Even if you are a Non Habitual Resident (NHR) with preferential tax status, UK and Portuguese property will remain taxable on both income and capital gains. However, there are certain planning opportunities you can tax advantage of in Portugal and the UK.
Tax planning around property
By Portugal team
This article is published on: 15th September 2023
15.09.23
UK property planning
When selling UK property, you can deduct expenses associated with buying and selling the property, including professional fees and fees incurred on the transfer of property, such as stamp duty. You can also add any expenses incurred in enhancing the property to your base cost.
If the property has ever been your principal private residence (PPR) you can reduce or even eliminate the capital gains tax with main residence relief. This ensures that any period during which the property was your PPR is exempt from tax. For example, if you lived in the property for 5 years out of a total ownership period of 10, then only 50% of any gain would be subject to tax.
The property is also considered your PPR for 9 months after leaving the property so you can increase your tax-free ownership period.
UK allowances available
Even if you have left the UK, as a UK/EEA national you can retain your annual capital gains tax (CGT) allowance to offset any taxable gain, although this is reducing – the current allowance is £6k but falling to £3k from the 2024/25 tax year. If you hold property jointly with your spouse/civil partner, you can combine your CGT allowances (and income tax allowances if letting).
Timing is important
If possible, selling when you have not sold other assets will ensure your full CGT allowance can be set against the property gain.
If you are still UK tax resident you can also:
- time the sale when your income level is low, as your overall income level determines which CGT band will apply (18% for basic rate tax payers and 28% for higher and additional rate), and/or
- higher rate tax payers can potentially lower their tax bands via a pension contribution or donation to charity.
Non-Resident Capital Gains Tax (NRCGT)
If you are a Portuguese tax resident, you are able to benefit from NRCGT which is a UK tax concession which states that only the increase in value of property after April 2015 is taxable e.g. if you purchased a property in 2000, any increase in value between 2000 and 2015 is not taxed. This can substantially reduce your tax bill and wash out gains, and as stated earlier, you can still retain your annual CGT allowance.
If you also qualify for NHR there would be no tax in Portugal, which under normal circumstances would otherwise be taxed at progressive rates.
A further planning angle for those with NHR is that, if properties are held within a company, any dividend taken would be free of tax.
You may find the HMRC link useful when calculating your likely liability https://www.gov.uk/tax-sell-property/work-out-your-gain
Portugal property planning
Properties purchased after January 1989 are subject to capital gains tax on 50% of the gain. Property purchased before this date is not subject to CGT. Do note, NHR does not have any effect on the taxation of Portuguese property.
Some expenses are deductible, such as the buying and selling costs. In addition, inflation relief is available in Portugal if the property is held for more than two years.
It is possible to mitigate or even eliminate the taxable gain on a Portuguese main home by:
- Reinvesting in another property within the EU;
- Reinvesting in an approved investment structure; or
- A combination of the two e.g. if you sell a property for €1m, you can downsize into a smaller property for €500k and put the balance of €500k into an approved investment structure. This investment structure can then provide a tax-efficient income for life.
The amount that must be reinvested is the net sale proceeds, not just the gain. Any amount not reinvested is taxable under the normal rules.
There are nuances around these rules so please always seek professional advice. There are also complicated scenarios when selling property held by companies and specialist advice and calculations are required.
The dilemma: cash or investment markets?
By Portugal team
This article is published on: 12th September 2023
12.09.23
With rising interest rates, we have seen banks offering interest rates in excess of 4% or even higher with 1-year fixed terms. This coupled with the perceived risk of investment markets and the constant stream of negative news has left many wondering whether staying in cash is best.
Short term goals
Cash certainly has a place as an emergency “buffer” to allow for life’s unexpected events, and it is also sound financial planning to set aside sufficient for your short-term needs. Likewise, holding cash as part of an investment portfolio is important and it can help reduce the effects of volatility often seen in markets.
Cash as a long-term investment
Interest rates offered by banks to customers rarely beat inflation, so using this as a long-term savings strategy is not ideal.
Even with rising interest rates, the returns from cash are still negative when you consider that inflation currently sits at 7.9% in the UK, so investors are not getting any real returns. As an example, the negative effect of a modest 2% inflation on £100,000 over 10 years is £82,035 and £67,297 over 20 years.
