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Smart Banking

By John Hayward - Topics: Banking, internet banking, Spain
This article is published on: 1st September 2021

01.09.21

Don´t panic Mr Mainwaring!

We’re almost 2/3rds through 2021 and there seems to be a lot more optimism, in Spain at least. However, certain problems exist and are not likely to go away any time soon. One of these problems is with banks. My particular bank branch did not exactly cover itself in glory over the last 17 months or so, allowing long queues to form outside, allowing only one person in at a time (when there were three members of staff inside!?). We all understood why they were doing it, but opening for only 2¾ hours a day and then not being particularly helpful if you could get in during that short window of time, made us feel a little bit let down.

The days of the local bank manager who knew everything about you, from the details of your spending habits to what school the kids went to, have long gone. There is little or no familiarity with customers and the main aim for the bank staff these days is to sell products, often with questionable relevance to the customer and rarely explained sufficiently, in my experience.

internet banking

Let us think about the future of high-street banking. My opinion is that there will be a lot less bank branches in 10 years’ time than there are today, maybe none. I avoid going to a bank as much as I can, other than to grab some cash outside (from the machine and my account, obviously). I do all of my banking online. I have no fear of it but I appreciate that there are those who do and do not trust the system. I also appreciate that there is the possibility of fraud and theft but, as long as I follow the instructions like “Don´t give your card and pin number to someone else!”, I am confident that any money stolen will be covered by the bank. There are people who keep their card and a note of the pin number in the same handbag/wallet. The bank will not be very sympathetic in these circumstances. Also, be wary of anyone taking your card where you cannot see them. Cloning cards is a popular pastime for some. The overall feeling here is that those who do not like or want online banking will not have the choice in the future.

UK Banks closed

Everything is pointing towards branchless banking. That means people having to do all of their banking online. For me, that is perfect. The internet connection permitting, I can go to my bank at any time of the day. I don’t have to wait for it to finish a chat about the weather or the health of their cat before being attended to. I don´t have to find a home for half an Amazon Rainforest worth of paper and, generally, on the homepage there is a smiley photo of a person who may, or may not, work for the bank but that doesn´t matter. In order to perform certain actions online, you need to have registered a mobile telephone. For those not yet in the world of smartphones, it might be time to arrive. A smartphone is not essential for internet banking but the functionality of a smartphone just makes the whole process so much neater and easier (eventually). Whether you use a phone, iPad, laptop, or PC for your internet use, you will need the phone to confirm certain transactions and instructions.

I mentioned some months ago about ways of getting around bank charges that have been applicable since Brexit. Although the withdrawal agreement stated that the UK would remain part of the Single Euro Payments Area (SEPA), certain banks decided to apply charges to UK transactions with the excuse that the UK was no longer part of the EU. They have not taken any notice of the agreement and customers have been paying exorbitant fees for banking. I have recently discovered that a client of mine has been charged €18 a month on a small private pension of around £170 per month. This is being paid to her Spanish bank and they are charging, because they can. She challenged them on this (10% fee a month) and they said that they didn’t realise that it is a pension. However, they still have not done anything about it. Therefore, I have helped the client sort out a new banking arrangement for these transfers, saving her hundreds of euros a year in bank charges, as well as providing her with an exceptional exchange rate.

Brexit has introduced new problems and highlighted existing ones. Undoubtedly, as we progress through the journey and consequences of Brexit, we will have to deal with new taxes, new charges, new barriers, and new paperwork. We at The Spectrum IFA Group can help to make that journey less painful and less complicated.

Contact me today to find out how I can help you make more from your money, protecting your income streams against inflation and low interest rates, or for any other financial and tax planning information, at john.hayward@spectrum-ifa.com or call or WhatsApp (+34) 618 204 731.

Should I leave money in the bank?

By Michael Doyle - Topics: Assurance Vie, Bank Charges, Banking, France, Investments, Luxembourg
This article is published on: 22nd March 2021

22.03.21

For citizens living in France, assurance vie is known to be one of the safest ways to invest money and organise your inheritance. It is an insurance instrument that serves as a tax-efficient investment vehicle containing one or more underlying investments.

Why It’s Considered Better Than the Bank?
In November 2020, the Banque de France told us that the average interest rate on bank deposits is 0.46%, unchanged since August 2020.

Any gain on your deposit would be subject (in general) to a 30% charge between tax and social charges, leaving a return on investment of just 0.32%.

Couple that with the fact that inflation in France in 2020 was 0.46% (www.statista.com) and you are effectively losing money by leaving it in your bank account.

A well-managed cautious portfolio held within an assurance vie returned about 4% in 2020.

