A balanced portfolio

By Mark Quinn
This article is published on: 2nd December 2022

02.12.22

Investment and fund management

There are several different investment management styles to consider and each will have benefits and drawbacks. The key difference are between a managed/active/discretionary route, and a passive/tracker approach, and this can be a divisive area within the investment industry.

In order to put into context the differences between these styles and which approach may be right for you, let’s first look at what a stock market index is.

An index simply measures the performance of a group/basket of shares. For example, the S&P 500 index tracks the performance of the shares in the largest 500 companies in America. As the US market is the largest stock market in the world, and the US is the world’s largest economy, it is often seen as a barometer for the health of global markets in general. The equivalent index in the UK is the FTSE 100 index.

Managed/active management/discretionary
Historically, most private investors would invest through a fund manager. In this way, you would pay an annual percentage fee to an investment institution to actively manage your investment i.e. make the buying and selling decision on your behalf.

The aim of investing in managed investments is to generate better investment returns than the stock market index as a whole, or another appropriate benchmark.

Discretionary investment is a specialist branch of managed investment whereby the manager has a greater range of investment powers and freedoms to make buying and selling decisions without your consent (although always within with the remit and investment powers that you grant at outset).

Over recent years there have been numerous studies to suggest that many fund managers do not achieve their aims of beating their respective benchmarks, and it has led some investors to favour a “passive” investment approach.

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Passive or index trackers
Passive investment does not employ a fund manger to make decisions, and instead of trying to outperform the market, you simply ‘buy’ the market as a whole. For example by investing in an S&P 500 tracker, you would effectively be purchasing the top 500 shares in the US stock market.

The key difference between the managed style is cost i.e. whereas a manager may charge between 1-2% per annum to manage your fund, you can access a tracker fund from as little as 0.1% which can make a huge difference to your fund value cumulatively.

Proponents of this approach accept they will only even achieve the return of the market as a whole (with no outperformance) but because you are spending far less in fees, believe they will do better over the longer term.

Proponents of active management on the other hand highlight the drawbacks of the passive approach viz. in a falling market, you will only ever track a falling market, tracker funds “blindly” sell what may otherwise be high quality investments at inopportune times, and that tracker investments can still be complex to understand, such as the difference between ‘synthetic’ versus ‘physical’ tracking methods.

Summary – balance pays
As my previous two articles have demonstrated, tax and investment planning generally involves shades of grey, rather than black and white solutions and in practice we do not believe either approach is the ‘holy grail’.

Rather each management style can offer benefits within a balanced portfolio. Holding passives can reduce the overall cost of your portfolio (thus increasing your net return) and using managed funds can completement by avoiding “blind” automatic sales and potential downside mitigation.

Whichever route you choose, minimising fund fees is crucial as it is biggest eroder of returns over time.

Debrah Broadfield and Mark Quinn are Chartered Financial Planners (level 6) and Tax Advisers specialising in cross-border advice for expatriates.

Contact us at: +351 289 355 316
mark.quinn@spectrum-ifa.com
debrah.broadfield@spectrum-ifa.com

Financial updates in Spain

By Chris Burke
This article is published on: 23rd November 2022

23.11.22

This month we cover the following topics (if there is anything you would like to understand more or wish to see covered in these articles, don’t hesitate to ask):

Digital Nomad Visa – Update
New Wealth Tax Implemented for those with assets over €3 million
New Autonomo payments from 2023

Digital Nomad Visa – Update
The Spanish Government has confirmed plans for its digital nomad visa scheme. The scheme will offer citizens from non-European Union countries the opportunity to live in Spain whilst working remotely for companies located outside the country.

The visas will be available for those who derive a maximum of 20 per cent of their income from Spanish firms and who work remotely for companies located outside Spain. The visas should bring vital help to the Spanish economic sector and that it will also help the country recover from the economic damages caused by the Covid pandemic.