However in the longer term, interest rate cuts are likely as the Bank of England is starkly aware that keeping interest rates high risks triggering a recession and destabilising the UK housing market. Central banks globally are also now close to pausing and then reversing recent rate hikes.
Protect yourself against inflation
Investing in high-quality company shares has been shown to offer inflation protection. Looking at long-term figures, Credit Suisse show that over a 123-year period starting in 1900, shares in developed equity markets have generated returns of 5.1% above inflation and emerging equity markets have achieved 3.8% over inflation.
The Credit Suisse figures also show that shares have outperformed cash (and bonds) in every one of the 21 countries its data covers over that 123-year period. This is quite remarkable given this period covers two world wars, two global pandemics, the great depression, the 2000 dot-com bubble, and the 2008 global financial crisis.
Opportunities elsewhere
Falling interest rates will provide opportunities elsewhere. For example, bond prices move in the opposite direction to interest rates so a future fall in interest rates is likely to result in capital gains on bonds, or holding shares allows investors to not only benefit from the increase in share price over time but income from dividends too.
If we look at the top 100 shares in the UK, analysts are expecting a dividend yield of 4.1% this year and 4.4% in 2024 and with the possibility for share buybacks added into the mix, this could be as high as 6% for 2023.
Tax considerations
Always consider the net interest rate you will earn. For example, a relatively attractive rate of 5% becomes a somewhat mediocre return of just 3.6% for a standard Portuguese tax resident who must pay 28% tax.
Also be cognisant that some of the more attractive rates being offered by banks in Guernsey and Jersey will have a higher tax rate applied of 35%, even if you are a Non-Habitual Resident.
The solution – balance
We believe a balanced approach of cash and investments makes most sense. The split however really comes down to your short- and long-term goals.
In short, cash is still king for short-term needs but for meeting longer-term income and growth objectives, stack the odds in your favour by using a sensible and well-diversified portfolio of shares, bonds and property. Coupling this with effective tax planning can lead to even more savings.
Lastly, Warren Buffet’s advice as one of the world’s most successful investors is, “The one thing I will tell you is that the worst investment you can have is cash. Cash is going to become worthless over time but good businesses are going to be worth more over time”.
Are you thinking about moving to Italy?
By Gareth Horsfall
This article is published on: 9th September 2023
09.09.23
If you are thinking of moving to Italy to become a full time resident, or even a resident for part of the year, then it make sense to understand your tax and other financial liabilities before you make the move.
When you buy a house in Italy, you will very likely receive competent and complete advice regarding the cost of buying and renovating a house. The agent may also explain the difference between the cost of buying as a resident in Italy and a non resident. But, the buying process should be accompanied by a clear and concise longer term financial plan to minimise tax liabilities.
Italy has its own tax code and its own preferred set of tax efficient savings and investments products and whilst you may think that you can take advantage of the same financial benefits as you have done in your home country they may not represent the best and most efficient ways to hold your incomes and assets, whilst living in Italy. Tax efficient accounts in one country often have no relevance in Italy. But there are alternatives available which could save you money.
Sadly, and all too often, expats fail to do sufficient tax and ongoing planning for living in a country which has a very different set of rules to their own and as a result end up paying more than they need to, getting fined for simple and honest mistakes and in the worst case scenarios needing to return home.
At The Spectrum IFA Group (Italy) we can help you to not just look at the initial financial aspects of moving to Italy, but also to help you look at the longer term consequences and avoid any inevitable surprises once you have made the decision to purchase property in the country. We want to ensure that your dream move continues to be a dream.
We can help you look at the most tax efficient ways of holding your assets and incomes taking into consideration both Italian tax law and that of your home country and ultimately help you to minimise your tax liabilities.
Cross border Tax Planning involves a complete overview of your types of income, e.g pension, rental income and interest from savings, and also a look at how your assets are structured.
In the majority of cases we can show you how to simplify your financial affairs in an Italian compliant manner without needing to bring your money into Italy.
The end of succession tax in Valencia
By John Hayward
This article is published on: 6th September 2023
06.09.23
On 28th May 2023, Carlos Mazón was elected president of the regional government of Valencia as leader of the Partido Popular. On 21st July 2023 he announced that his government had approved the initiation of a bill to reduce succession and gift tax (ISD – Impuesto de sucesiones y donaciones – Inheritance Tax to the UK reader).
