season the Tigers were dominant. Their versatile plays on offense and no-nonsense defence led them to win five out of their 6 matches, moving on into the playoffs comfortably holding the number 1 seed.
In the semi-finals the Tigers faced a resilient Simpl Lords team. The game was neck and neck in the first half but in the second half some good defence saw the Tigers maintain a slight cushion over their opponents. The match ultimately had to end a few seconds early due to an injury being sustained by one of the Simpl Lord players, leaving them with insufficient players to play on. The other semi-final saw Balluta Ballers progress after a forfeit from Enteractive Kings.
The final between the Tigers and Ballers was very tight, but the Tigers great defence seemed to be the difference between the two teams. This meant that after a great encounter, the Tigné Tigers were crowned as the first MFFL champions.
Well done to all those involved, and a special mention to our very own Jozef Spiteri who was the man who organized most of the league.
Tales of an olive tree
By Gareth Horsfall
This article is published on: 17th April 2023
17.04.23
I wrote this article because during this Easter period we decided to stay in and around Rome. We took a number of long bike rides around the city and along the Tiber and I could not help but notice the spring green of Rome, once again.
It’s an amazing sight and one that I feel grateful for. It also reminded me that whilst the investment markets are still recovering slowly and tentatively from last year’s sell off due to the Ukraine/Russia war, they are cyclical by nature and whilst, as humans, we will always tend to run from one crisis to another, there will inevitably be times of abundance and plenty.
My experience of olive trees through my clients
You may have olives’ trees that you tend to in your garden or land, in Italy. I know that many of my clients do, and take great satisfaction in looking after them year in year out to harvest the precious oil that comes from them but, listening to the tales over the years, I can make many comparisons with investment markets.
The ‘Ulivo’ goes through the seasons of the years but never appears to bear fruit in a linear way. In fact, many of you tell me that some years the ‘Ulivo’ may not produce any fruit, other years it is plagued by the ‘moscerino’ (little fly), other years there isn’t enough frost or too little frost and some years you get a double harvest. In other years your friend with the neighbouring field, facing a different direction, has a bountiful year, whilst you have none. None of it seems to make any sense. All variable factors under which you have no control but you accept as part of your nurture for the ‘Ulivo’.
It seems that like every living breathing organism, the ‘Ulivo’ will provide what is needed, but not necessarily in the way you would always want it to. A defined amount of litres of oil each year, just enough to feed my family and friends would be fine. No such luck!
It is easy to forget that the component parts of investment markets are in fact living breathing human beings. Every company, government or supranational is run by people who are subject to folly, excess, corruption, huge advances forward, amazing decisions which benefit everyone, building and growing enterprises and generally trying to find a healthy balance.
Just like the ‘Ulivo’ the investment markets go through their cycles of life according to many variable factors of which we have no control. Flowers blooming (markets rising), leaves falling (market falls), harsh winds (the volatility), buds sprouting (opportunities presenting themselves) and then the cycle repeats itself. Your portfolio goes through its own cycles of life.
I have seen in the past that people new to Italy, and the ‘Ulivo’, have talked of uprooting an old tree (with those amazing architecturally contorted trunks) because it’s old and no longer bears fruit, only to be told by someone with more experience that it just needs to be trimmed in the right way, at the right time of year and creating that hollow space in the middle of the tree so the light can shine through (the equivalent of a review of your portfolio) only for the tree to once again bear fruit when the conditions are favourable for it to do so. This is not to say that dead or dying plants should not be replaced. If they have served their purpose and need to be replaced with a younger healthier variant then so be it.
There are so many similarities between our investment portfolios. The timescales and the variables may differ (wars or winter / inflation or summer) but the ebb and flow, the rises and falls and the seasonal changes are ever present.
The coming years may be lean years, or could provide us with way more then we could ever want or need. Ours is not to know, nor have any control over the variables, but only to do the best we can to make sure that we look after what we have.