Even though there has been no detailed information publicly and the law has not yet been 100% passed through Parliament, it has been publicised that the visas will be initially granted for a period of one year. There will then be the opportunity for this period to be renewed for more than five years, depending on the circumstance of the applicant.

Spain’s Economic Affairs Minister, Nadia Calviño, stressed that “the digital nomad visa will attract and retain international and national talents by helping remote workers and digital nomads set up in Spain.”

In order to benefit from Spain’s digital nomad visa, applicants must be able to show or prove that they have been working remotely for at least a year and be from outside the European Economic Area. They must also show that they hold a contract of employment or, if freelance, prove that they have been regularly employed by a company outside of Spain. Proof that they have enough money to be self-sufficient and have an address in Spain is needed too.

Spain is not the first country in Europe to instigate a Digital Nomad Visa programme. Estonia, Croatia, Portugal and Iceland already have a similar visa scheme, and in January this year the Government of Romania implemented a similar visa.

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New Wealth Tax Implemented for those with assets over €3 million
Spain is set to implement a new wealth tax, its second, as the country looks for ways to raise funding to pay for social policies amid soaring inflation.

As reported by Bloomberg, those who have assets worth at least €3 million ($2.9 million) a year from 2023 will be affected, the Budget Ministry said in late September. Payments made against an existing wealth tax will be deductible from the new one, it said.

There are three ranges to the tax:

Assets	Tax (Payable Yearly)
Between €3 and €5 million	1.70% payable on the value of the assets
Between €5 and €10 million	2.10% payable on the value of the assets
Over €10 million	3.50% payable on the value of the assets

23,000 people will be affected by the new tax and is expected to raise around 1.5 billion Euros. In 2024 another 204 million is expected to be raised by an increase of up to 2 percentage points on incomes above 200,000 Euros a year. There will be tax reductions for lower earners which is estimated to be worth about €1.88 billion over two years.

New Autonomo Payments from 2023
Self-employed workers (Autonomo’s) in Spain will start paying new monthly social security fees which will be based on the amount they earn. The changes will be brought into force from January 2023.

For those newly self-employed and under the age of 35:

Time Period	Amount Payable
The first 12 months	€60 (80% reduction)
Month 13 – Month 18	€146.97 (50% reduction)
Month 19 – Month 24	€205.76 (30% reduction)

This flat rate is a measure to promote self-employment that consists of paying a reduced monthly Social Security contribution as a self-employed person for two years.

For those who have been self-employed for two years or more:

Amount earned per month (€)	2023	2024	2025	2026
< 600	€281,50	€269,30	€257,00	€244,80
600 – 900	€281,50	€269,30	€257,00	€244,80
900 – 1.125,90	€293,90	€293,90	€293,90	€293,90
1.25,90 – 1.300	€351,90	€351,90	€351,90	€351,90
1.300 – 1.500	€351,90	€413,10	€413,10	€413,10
1.500 – 1.700	€351,90	€413,10	€474,30	€474,30
1.700 – 1.900	€351,90	€413,10	€474,30	€535,50
1.900 – 2.330	€351,90	€413,10	€474,30	€535,50
2.330 – 2.760	€351,90	€413,10	€474,30	€535,50
2.760 – 3.190	€351,90	€413,10	€474,30	€535,50
3.190 – 3.620	€351,90	€413,10	€474,30	€535,50
3.620 – 4.050	€351,90	€413,10	€474,30	€535,50
>4.050	€351,90	€413,10	€474,30	€535,50

*Source: Government of Spain

In summary, the current minimum fixed payment of €294 will be changed to a progressive system of 13 instalments, depending on income. This will be introduced over 9 years. It’s important to note that these changes have not yet been finalised and there are still some details to be agreed.

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. You can book an initial consultation via my calendar link below or email/send me a message.

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International SIPPs

By Andrea Glover
This article is published on: 22nd November 2022

22.11.22

What are they and how do they benefit a non-UK resident living in France?