The draft bill was placed on the urgent pile with Les Corts on 3rd August 2023 and it awaits absolute approval.
Mazón’s reasoning was that the income from ISD represents around 1% of the region’s total revenue and that charging tax on money that has been taxed before was not fair. He wants to reduce the tax burden to prevent an inheritance from becoming a “serious economic loss for many families, who have to face its payment, without the inheritance entailing any economic benefit or real increase in their assets.” This seems a very refreshing attitude although his opposition have argued that the wealthy will avoid tax that would generate around €400 million a year. This assumes that the timing of deaths and gifts matches their statistics.
There are conditions to this bonificación in that only close family members and spouses will benefit but that is the same with the existing reduction. The improvement is that, for the majority of spouses and close family members, they will receive a reduction of 99% on the tax bill. Currently it is only 50%.
All this being said, there is still room for inheritance tax, and gift tax, planning. We experience many complicated situations where, for example, couples are not married or there are children from different marriages. Keeping assets away from the inheritance and gift tax net in Spain, in a legal way, is key, especially for beneficiaries who do not live in Spain.
We await absolute approval of the bill but, and although this may sound a little insensitive, any deaths, and gifts made, since 28th May 2023 will be eligible for this new law.
And like buses… Abolition of Wealth Tax in Valencia?
One at a time, please!
More to follow…
To find out how Spanish inheritance and gift tax will affect you and your beneficiaries, as well how we can help you with your existing investments and tax planning, and provide you with ideas for the future, contact me today at john.hayward@spectrum-ifa.com or on +34 618 204 731 (WhatsApp)
Financial update – France September 2023
By Katriona Murray-Platon
This article is published on: 4th September 2023
04.09.23
I hope you all had a good summer. We spent ten days in Andernos and then enjoyed a much cooler ten days visiting family in the UK. Whilst I was in the UK I saw an advert in the paper for a bank savings account offering around 5% interest on amounts up to £50,000.
However, I noticed that in order to benefit from this rate you would have to commit to leaving the money there for two full years otherwise if you took the money out you would only get around 2% interest. A quick scan of the finance section of the paper showed similar offers. Now, leaving aside the fact that once you are French resident you can’t open a UK bank account, with inflation in July being 6.8% in the UK these rates are still far below inflation. IF you were to have one of these accounts and be a French resident you would need to reduce the interest rate by 30% because that is the French tax that you would have to pay on any gains. Also there is exchange rate risk that needs to be considered.
Some other accounts were brought to my attention in Jersey. However there is no double tax treaty between France and Jersey so any interest earned would be taxable in both countries.
I always advise people to take advantage of the French tax free savings accounts like the LDDS and the Livret A and the LEP if you meet the income threshold BEFORE investing. If you add the CEL account to this list it effectively means you can hold around €50,000 readily available cash earning tax free interest. These rates are reviewed quarterly on 1st of February, May, August and November. You will be pleased to hear that there have been no changes to these rates as at 1st August 2023.
One of the key points about investments is diversification. Not only are the investments we recommend very diversified in terms of geographic location and asset class but if you have invested with us this is usually only a part of your assets.
All investments whether it is your house, your bank accounts, or your other investments, involve some level of risk. You only have to look at the history of the rates on the savings accounts HERE or the current concerns about house prices and mortgage rates in the UK, to see that nothing is guaranteed in the long term. But what we can show you from the past performance of the investments we offer is that over the past three or five years they have performed well. And the longer the investment term, the greater the likelihood of strong, positive returns ahead of the rate of inflation.
Another thing we managed to do at the end of July was to complete our wills and make stipulations about the guardianship of our children. I wrote about guardianship HERE but I admit I never got round to doing anything about it until now. The husband of a French financial adviser that I recently met is the Notaire in an office in our neighbourhood so we were able to make an appointment with him. We hand wrote our wills before the notaire, signed and dated them and then handed them in with a cheque for them to be registered. It was all very easy and I’m glad that it is now sorted.
By now you should have been able to view your tax statements in your online tax account, if you have any questions about the figures please do let me know.