If you find it difficult to stick with your investment strategies and would like to get busy trying to chase market returns (I include myself in this group, but am trained enough to know that it doesn’t generate higher returns), the research shows that it has no better effect than generating higher transaction costs and other fees associated with switching investments frequently. The only thing you can be assured of is lower investment returns as a result.
Patience is key! Live the seasons and wait
for abundance to once again raise its bountiful head.
Let’s talk cash!
OK, now that I have my hippie moment out of the way, we can get back to talking about financial things again. So, let’s talk about cash that you might have sitting around and finding a better home for it.
Unfortunately, as many of you find out, once you leave your home country and become resident in Italy, you are almost instantly excluded from taking out new financial products in your home country and instead need to look at what other offerings are available to you here. This means often looking at what Italian or EU based banks can offer, and principally in EUR.
A number of people have mentioned to me recently about the savings rates available in the UK, nearing 5% in some cases and wondering whether they can achieve anything similar in Italy or the EU. The answer is that there seems to be very few, and where they are available the interest rate varies between 2.5% and 3% gross max for 1 year deposits, rising as much as 4.5% if you are willing to lock your funds up for 3 years. In addition, you have to look out for accounts which are ‘vincolati’ i.e. they have terms and conditions attached. These may be as simple as locking you in for a specific term (fixed deposit) or requiring you to open a current account and transfer your basic banking to them as well. In true form things are made a little more complicated than somewhere like the UK.
Italians, of course, are akin to also looking at their home country government bonds which are currently paying around 3% interest gross at the moment. having dropped from about 3.38% gross around the beginning of March.
One advantage of investing in government debt directly is that it offers an attractive tax rate at 12.5% rather than the 26% for other financial instruments. Placing cash monies into short term Italian or EU government debt, if you are seeking better EUR returns on your cash, might be a useful alternative to seeking out a higher paying deposit account. (Bear in mind that if you want your capital back at the end of the bond period then you need to wait until bond term matures. Selling early could mean a capital loss). Of course, if you are seeking better returns in other currencies then you can buy government debt in that country instead. Government debt, wherever it is purchased still attracts the 12.5% tax rate on interest in Italy.
If you are simply looking for a deposit account then you could do no better than compare rates on facile.it or confrontaconti.it
The only way to purchase government bonds is through an exchange mechanism such as an investment platform. In Italy, investment and banking are highly institutionalised so speaking with your bank might be the best way to approach it if you are new to this kind of investment. Otherwise, a quick online check with throw up some other solutions.
Inflation considerations
Whilst these rates offer considerably more than the last decade it is indicative of the bigger and more aggressive trend upwards: inflation.
For perspective, the USA and UK are experiencing inflation ( measured by the Consumer Prices Index) at around 9% and 10% respectively. Italy is currently on 7.7% inflation year on year.
So, regardless of how much you might make on a deposit it is always going to be well below the rate at which the spending power of your savings is being eroded year on year. You may know my thoughts on the matter already, as I have mentioned it in previous E-zines, but I think inflation is here to stay, and I am deeply suspicious of the opinions that it will fall back to 2 or 4% within a year or so. There is so much debt in western economies and the only way to rid ourselves of it, and bring back economic stability to the west is to inflate it away. That could mean more medium term pain.
In summary
If you have cash lying around in deposit accounts, cash which you may need for an emergency or just need to live on, then seek out better interest paying accounts. A good strategy is to keep approx. 6 months cash on hand and then stagger your further 6 months cash needs in 6 month deposits, 12 month,18 month etc. In this way every 6 months you have a maturing deposit when your cash starts to run out. If you don’t need the cash then you just roll it over into another longer term deposit.
But whatever you do, don’t keep all your life savings in cash hoping that a higher interest rate will protect you from rising prices. It won’t!