Myself and my colleagues have seen a significant increase in enquires this year from clients who have private pension schemes in the UK. Many are having difficulties accessing pension benefits for the first time due to changes post BREXIT or their UK adviser has informed them that they can no longer work with them, because of the post BREXIT rules on ‘passporting rights’.

One of the solutions that has helped many of these clients is a scheme called an International Self Invested Personal Pension (SIPP). So, I am going to explain the background to this product and why it might be the appropriate home for your pension funds.

The SIPP was first introduced in the UK budget in 1989 and following further regulation became a registered pension plan in April 2006. SIPPs were introduced to encourage individuals to save for their retirement.

SIPPs are often set up by the provider using a master trust and the provider will normally be the scheme administrator and trustee. The individual then become a member of the scheme and investments are normally in the name of the provider or the trustee but are earmarked for the individual member.

The main advantage of a SIPP compared to a traditional personal pension is the level of investment flexibility the member has, as the range of available investments is much wider than a standard personal pension.

An International SIPP is a UK SIPP that has been specifically designed for non-UK residents. The structure is similar to that of a SIPP and both are regulated by the UK Financial Conduct Authority.

An International SIPP provides the ability to invest in several currencies and some providers allow withdrawals in euros, paid directly to a French bank account.

As with a SIPP, the international version allows you to transfer your pension or consolidate several pension plans into one simplified scheme. More importantly, the International SIPP allows a locally based, regulated financial adviser to implement an investment strategy and assist you with overall retirement planning.

It is also important to note that a locally based adviser will have knowledge of the French tax treatment of any income from the pension and the various options available.

You can transfer from most private or company pensions to an International SIPP and you can also consider transferring from a defined benefit or final salary scheme, if you’re not already taking benefits. However, you can’t transfer from an annuity or many of the public sector and government schemes.

If you have a very large pension pot, a Qualifying Recognised Overseas Pension Scheme (QROPS) may be a more suitable home for your pension funds, as it can help protect against future tax liabilities for those nearing the UK Lifetime Allowance (currently £1,073,100).

As with all such matters, it is important to seek advice from a regulated adviser to ensure that the appropriate recommendation is given for your individual circumstances.

The Spanish State Pension

By John Hayward
This article is published on: 21st November 2022

21.11.22

How many years must one work in Spain to claim a Spanish State Pension?
When Brexit finally happened, one of the concerns that I had was regarding the bilateral agreement between the UK and Spain. I wanted clarification on whether years worked in the UK would continue to count towards the years required to qualify for the Spanish State Pension. The minimum number of years in the UK is 10 years but in Spain it is 15 years. Under the Trade and Cooperation Agreement made between the EU and the UK on 24th December 2020, and specifically the Article SSC.7: Aggregation of periods, it states that the periods of employment must be considered “as though they were periods completed under the legislation which it applies”.

How does this work in practice?
If someone has worked for 9 years in the UK and 14 years in Spain then, under the individual countries’ rules, neither minimum has been achieved. However, both countries’ rules are satisfied when adding the 9 to the 14 and vice versa. That is not to say that one would receive 23 years’ pension from either or both countries but merely that the person qualifies for a pension in both countries; 9 years’ pension in the UK and 14 in Spain. Details of how the pension is calculated can be found in my colleague Chris Burke’s article Claiming your UK State Pension whilst living in Spain/EEA.

Can you continue working in Spain whilst claiming a Spanish State Pension?
In the UK, you can receive your State Pension and continue to work. You will then only pay Class 4 National Insurance contributions, those associated with profit, as no further pension benefit will be accumulated. In Spain, you cannot claim your full State Pension entitlement if you continue working, and you do not employ anyone. However, it is possible to continue working beyond Spanish State Pension age and claim a reduced pension subject to certain conditions, one of these being that you must have achieved the minimum number of years to claim 100% of the Spanish State pension. This is currently 35 years but will be increasing over the next few years. You can once again apply the principle as discussed above in terms of adding the years in the UK to achieve this minimum.