After a long and much needed break, I am excited to be back at work and arrange appointments with my clients and those who have contacted me. If you want to speak to me about something please do let me know.
Looking forward to speaking or hearing from you soon!
Preparing for the inevitable
By Richard McCreery
This article is published on: 4th September 2023
04.09.23
A few tips on how planning ahead, as well as looking back, can make a difficult time much easier on our loved ones. It comes to us all, but we devote relatively little time to thinking about it: death.
Unsurprisingly, most people prefer to avoid thinking about their own mortality, but they are keen to ease the pain for loved ones who are left behind. In this short article I’ll take a look at some tips to make this time a little less hard on your family and I’ll even give you an idea of how you can leave behind a moment of happiness for your closest relatives.
Make ‘The Folder’
My colleague Gareth Horsfall has written about the importance of ensuring your paperwork is in order and stored where your relatives can find everything they’ll need to get through the formalities that inevitably ensue from your passing. The Folder is a central location (digital, physical or both) where you keep a record of all your assets, your bank accounts, your pensions and investments, as well as a copy of all your important documents like birth certificates, marriage certificates, your social security number etc. And, finally, a list of all your internet and device passwords, of which there could be a lot!
Modern life can be extremely complicated whilst we are still alive and it becomes even more so when you have to deal with someone else’s affairs that may not be entirely familiar to you. By collecting all the important paperwork and information in one place, you can ease the inevitable administrative burden and show your loved ones that you were thinking about them. And don’t forget to tell them where they can find The Folder.
Close old overseas accounts and companies
I was once asked to help the wife of a client to deal with some of the inheritance formalities that were required for the settlement of his estate after he died. Wealthy people often have assets in various countries and this can lead to significant extra time and expense when attempting to transfer everything from the deceased’s estate to the beneficiaries.
For example, the ownership of a British Virgin Islands company can’t be transferred to someone else before probate is granted in that jurisdiction, which entails securing the services of a local qualified lawyer. If that company is no longer needed once the deceased is gone then further fees will be incurred in BVI for closing that company. Multiply this scenario across various foreign jurisdictions and it can become quite costly and time consuming in order to settle the full estate.
Conclusion: if you can simplify your affairs by closing underutilized overseas companies or dormant bank accounts, it can save your family a lot of hassle and money later.
Avoid paying more tax than is necessary
Ironically, inheritance tax is a fact of life. It is often only considered when it has to be paid and it can be surprisingly substantial – in France a house can swallow up any allowances you may benefit from, leaving the remainder to be taxed at up to 45% for children and up to 60% for non-family beneficiaries. By using an assurance vie policy as a vehicle for managing some of your wealth you can substantially increase the tax-free sums your loved ones inherit, they may pay a lower tax rate on the amount that is taxed, you can use the beneficiary clause to choose who gets what and the money can grow free of tax during your lifetime if not withdrawn.
Everyone hates paying inheritance tax, so when you know that your children can inherit an extra 152,500€ each tax-free if the money is coming from an assurance vie policy, it quickly becomes apparent how much you can save them (don’t forget: in order to get the maximum benefit, you should start your policy before you turn 70). They say there are only two things that are certain in life: death and taxes. Whilst you can’t avoid the first, your family might avoid the second with a bit of foresight and planning.
Finally, leave them something really personal
You’ve finished tidying up the loose ends of your life, you’ve done all you can to minimize the tax your family will pay and your affairs have been put ‘in order’. You have made every effort to ensure your passing will be as little of a burden on your beneficiaries as is possible, you have made a difficult time less difficult by thinking ahead. There is also a way to use this moment to bring some joy into the lives of those who love you: by thinking back on your life.
A memory journal is a little treasure that helps you to record some of the most precious moments of your life, to be passed on to your children or grandchildren. It is a guided book that contains prompts and questions such as ‘How did you meet my mother?’, ‘What was your favourite subject at school?’, ‘Tell me about the happiest or greatest memories of your life’ or ‘What did you feel when you first saw me after I was born?’ It gives you the opportunity to leave your family the story of your life, your most intimate thoughts and feelings, perhaps alongside a few photos.