Benefits of Inheritance
When you set up this form of investment before you turn 70, each beneficiary is entitled to a tax-free deduction of €152,500 for money invested before you turn 70, with taxes limited to 20% for everything beyond that (although sums exceeding €700,000 per beneficiary are subject to a higher tax rate of 31.25%).

Why Should You Invest in Assurance Vie?
Investments held within an assurance vie grow income tax and capital gains tax free, so you have a gross roll up of any gains within the investment.

Tax and social charges are paid only on withdrawal, however as part of the return is capital much of these gains are offset.

Advantages for Foreigners
If you are a foreign national living in France, assurance vie should be a key investment, particularly if you expect to live there for the long term. As a British expatriate living in France, you have a host of international assurance vie policies at your disposal, most of which are Brexit-proof. Not only are these policies consistent with the European Union rules, but they also operate across borders in the United Kingdom, meaning you can take them with you if you change your home again or go back to the UK.

Banks, Bonds and Badwill

By Andrew Lawford - Topics: Banking, Italy
This article is published on: 13th December 2020

13.12.20

Today I’d like to explore the topic of Italian banking consolidation – but first I’d like to mention my new podcast episode, which features an interview with entrepreneur Andrew Meo, who walks us through his experience of starting a business in Italy – Milan based Rocket Espresso www.rocket-espresso.com. Even if you have no interest in starting a business in Italy, his story is a compelling one and gives us the chance to think more deeply about the prospects for the Italian economy. Check it out on iTunes, Spotify, Google Podcasts or Stitcher.

Now on to the banks
It probably hasn’t escaped your attention that there has recently been a new round of consolidation in the Italian banking market. It’s really no exaggeration to say that once Intesa Sanpaolo completes its takeover of UBI Banca and if, as seems likely, Unicredit ends up having the House of Horrors that is Monte dei Paschi di Siena foisted upon it (see below), that there will really only be 2 large banks in Italy. Of course, Italy has many, many banks – just look here at the list of members of Italian Banking Association, but in terms of concentration of assets, the situation is clear.*

Italian bank assets

* Please note that the Intesa – UBI takeover has yet to complete and the combination of Unicredit – MPS is currently only a rumour

Intesa, in particular, has been making the best of a bad situation over recent years, having taken on, for the sum of €1, the good parts of two failed banks from the Veneto region (Veneto Banca and Banca Popolare di Vicenza) in a deal that was breathtakingly good for them. Aside from being able to pick and choose only the best bits of the banks, they also received the following benefits (see the press release from June 2017):

  • A public cash contribution of €3.5bn to guarantee the stability of Intesa’s financial ratios;
  • A further public cash contribution of €1.285bn to cover “integration and rationalisation charges”;
  • Public guarantees of €1.5bn “to sterilise risks, obligations and claims” arising before the transfer to Intesa;
  • Full availability of deferred tax assets (roughly €2bn);
  • The right to give back certain higher-risk loans if these turn bad by the end of 2020

Nice work if you can get it!
The reality is that Intesa was able to call the shots in this deal, because Unicredit, the only other Italian bank theoretically able to take on the task, was still trying to sort out its own troubles with non-performing loans, having had to launch capital increases for €20bn or so in the period between 2012 – 2017 (a €13bn capital increase had just been completed at the time of the Intesa deal for the Veneto banks).

Moving on to the recent deal to acquire UBI Banca, we encounter the curious phenomenon of badwill, or “negative goodwill” as Intesa prefers to define it.

Intesa presentation

Intesa presentation re: UBI Banca acquisition – February 2020

Instinctively, we could define “goodwill” as that aspect of a business that defines the value it provides to its customers. In accounting terms, goodwill is an intangible asset that arises in an acquisition when the price paid is greater than the value of the net assets received. It follows from this that “badwill” arises when you get assets of a greater value than the price paid for them. Such is the story of Italian banking (and most banks in Europe, to be fair) – their assets simply aren’t perceived as having great value. In Italy, in particular, after a long period of struggling with non-performing loans, the market is worried that a fresh batch will be showing up over the coming years once the effects of COVID support have worn off.

Moving on to Unicredit, there was some hope that under its CEO of recent years, Jean Pierre Mustier, that the bank could become an Italian champion of consolidation in Europe. In particular, Mr Mustier’s old employer, Société Générale, was floated as a potential candidate for a tie-up, and certainly a far more presentable option than that of a domestic union with Monte dei Paschi di Siena, undoubtedly the ugliest girl at the dance of Italian banking consolidation. In recent weeks, Mr Mustier has decided to hand in his resignation after clashing with his Board of Directors, so it seems only to be a question of time before the unhappy couple announces their engagement.