To find out what your options are and how we can help you with your retirement planning, please contact me at john.hayward@spectrum-ifa.com or call/WhatsApp me on (0034) 618 204 731.

Keeping occupied when you’re retired is not always easy

By Jeremy Ferguson
This article is published on: 21st November 2022

21.11.22

Over the years I’ve been living and working in Spain with retired expats, one of the issues that very often comes to light is finding things to do, and making new friends. For the avid golfers among you, that may not be a problem, but for many others it can be.

We have recently started supporting the Benahavis Arts Society, who not only organise Talks in Benahavis once a month, but interestingly, they are also organising regular trips to places of interest in and around Andalucia, as well as other planned social events.

If you are looking to make new friends, and explore Andalucia, then this may be for you. There are planned trips to The Malaga Christmas Lights on the 9th of December, a Christmas Lunch of the 15th of December, and a pub quiz on the 19th of January next year. Non-members are welcome, and more details can be found on their website at; www.theartssocietybenahavis.com

As can be seen from the write up below, the most recent trip to Antequera was a huge success:

“With the guidance of Miranda, our excellent tour operator, we started our day driving through stunning scenery including the extensive rich farmlands in the valleys around the city and the imposing Pena de Los Enamorados (Lovers Leap); a distinctive face-shaped mountain from a romantic legend that overlooks the town and dominates the landscape.  

On arrival at the top of the city, we started our historical walking tour with a local guide. This included the majestic Alcazaba; the centuries old Moorish fortress and the beautiful Colegiata with its superb façade. We visited the municipal museum with its many artefacts tracing Antequera’s extensive archaeological history and the splendid renaissance style church of Parroquia San Sebastian.  

We then had free time to explore the city further and take in a delicious lunch at one of the delightful tapas restaurants around the central square.  

The spectacular cultural heritage site of the Dolmens was the destination for our afternoon visit. These bronze age burial grounds built with huge megaliths are nothing short of impressive. Inside, the chambers are magnificent and clearly show the scale of the architectural and engineering feat required to build them.  

The whole day was truly delightful with something for everyone. It was very well planned and organised, with highly knowledgeable and personable guides, various pick-up locations and brief stops on the way there and back for refreshments. I would particularly like to thank Miranda, Betty and Tracey for looking after us so well but also the whole group who were so incredibly welcoming.”

Working with clients in the Costa Del Sol and helping with their financial planning and tax matters has meant I get involved in so many other areas of people’s lives, this being just one great example.

If you would like to find out more about how we can help you not only make sure your financial world is in order here, but also integrate into life here in Spain, please feel free to get in touch for a chat.

Declaring your taxes in Italy

By Gareth Horsfall
This article is published on: 9th November 2022

09.11.22

I had a nasty surprise the other day and I just had to tell you about it. I got one of those dreaded pec (posta elettronica certificata) emails with the title ‘Agenzia delle Entrate – riscossione‘. They put the living fear into me and for obvious reasons. This time it was nothing significant, but still an issue relating to something my old commercialista did, or didn’t do, back in 2012, 2015 and 2017. My new commercialista has launched an investigation and hopefully we can park that particular communication in a draw somewhere, but I suspect I will end up having something to pay.

Why you should ask for a copy of your Unico!
With my horrible experience in mind, I decided to write this article where I want to just briefly touch on why you should really be asking for a copy of your Unico from your commercialista or whoever declares your taxes.

If you are unsure what an Unico is, it is merely a copy of your declared tax return pages that have been submitted to the Agenzia delle Entrate.

And will normally be about 20/30ish pages long, depending on how complex your financial affairs are.

You also want to request a copy with the receipt on the back pages, as this is confirmation that it has been lodged with the tax authorities.