Money and paperwork are important, they have to be dealt with. Put everything in order, in advance, and you will be doing your family a big favour. Leave them as much money as you can tax-free and you’ll ensure they will be better off. And finally, a few of your own words left alongside the admin makes this difficult time more bearable. These things are easily put off, you may not even want to think about them, but if you take action sooner rather than later, I promise you will never regret it.
If you would like to speak me about planning ahead and putting your family affairs in order, please get in touch. I’m here to help and happy to answer any questions with no obligation.
Expatriate life in Malta
By Jozef Spiteri
This article is published on: 31st August 2023
31.08.23
When expats think about possible destinations for settling down and retiring, several factors come into play. Apart from Malta’s attractive Mediterranean climate, English-speaking locals and great connections to other European cities, the financial advantages associated with living here should also be considered.
When looking at Malta, apart from the obvious desirable features of the island, there are various visa programs available, offering a range of tax-efficient solutions specifically aimed at expats.
The following are just some of the options available:
Malta Retirement Programme (MRP)
This program is available to EU and non-EU nationals (including EEA and Swiss nationals) who are not employed and receiving a pension as regular income.
Beneficiaries of the MRP will be granted a special tax status with pension income remitted to Malta taxed at a flat rate of 15%, whilst other income arising in Malta will be taxed at a flat rate of 35%.
This can be very attractive for expat retirees who are paying significantly higher tax rates on their pension incomes in other countries.
Although they cannot be employed as such, those retirees on the MRP can hold non-executive roles on boards of companies based in Malta, and they can also engage in activities related to any institution, foundation or trust of a public nature (for example educational, philanthropic, or research and development work in Malta)
Professional advice should always be sought on suitability to personal circumstances.
Digital Nomad Visa
Many professionals are now working remotely – why not do so from a sunny island in the Mediterranean? This visa is valid for ‘third country’ individuals (non-EU, non-EEA, non-Swiss) who are either partners or employed with a company located outside the country. Consultants advising entities outside Malta are also eligible to apply.
The main requirement is that applicants must be earning a minimum of €2,700 per month.
Applicants who are accepted will also be allowed to bring over spouses and dependent children to live in Malta. These individuals will be able to take advantage of all that Malta has to offer, including hassle free travel to other Schengen countries.
A key advantage of this program is that no tax is payable within its first year. Again, professional advice is recommended.
Citizenship by Investment
This program is targeted at ultra-high net worth individuals who are willing to make a minimum contribution of €600,000 to the national development fund set up by the local government and who have been Maltese resident for 36 months. Another option is also available, requiring a contribution of €750,000 but with a lower residency condition of 12 months. Additionally, applicants must contribute a further €50,000 for each dependent included in their application.
€700,000 will also have to be invested into residential real estate or a rental contract of €16,000 per year will have to be established and maintained for five years. A donation of €10,000 will also have to be made to a registered philanthropic, cultural, sporting, scientific, animal welfare or artistic non-governmental approved organisation/society.
This will lead to citizenship and a Maltese passport after one to three years of residency, which by default also brings European citizenship, enabling these individuals to live, work and study anywhere in the EU.
Malta Permanent Resident Scheme
This program is a straightforward residency by investment program. The processing time for applications is four to six months from the submission of a correct and complete application form. The program is particularly valuable for prospects intending to make Malta their second home.
To be eligible for the MPRP, applicants should:
• be a third country national (non-EU, non-EEA, non-Swiss)
• not hail from sanctioned countries, as announced from time to time by the Community Malta Agency
• not benefit under other pertinent regulations and schemes
• have sufficient financial resources to maintain themselves and their dependants without recourse to the social assistance system of Malta
• show they have capital assets of not less than €500,000, out of which a minimum of €150,000 must be financial assets
• be fit-and-proper individuals and have a clean criminal record
• not pose any potential threat to national security, public policy, public health or public interest
Global Residency Program
The GRP is designed for non-EU, non-EEA or non-Swiss nationals who are not long-term Maltese residents. Individuals applying for the program can work in Malta if they satisfy the necessary conditions to obtain a work permit.
Successful applicants may also have household staff providing services in their qualifying property if all requisite conditions are met.
If you would like to know more about these programs feel free to contact our team in Malta. We can outline the various options and determine suitability to your circumstances. All initial meetings and discussions are free of charge and carry no obligation to proceed.