All of this concentration of banking assets in two main groups leads to a number of considerations. Firstly, the unhealthy connection between bank balance sheets and Italian sovereign credit risk seems to be growing. Between them, Intesa-UBI and Unicredit-MPS hold about €175bn of Italian sovereign debt (as at 30/06/2020). The banks themselves have also become so large that they might not only be “too big to fail”, but also “too big to save” – assuming that the ultimate backstop is always an implicit government guarantee.

From our perspective as depositors, whilst we wait for the proposed EDIS (European Deposit Insurance Scheme), the best we have is the Italian FITD (Fondo Interbancario di Tutela dei Depositi), which does guarantee deposits up to €100,000, but is based on a system of mutual assistance between the banks – if one of the two giants were to stumble, the system may well struggle to make good on all claims.

All this brings to mind the wisdom of the following quotation from Mark Twain:
“I’m more concerned about the return of my money
than the return on my money”

It clearly makes sense to have a bank account in Italy if you are living here, and there are some good, low cost options out there. Many of you may already have the bulk of your financial assets in Italy and some of you are probably thinking seriously about moving more funds here, given that a number of UK banks will struggle (or even refuse) to service Italian residents after Brexit. However, there are also good reasons to maintain a substantial portion of your financial assets outside of Italy, and I can help you to understand all the options and eliminate the complications that arise from the tax declarations. Please feel free to get in touch if you’d like to learn more.

And with that, the only thing left to do is wish you all a pleasant and relaxing Christmas and New Year – with any luck, 2021 will be a substantial improvement on 2020 (admittedly a low bar to jump over!).

Italian banks – should we be worried?

By Gareth Horsfall - Topics: Banking, Italy
This article is published on: 27th May 2020

27.05.20
Milano palazzo Banca Commerciale

In this month’s article, I promised I would take a slightly closer look at Italian banks and at what our risks are as deposit holders in banks, which, in all probability, are going to be a risk in the near future as the Italian economy slides further into contraction and a likely deflationary spiral.

But before I go into that I thought a little update on life post-lockdown might be in order. I was hoping to have written more articles during this time, and also send more videos, but after week 3 of lockdown and a decision to do an exercise challenge online every day with some friends and colleagues, I ended up with a herniated disc, a lopsided spinal column touching the sciatic nerve and was unable to sit down for 3 weeks due to the pain (lying down and standing up only). In fact, writing this article is my first attempt at spending any length of time in front of the computer. Well, if nothing else I have learned that I am no longer a spring chicken and need to be a bit more careful about my exercise routines in the future! Other than that, nothing has really changed much for us here, apart from being able to go out more. An unexpected upside of the lockdown has been that Rome without mass tourism is an absolutely beautiful place to be at this time of year. But since schools are still online and the teachers have ramped up the lessons to 4 hours online a day, then there is little chance to do anything other than manage the daily lessons and homework routine. Thankfully only 2 weeks to go and the school season will be over. Then what we do is anyone’s guess! I will keep you posted :0)

OK, so back to some financial news. I want to take a closer look at Italian banks in this E-zine, specifically just what our risks are by holding our cash in them, whether the minimum deposit holder guarantee is really worth anything and what we might be able to do to avoid any potential near and medium terms risks.

italian debt

To start this somewhat complex journey we need to first look at the subject of Italian government debt: who holds it, how quickly they would be likely to sell it if problems persist and ultimately who would be left carrying the losses.

Domestic v foreign debt holders

Firstly, let’s examine the distribution of Italian government debt between domestic and foreign holders (foreign holders tend to be less loyal and more likely to sell at the first whiff of trouble). There is a widely held belief that the majority of Italy’s public debt is domestic because Italian households hold large financial assets. You may have heard the term ‘Italians are great savers’. This is true and the approximate net wealth of Italian households is €10 trillion, of which about a half, €5 trillion, is in financial assets. This figure is about twice the amount of public debt (before the Covid crisis) and could go some way towards explaining why one might consider the public debt to be covered by the assets and cash that Italians hold in the country.

However, the figures show that Italian households only hold about €100 billion in Italian public debt (roughly 5%) because a much larger part is held by Italian financial institutions: banks, insurance companies etc. whose ultimate beneficiaries, interestingly, are Italian households! This is where our risk lies! As Italian bank account holders, the real risk is that since Italian financial institutions are so heavily invested in the Italian state, a crisis in government could create a potentially bigger crisis in the financial sector.

Other categories of debt

We should also note that public debt also comes in the form of direct loans. Italian banks also have on their books about €290 billion of loans to general government and we don’t know much about the rates charged by banks on these loans. These are mostly issued to Italian local and regional authorities.