That page should have a header as follows:

SERVIZIO TELEMATICO ENTRATEL DI PRESENTAZIONE DELLE DICHIARAZIONI COMUNICAZIONE DI AVVRNUTO RICKVIMENTO (art. 3, comma 10. D.P.R. 322/1998)

Now, you may ask why I am telling you this?
In the last few years, I have widened my services to my clients to incorporate a check on their declared financial affairs in Italy, to ensure that everything is being reported correctly. I decided to do this because it had become apparent that some errors had been made by various commercialisti and the odd client had been incurring higher taxes than necessary, as a result.

Checking your tax return may seem a complicated procedure, and you may be reluctant to do so, but actually, for most of the International English-speaking community living in Italy the entries in the tax return should be relatively simple. Apart from any declaration of income, which you would find under section Quadro RN or RT for investment income, you can also check on things like your accrued medical expenses under Quadro RP.

[An interesting point about the medical expenses section is that this year my commercialista contacted me about my receipts for farmacia expenses for 2021. However, he didn’t just asked me for the scontrini, but actually sent me a screenshot from the Agenzia delle Entrate website detailing all my farmacia spending for the whole year, where I had given my tessera sanitaria, which I found quite unsettling!]

The main sections that I would suggest that you check over are Quadro RW and RT. These are where overseas assets, incomes and capital gains have to be declared. These include properties, portfolios, bank accounts and other overseas assets, such as art or vintage cars, for example. These are the sections where I find the most errors. It might be that the market value of a property has been reported instead of a purchase value or local authority value or they have misunderstood the nature of a pension and declared it as an investment portfolio.

Also, remember when checking these figures that they must be converted into EUR from the foreign currencies in which you may have an asset. To do this you need the exchange rate for your respective currency. The Agenzia delle Entrate publishes those conversion rates and where valuations have been provided for the 31st December, for example, then you would need to use the declared rates from the Agenzia delle Entrate for that month. The link below takes you to the AdE provvedimento for Dec 2021 that provides exchange rates on all world currencies.

Click here for the link to the Dec 2021 AdE provvedimento for Dec 2021

In more recent years, where I have started working with commercialisti more closely for my clients, I have managed to iron out these problems and, in most cases, a good commercialista will be happy to learn the nature of an overseas asset and ensure it is declared correctly. However, there are still instances where mistakes can be made.

In brief, I would advise you to request a copy of your Unico for the last financial year. A good commercialista shouldn’t be worried about providing you with a copy. There shouldn’t be anything to hide if they have done it all correctly. You can also download this directly from the Agenzia delle Entrate (AdE) website. If you have not already done so, you can request access details to register with the AdE from a local office, and then create your access point. If you have a SPID (Sistema Pubblico di identità Digitale) you can access the website using this means, which is much easier. You want to find section Cassetto Fiscale > Dichiarazioni Fiscali.

Do a check of your declared financial position! There is unlikely to be anything wrong in most cases, but you may just be the one who is paying more than you need to because of an incorrect code or misplaced figure. Do not leave the exclusive responsibility of your finances in the hands of your commercialista or fiscalista and if you are unsure of how to interpret the data in there then you can always ask for my help by contacting me on: gareth.horsfall@spectrum-ifa.com or call/whatsapp on +39 3336492356

Bonus and Superbonus Edilizia
I have been asked a number of times recently about whether I think the new Italian government will stop the current range of bonuses for doing work on your property and/or upgrading your white ‘elettrodomestici‘ goods. Well, I had written a long article explaining the hypothetical new arrangements that could be announced to begin in 2023, only to be usurped by the Italian government which have now announced how things will change for 2023, as I explain below.

My thinking has always been that they are likely start to phase the bonuses out rather than cull them altogether. But, I can’t see a long-term sustainable economic plan for the country with continued ‘Bonus Edilizia‘ at the current levels, particularly the 110% bonus.

Under the legislation brought in by Draghi the 110% Bonus would have been in place for the whole of 2023, after which it would fall to 70% in 2024 and 65% in 2025. For ‘ville‘ and properties which are classified as ‘unifamiliare‘ the bonus would only be available until the end of 2022. But this is Draghi legislation. He has now gone and the new administration want to put their stamp on things, hence the revised measures coming into force from Jan 2023.