How do I get maximum benefit from my share options?
By Barry Davys
This article is published on: 18th August 2023
18.08.23
There are many different share option schemes and this can cause confusion. A simple google search “employee share options explained” gives 79.1 million results. Most of these results try to cover the multitude of scheme constructions, variations and possibilities; an almost impossible task.
Share option schemes vary from country to country, from company to company and even to level of employee seniority or skill. The reality is, despite all these search results you will only know the full details of your share options arrangement when you get your contract.
Share options are, however, becoming more and more a part of pay packages. I have a reasonable proportion of my clients with these options and several have been able to exercise the right to sell at a generous profit. The tech sector is particularly keen on share options and their employees are keen too as they are fast growth companies which increases the chance of selling the options at a profit. Other sector companies also run share option schemes.
What is it about share options that is significant for you as an individual (and your family), especially if you are lucky enough to have a significant profit?
- Before you leave your company, check what the rules are for your particular scheme. Leaving clauses can include
→ loss of your options
→ Compulsory sale of shares back to the company
→ Sale of the shares in the open market but within a set time
- Shares you are entitled to can be for a parent company of your employer, the regional company e.g. XYZ Europe of the parent company and even the shares of the company that directly employs you e.g. XYZ SA. It is critical to know which company you have your share options in. I have seen a very sad error when someone sold options based on XYZ Europe share price when the shares were for actual only in XYZ SA. It resulted in a loss instead of profit on the sale of the share options
- Tax on share options schemes is based on where you as an individual live, not where the company that issues the scheme is based
- In Spain, profit from share options is added to your employment income and taxed at the corresponding top rate
- Tax planning is a possibility when selling the shares. However, you must do this before you sell the shares
- Also, before selling your shares, view the sale as a business owner. You may only be a minority owner but the shares do give you ownership. Assess the sale as if you own and are selling the whole business. This means looking at the likelihood of future growth, increase in profits, and how healthy the balance sheet is. As an employee you will have insight into the company prospects. You will have a gut feel about the prospects for the next year or two. Use this insight to help you decide when to sell for the best profit
- Options in a US company can result in you having assets in the US. Whilst inheritance tax (estate tax) is only payable on estates valued at more than $12.29 M (2023) for US citizens, the starting value for non-resident, non-US citizens is only $60,000. This is not a typo, it is $60,000. Above this figure, inheritance tax starts at 18% and rises to 40%If you have options over this figure you can mitigate the problem by selling some of your options. Before doing so, take professional advice from a financial planner who is familiar with this problem. Your personal circumstances will dictate whether you should reduce your US inheritance tax liability by selling some options.
Share options can give a valuable boost to your financial security. Yet, I often see the proceeds of a sale be treated as a windfall and spent quickly and inadvisably. Treats are fun and a healthy part of life. Perhaps, however, use only part of the proceeds for treats. This related article, What to consider when you have sold “your” business gives excellent insight on how to benefit from the proceeds of a sale.
What next?
If you are considering selling your share options or if you have share options and wish to discuss your situation, you can book a call with me Barry Davys, using my online system. The system allows you to choose a time that is convenient for you for the call.
Source:
Internal Revenue Service (IRS), USA
Investments in Spain
By Chris Burke
This article is published on: 16th August 2023
16.08.23
Savings accounts or investing in Spain – what is right for you?
This is one of the most common questions I am asked, and with interest rates creeping up I thought it prudent to run through how you should decide what’s right for you.
To help with this, firstly we need an explanation of the important differences between the two:
Why would you put money into a savings account?
Saving is putting money aside in a deposit account for the next few years. When interest rates are low, the return you’ll get on your money will be very modest. The risk is that it won’t beat inflation, which is the rate at which the prices of goods and services increase. So, whilst your money is safe (covered up to £85,000 in the UK and €100,000 in Europe), its purchasing power will be eroded over time, meaning you will be able to buy less with your money in the future. When interest rates are high you will get more return on your money, but generally in this type of economic climate it will still be less than inflation. Because of this, money you keep in cash savings accounts should be for short term savings of less than about 5 years.
Why would you invest your money?