French financial updates April 2023
By Katriona Murray-Platon
This article is published on: 12th April 2023
12.04.23
April hails the beginning of tax season. For those eager bunnies who want to get on with it as soon as possible please note that the tax season will begin on 13th April with the online service being available and the new 2022 income tax forms available to be printed online or found at the tax offices from this date.
If you do want to get it over and done with, that is understandable, but actually this year you have a bit more time to get it done as most of the submission deadlines are either towards the end of May or even beginning of June.
Those submitting their first paper returns have until Monday 22nd May 2023 at 11.59pm, as attested by the postal stamp. The other dates for the online submissions are as follows:
- Zone 1 or departments numbered 1 to 19 have until Thursday 25th May 2023 until 11.59pm
- Zone 2 or departments numbered 20 to 54 have until Thursday 1st June 2023 until 11.59pm
- And Zone 3 or departments numbered 55 to 974/976 have until Thursday 8th June until 11.59pm
At the time of writing and until the 13th April, I can’t comment on any changes in the tax forms but in my next Ezine I will give more information about any specific aspects of the 2022 declarations. You can always download our free tax guide HERE and please also look at my adviser page for previous articles on tax matters.
As tax residents in France, you have to declare your worldwide income irrespective of where it comes from. Not everything is taxable, depending on the provisions of the double tax treaty, but everything is declarable. One of the things you do not need to worry about is any French sourced income like salaries, French pensions, French bank interest. This information is generally already completed on your tax return so you just need to check that it is correct. You only need to declare your foreign bank accounts on the 3916 form and not any French accounts or investments.
Tax offices often get confused about what foreign income gets a tax credit under the double tax treaty and what gets a tax credit because it was actually taxed in the country in question whereas, very often, because the income falls under the tax threshold the income wasn’t actually taxed. Well the French Administrative court, the Conseil d’Etat has just confirmed in a decision dated 20th March 2023 (https://www.legifrance.gouv.fr/) that where a double tax treaty grants a tax credit on this income, this is not subject to whether or not the income has in fact been taxed in the country from which it originated.
Finally, an additional energy cheque of an amount of between €48 and €277 depending on income, will be sent out and can be used until 31st March 2024 to pay gas or electricity bills. This is in addition to the exceptional energy cheque and the wood and fuel cheque that have been sent out already.
I will be available for meetings except for the week commencing 17th April as I will be away with my family. But there are still plenty of slots for meetings in the second and last week of April. Please do get in touch with any tax or financial questions.
Arts Society de La Frontera
By Charles Hutchinson
This article is published on: 11th April 2023
11.04.23
The Spectrum IFA Group again co-sponsored an excellent Arts Society de La Frontera “Live” lecture on the 15th March at the newly renovated San Roque Golf & Country Club on the Costa del Sol. We were represented by one of our local and long-serving advisers, Charles Hutchinson, who attended along with our co-sponsors Currencies Direct represented by Ignacio Ortega, Carol Schleisman and Cristina Ruiz. Also present was the society’s European Chairman Jo Ward.
The Arts Society is a leading global arts charity which opens up the world of the arts through a network of local societies and national events throughout the world.
With inspiring monthly lectures given by some of the UK’s top experts, together with days of special interest, educational visits and cultural holidays, the Arts Society is a great way to learn, have fun and make new and lasting friendships.
At this event, over 50 attendees were entertained by a talk on The Manufactured Woman which is the story of Pandora, her box and the reasons for her creation by Mary Sharp of BBC Radio 4 fame. She gave an interesting talk showing comparisons with other created female characters such as Eve in the Bible and Eliza Doolittle in Pygmalion and the later My Fair Lady.
The talk was followed by a drinks reception which included a free raffle for prizes including CH supplied book on Dutch Art and Champagne. Smart Currency Exchange also supplied wine presentation cases with glasses and Brandy.
All in all, it was a good turnout and a successful event at a wonderful venue. The Spectrum IFA Group was very proud to be involved with such a fantastic organization during its current global expansion and we hope to have the opportunity again at the November lecture.