So, the new measures announced last week are as follows:
1. The superbonus will be reduced from 110% to 90% from the 1st Jan 2023 for all condomini (buildings with more than one property).

For ‘unifamiliare‘ properties, i.e villa’s or standalone houses, the same percentage will be offered, as long as it is used on the ‘prima casa‘. However, a new measure for ‘unifamiliare‘ properties has been added. They will now also assess the ‘reddito familigiare‘ of the occupants of the property and reduce any bonus accordingly. The maximum income and formula for the reduction in bonus have yet to be announced.

Possible reductions/removals
No mention has been made as to whether the superbonus will still be available or reduced significantly for ‘seconde case‘. The proposals for the ‘seconde case‘ could range from anywhere between 50% to 65% or a complete removal altogether.

The other notable plan is that the Agenzia delle Entrate have been given more powers to ramp up the controls and investigations for bonuses. More paperwork requirements are expected to be demanded to ensure that the monies for the work end up in the hands of the people actually doing the work, at a fair price and not artificially hiked to exploit the bonus regime.

As for all the other bonuses for electric white goods, etc. It looks like they will be here to stay for the coming year/s, at the very least. (Ecobonus, Sismabonus, Bonus mobili e elettrodomestici, Bonus Verde, Bonus idrico, Bonus acqua potabile, Bonus Facciate, Bonus ristrutturazione, Bonus restauro, Bonus prima casa under 36, Bonus affitti giovani under 31)

The final details have not yet been ironed out and knowing the normal process for the Legge di Bilancio we may not know the final details until after the 1st Jan 2023.

Since the superbonus scheme started the Italian government have now paid (or are awaiting payment) of €51 billion of tax rebates. The objective is to reduce that to €31 billion for the period between 2023 and 2028.

For anyone looking to apply for the ‘Bonus Edilizia‘ right now, my suggestion would be to get your requests in and push the people who are making the application on your behalf to make sure that you qualify for the current bonus amounts. If not, you may find the amount you get back is lower than you had expected.

Have you made your ‘Folder’ ?

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

06.11.22

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

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

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

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

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

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

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

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

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

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

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

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

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

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

So what should go in ‘THE’ folder?

Birth, marriage and divorce

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

Life insurance and retirement

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

Bank accounts

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

(see my comments on passwords below)

Assets

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

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

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

Liabilities

Mortgage details
Proof of debts owned

Details of gifts

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

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

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

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

Income sources

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

Employer details

A copy of your most recent tax return or accounts

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

Utilities
Insurance
Rent / mortgage
Loans
Subscriptions / membership details

Email and social media account details

Essentials

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

Contact details

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

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

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

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

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

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

Children and taxes in France

By Katriona Murray-Platon
This article is published on: 4th November 2022

04.11.22

I am the proud mother of two wonderful boys. I love my children very much, but in addition to the joy they bring to my life, they also bring tax advantages. Admittedly the tax benefit is probably less than the overall expense of having children, but one must count one’s blessings!

Let’s take a couple earning €60,000 per annum.

The current tax brackets for 2022 are as follows:

Income	Tax rate
Up to €10,225	0%
From €10,226 to €26,070	11%
From €26,071 to €74,545	30%
From €74,56 to €160,336	41%
Over €160,336	45%

*These tranches are likely to increase by 5.4% in 2023.

If they have one child? their tax is reduced by half a tax part. Whereas alone they were in the 30% tax bracket, with one child their income is divided by 2.5 to €24,000 per person, which puts them into the 11% tax bracket. Their tax bill would be €3,788 instead of €5,844. The child has saved them €2,056 of tax. If they had a second child, and on the same income, their tax would be €3,226. The second child has therefore saved them €562 euros.