Investing is another way of setting aside money for the future, where you invest your money into something with the aim of making a profit in the long run. When you invest, you’re generally exposed to the risk of stock market volatility (although some investments don’t invest entirely or solely in these markets). Your expected returns can fluctuate and you may not get back what you put in, especially in the short term.
You should aim for a minimum of 5 years when investing and start planning ahead with your investment strategy to manage this risk a few years before you want to access your money.
“Save for what’s around the corner and invest for the future”.
Why take any risk with your money?
Firstly, as explained above, inflation will eat into the power of your money over time. This is a problem while you are working, but is particularly important to manage when you are retired and you cannot replace lost buying power with income from your job. Secondly, not all investment risk is equal. The benefit of taking a calculated amount of risk over the long term is that it gives you the potential to make much more money than you would from a savings account, helping to pay for future large expenses and a more comfortable retirement.
What is the trend when interest rates are high compared to investing in the stock markets?
Over a short timeframe, holding cash in a savings account is usually a safe and appropriate option. It is less risky in the short term as it is readily accessible and interest rates are currently attractive relative to the past few years.
However, time is the critical factor to consider here, as over the longer term cash won’t beat inflation but investing should, as can be seen in the chart below:
Over long periods of time there is a big difference in the returns achieved from saving and investing. In the short-term, investing is riskier than an interest-bearing cash account, however when compared to inflation investing has offered far more certainty and success in the long run.
Prudential 90’s advert
Do you remember this timeless, funny classic: We want to be together!
The principles remain the same even today……
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If you would like any more information, or to talk through your situation initially and receive expert, factual advice, don’t hesitate to get in touch with Chris.
Refused Italian residency
By Gareth Horsfall
This article is published on: 8th August 2023
08.08.23
Living in Italy always feels like a great privilege for me. I never expected that a ‘lad’ from Yorkshire would be having the opportunity to live the life I now do. Of course, it comes with it’s issues and there are many people who, every year, also make the decision to want to come and live in ‘Il bel paese‘.
However, as I have found out this year, there are those who also get refused this opportunity when they have applied for ‘residenza elettiva’. (elective residence in which you demonstrate to the Italian ‘Consolato Generale d’Italia’, that you have the financial resources, now and in the future, to be able to live your life in Italy without becoming a burden on the Italian state). There are certain criteria which you must meet, such as minimum income levels and financial independence.
Since Brexit, of course, many UK citizens who previously only had to trot off to their local comune and register as residents in Italy, under their EU citizen rights, are now subject to much stricter assessment of their financial affiars before a visa will be granted to enter the country and life begin in Italy.
Over the years I have met many people (US citizens mainly) who have been through the elective residence process and managed to get the necessary visa to come and live in Italy. I also learned that many managed to do so without meeting the strictest financial requirements. Instead with some help and understanding of the types of accounts they held in the US they were able to assist the consulate in assessing their application, at which point the elective residency was granted.
The people I have met this year (all Brits) who have been refused the elective residency visa were refused due to failure to strictly adhere to the rules. (Strict adherence to rules not being something that Italians are famous for).
This is quite sad to see because, firstly it could be said that the British citizen might be treated unfairly due to Brexit. There is no evidence to suggest this. It is merely a hunch, but one which is shared with a few other professionals with whom I have been in touch about this. Secondly, there are certainly the rules, but interpretation is everything and as you will see from reply from the Consolato below, certain assumptions have been made by the assessor regarding this specific application which could be argued to be true and fair, but would still not affect this persons ability to live comfortably in Italy without being a burden on the state. (I can attest to this as I conducted an initial financial planning exercise with them) It would seem the absolute letter of the law is being applied here when in fact merely the extracted statement below from the legislation itself gives a significant amount of discretion to the assessor.
‘Il visto per residenza elettiva potrà essere esteso anche al coniuge convivente, ai figli minori o maggiorenni se conviventi e a carico e ai propri genitori, qualora le condizioni finanziarie suddette siano sufficienti a garantire il mantenimento di tutti i soggetti interessati.’
The point to this E-zine is to say that this application was likely refused because the application was not prepared with the help of an Italian professional (lawyer and commercialista) who could a) interpret the foreign held accounts for the assessor/s and explain how they function and b) provide a signed and certified overview that would be seen by the Italian authorities as more credible than merely statements from the applicant themselves.