In addition to lowering your taxes, if your child is under six and goes to a child minder or nursery, 50% of these costs, up to a maximum of €2,300 per child may be deducted, so a maximum tax credit of €1,150 per child. This is a tax credit, so in our example above, the couple would pay only €926 in taxes.

After six years old and until they go to high school, as delightful as they are during this time, there are no tax advantages. From high school onwards there is a small tax reduction of €62 per child in high school, €153 per child in sixth form college and €183 per child in higher eduction (provided it is non-remunerated studies).

Download out French Tax Guide here

However when they are in their 20s and pursuing further education, this is the time to look at whether you are better to keep them in your tax household or take them out of your tax household and deduct the money you give them to pay for their studies, accommodation and food etc. I remember, when I was a tax lawyer, suggesting to a lady who had four sons, that she should remove her youngest son from her household – she looked a bit shocked! I meant of course that she should take her son out of her tax household, not kick him out of her actual household. It is quite common for children in France to remain at home during their university studies. The money given to an older child is deducted from the household income before it is subject to tax.

For an adult child to be considered part of your tax household, they must be under 21 on 1st January of the tax year (so 1st January 2022 for the tax return done in 2023), or be under 25 years old on 1st January 2022 and in higher/further eduction as at 1st January 2022 or 31st December 2022. There are also various conditions for children living with an adult relative.

So if we look at the couple above and both their children are at university. In 2021 they could have deducted up to €6,042 per child from their income which would have reduced their tax to €3,021 for the two of them without the children instead of €3,226 had the children been included on their tax return. For 2022, according to the Draft Finances Bill, this deduction is increased to €6,368 per child. For the full reduction to apply, you must be able to prove that the child needs this money, that they are unable to work or, if they have a student job, that they earn less than the minimum wage. You can deduct up to this amount but you have to be able to prove the expenses if so requested. If the child still lives with you, you can deduct their accommodation and food bills, up to €3,592, without need to justify these expenses.

Once your child is removed from your tax household, this will mean that they have to do their own tax return and declare the financial help that you are giving them. However, if they are earning less than the first tax bracket (€10,225 in 2021, €10,777 in 2022) then they won’t have any tax to pay.

For any questions on Children and taxes in France or on your general financial planning in France, please do get in touch via the form below:

Is Portugal a tax haven in Europe?

By Mark Quinn
This article is published on: 3rd November 2022

03.11.22

Portugal has long attracted expatriates looking for warmer climes, good food and a relaxing pace of life; but in recent years, the wide range of entry visas and attractive tax breaks for new residents have seen Portugal’s popularity soar.

With standard tax rates ranging from 14.5% to 53%, Portugal can either be crippling or a tax haven depending on how and where you structure your wealth.

New residents
Portugal introduced the Non-Habitual Residence (NHR) scheme in 2009 and made updates in 2020. It offers new residents to the country the potential for very low (or no) tax on pensions, capital gains and certain types of income for 10 years.

The greatest draws for expatriates are the favourable taxation of pension income: 10% for post-31st March 2020 NHRs (0% for pre), 0% tax on foreign dividend income and a 20% income tax rate on earned income for those working in Portugal in jobs deemed as ‘highly valued’ by the Portuguese government.

Another opportunity is for those with investment property portfolios. NHR can exempt capital gains tax in Portugal, which under normal circumstances would otherwise be taxed at progressive rates.

Existing residents
For those without NHR, Portugal can still be a tax-efficient home depending on how you structure your income and savings sources. With the correct planning and structuring, you can legitimately create a tax-favourable position and in some cases, single-digit rates of tax, which means that Portugal can still be more favourable than most individual’s home countries.

Optimise your move
Planning at least a year before your move is best to put yourself in the most favourable position. This will allow you to take advantage of any tax opportunities in your home country and arrive in Portugal with the right structures, assets or income sources.

Caveats
The benefits of NHR do not automatically apply to all situations; planning is required to maximise tax-saving opportunities.