I hope that if you, or someone you know is going through or about to go through the elective residence process then you can pass this E-zine and message to them. Take professional advice (lawyer and /or a commercialista) before submitting the application. Once granted then financial planning is also critical.
The applicant mentioned in the letter text below is being contested directly with the Consolato Generale d’Italia, now with legal help, but this could take up to 2 years. It might have been avoided ( possibly not) if professional help had been sought at the start.
Please feel free to pass the E-zine onto anyone you may know who this affect or of whom it might be interest to. The more we spread the word the less likely mishaps and refusals will occur in the future.
Harp House,
83-86 Farringdon St,
London EC4A 4BL,
United Kingdom
VISA SECTION
“As per Art. ,comma 2 of T.U. 286 modified by Law 30 July 2OO2 n.l-89, and Art. 6-bis of D.P.R. l-8 October 2004 n. 334 regarding visa denials, we regret to inform you that your recent application for an Elective Residence visa has been denied because unfortunately, at this point in time, it does not comply with the minimum conditions required for the issuance of such a visa.
To date, all the documentation provided with your applications do not currentlv illustrate that vou have immediate access to the minimum required economical and financial resources necessary lo guarantee continuity through time from a proven, steady & substantial income stream/s deriving from pensions, annuities, properties or other types of regular income declared in the UK ( with the “Tabello A’ Direttivo Ministero dell’lnterno dated March 7’t, 2000 ond as per D.l. 850/2077, i.e. startinq from a net amount of 37,000 euro per person), meaning not cash in the bank, savings, unrealised profits from investments subject to volatility and/or private income deriving from employment. It is worth highlighting that this office has carefully examined your recent applications, by comparing them with your previous ones; i.e. denials ref: XXXXXXXX prot n. XXXXX issued on the XXXXXX.2022 respectively, with the view to gauge if there have been any new and/or substantial changes in both your economic and financial circumstances to be considered when granting the issuance of such visa.
Unfortunately, when taking into consideration both your eligible proven and steady income streams guaranteeing continuity through time that you have provided to date i.e. combined net full pensionable entitlements from both state and private pensions (including future increases in net state pension and the potential volatility in exchange rates), we regret to inform you that,at this point in time, you do not meet the minimum conditions required for such a visa.
ln fact in particular, it appears that in the case of Mrs.XXXXX, she is yet still to reach State pensionable age (XXXX); with her only current source of income, coming from a yearly drawdown payments of circa £XXXXX per annum (subject to tax, effective from the XXXXX). These appear to be generated from a portfolio of pension investments that are in turn subject to volatility. and which unlike an annuity, do not offer a guaranteed, steady & substantial income stream that guarantees continuity through time.
As for Mr. XXXXXXX even in consideration of potential annual gross increases of 5% in line with RPl to his private and state pensions, his total net income, is unlikely to reach, at this point in time, the minimum levels required when granting the issuance of such visa.
Furthermore, in response to the letter dated XXXXXX from your legal representatives, we would like to clarify lhat, “the annual passive income requirement of €31,000 plus 20% for the dependent spouse” they have made reference to, is NOT applicable for this type of visa (i.e. elective residency), but rather to other types.
For clarification purposes, the minimum nef amount, for elective residency visas applications, starts from a guaranteed minimum of €31,000 per applicant. We appreciate that since BREXIT, you may have experienced limitations towards visa free travel arrangements previously enjoyed, but would like to remind you that, as British citizens you may still travel to the Schengen area visa free up to 90 out of 180 days. You have the right to appeal this decision by filing a formal appeal with the assistance of an attorney to the “Tribunale Amministrativo Regionale del Lazio” in Rome within 60 days from receipt of this Notice. To be valid, the appeal must be notified to the Avvocatura dello Stato (General Attorney) according to the Article !44 of the Code of Civil Procedure and Article LL of the Royal Decree no 1,61,1/1933.”
Kind Regards,
Visa Office Consulate Generale of ltaly in London
If you would like to discuss this or any other content I have posted online, or merely to discuss your financial situation for life in Italy, then please do not hesitate to get in touch:
Tel: +393336492356 or gareth.horsfall@spectrum-ifa.com
I would be happy to try and help where I can.