There are subtle nuances to the NHR scheme and international tax rules, meaning that in some cases it may not be beneficial to apply for NHR. It depends on how your income is generated and the interaction with your originating country and in some cases, we have seen this create an additional tax liability.

Another common complexity can be the interaction between taxation in Portugal and the former country. For example, what some people believe will be tax-free income may be taxable because of a nuance in the law e.g. income sources must have the ‘potential’ to be taxed in the originating country to qualify under NHR.

CLARITY WITH ADVICE
Paying zero or very low rates of tax is possible in Portugal as an NHR or standard resident, but it very much depends on each person’s circumstances. Planning (and potentially restructuring) is required.

As Chartered Financial Planners and Tax Advisers, we are in the best position to provide cross-border advice to expatriates and assist in creating compliant tax-efficient solutions.

For a complimentary initial consultation please contact Mark Quinn & Debrah Broadfield at +351 289 355 316 or mark.quinn@spectrum-ifa.com.
Alternatively, visit our financial guides page for tax updates and important information about living in and moving to Portugal.

Tax saving tips for Portugal

By Mark Quinn
This article is published on: 17th October 2022

17.10.22

Ideally, tax planning should start before you move to Portugal as this gives you the most flexibility and more planning options. However, residents can still take many steps after their move to reduce tax. Here are our 15 top tips.

Before moving to Portugal

Review your asset base, do you intend to restructure your investments for life in Portugal? Look at whether they can be surrendered tax-free or at a reduced rate in your originating country, rather than leaving it until after your move
Utilise any remaining carried forward losses and income and capital gains tax allowances prior to leaving your originating tax jurisdiction
Take your 25% tax-free pension commencement lump sum (tax free cash) if you are UK resident. This is not available following your move to Portugal and will be taxed
If you are moving from the UK and are non-UK domiciled, consider using the remittance basis to substantially reduce certain taxes before your move
If your UK-based pension savings are close to or above the UK Lifetime Allowance (LTA) of £1,073,100 you must consider LTA protection. Any amount above this is taxed at 25% or 55%, depending on how the pension is drawn down. This tax could be avoided or mitigated

After moving to Portugal

Apply for Non-Habitual Residence (NHR). In the vast majority of cases it is beneficial but please seek personalised advice to confirm how this will affect your position
If you are NHR, restructure your income sources and assets to take advantage of the tax breaks
Holding investments directly can give rise to unnecessary capital gains and income tax. Using a wrapper such as a pension scheme, company or life assurance bond, could substantially mitigate tax
Conventional planning dictates that you should maximise the value left in pension schemes given they are free of UK Inheritance Tax but the NHR regime turns this conventional wisdom upside down as you have a 10-year window to extract pension funds at a very low tax rate of 10%, after which tax can rise to over 50%. Advice must be sought before deciding to do this and must be tailored to your family situation
Do things in the correct order. For example, if you have losses on certain investments realising these first could allow you to offset these against future gains but if you realise the gain first you cannot do the opposite
Targeted withdrawal strategies. Funding your lifestyle from certain sources rather than others can save substantial amounts of tax. These may need to be switched over time e.g. when the NHR period ends
The UK Non-resident Capital Gains Tax rules. If you are selling UK property as a Portuguese resident, only gains made from 6th April 2015 are taxable in the UK with no further tax to pay in Portugal if you have NHR
If you are selling your home in Portugal capital gains tax is due on 50% of the gain at scale rates. There is main residence relief if you use 100% of the proceeds to buy a new home, but a new relief was introduced which allows certain individuals to invest the proceeds in a pension or investment instead, allowing you to release capital and provide a future income
You can submit joint tax returns as a couple (you do not have to be married) in Portugal so you can take advantage of your partner’s unused tax bands
Take advantage of the Portuguese personal deductions. By using your fiscal number when making certain purchases you can reduce your annual IRS tax bill e.g. €250 per taxpayer for general family expenses, €1,000 on health expenses etc