A web of complexity

A web of complexity

We know that Italian households don’t own a large part of the public debt (directly): it is the financial institutions that hold the lion’s share. Banks alone hold about €400 billion of Italian government debt and if we include

the loans to regional government then their total liability is in the region of €690 billion. This means Italian banks are by far the biggest source of funding for the Italian government and they lend more to the government than they do to small and medium sized businesses. That might explain the somewhat eternally sluggish entrepreneur market in Italy.

We also know banks are supposed to be safe and deposits guaranteed up to €100,000 per bank / banking group (clarification on this point below), but our deposit money is, in reality, an indirect loan to the Italian state.

Another 2 groups who hold Italian government debt are insurance companies (think Generali) who actually take a much longer term view and are less likely to sell in distressed markets, so we don’t need to worry too much about them. The other group is investment funds.

Investment funds are all those funds which you often find being offered by the banks to investors and quite often are loaded with Italian government debt. Those holdings need to be valued daily and will be much more likely to be traded quickly on the back of bad news. Between domestic and foreign investment funds, they hold approximately €750 billion of traded Italian government debt. This might sound a lot, but running into the Covid crisis it represented only about a third of all the Italian government debt in issue, and so even if subjected to frequent trading, it is less likely to have an impact on the stability of the system. Although, in the case of a government default they would be the first in line to take the losses, along with the banks!

banca d'italia

The last major holder of the debt is perhaps the elephant in the room: Banca D’Italia.

They owned approximately €400 billion of Italian government debt pre-Covid, and probably a lot more now. However, this is essentially a ‘giro dei soldi’ and

any interest that the Banca D’Italia earns from the Treasury, it immediately pays back. This debt can pretty much be considered Italian government debt. Also, it’s worth noting that the majority of this €400 billion was acquired under the last financial crisis European Central Bank quantitative easing programme, which basically means that Italian government debt is held by the ECB and has the effect of mutualising debt across other EU states. The ECB could raise interest rates on this debt and / or create less favourable payback conditions, but given the state of the EU, economically and politically, this is very unlikely.

How could trouble start in the banking system?

It is at this point that we return to the start and I answer the question (to the best of my ability), Italian banks – should we be worried?

As we have seen, the whole financial system in Italy is pretty much tied up with the state. It’s a clear case of robbing Peter to pay Paul. In addition, the majority of Italian debt is held within the EU, so there are vested interests holding the machine together, maybe with sticking plasters and bits of twine, but it is holding and working. And let’s not be under any illusion that this is just an Italian problem. France, Greece, Spain, Germany to name a few, are in similar situations.

Covid will not ease the situation, but given that a lot of the debt being created to ease the burden across the EU, will in some way or another be spread across it, it would take a pretty big move across global financial markets against the EU or one specific EU state for something major to happen. That being said, we would never have expected Covid to occur and so never say never.

What we can do to safeguard ourselves?
We all need banks for our daily living, and as we have seen in this article, Italian banks are just another appendage of the state. So, the safety of them is essentially a bet on the reliability of the Italian government, which brings me to my most important point. The safety of your Italian bank deposits, in truth, probably relies more on the stability of Italian politics than any other factor and my opinion, for what it’s worth, is that no matter which party comes into power in Italy, things move at such a snail’s pace that it’s hard to find myself losing sleep over my banking arrangements.

Protecting myself

That being said there are some measures to try to minimise my risk. The first being the minimum deposit guarantee of €100,000 per bank / banking group. In all honesty it’s not really worth the paper it’s written on and if there was a widespread run on Italian banks then the state would have to jump in and issue more debt, (which the banks would buy even more of), or the EU would have to step in to hold together the EU project. There are no reserves set aside for a moment like this. However, that being said it does make sense to spread your money if you hold more than €100,000 in cash. The key is in the wording, in that it is €100,000 per bank / banking group. The 4 banking groups in Italy are the Intesa San Paolo group, the UniCredit group, Banca BPM and Monte Paschi di Siena. Look out for the logo of one of these groups on your banking material, or check out your bank website and look at the small print to see if it belongs to one of these groups and if you have more than €100,000 in any one bank or group then think about spreading it. Alternatively, with bank interest rates being effectively negative, consider investing cash to maintain its long term value, whilst always leaving yourself with an adequate fund for emergencies.

Other banking options to look out for are the online bank offerings. I hear many people tell me that they opened up a bank account in Italy when they arrived, either by going along to their local branch and speaking with someone there, or a real estate agent helped them to do it. Most of these accounts are really basic bank accounts with very high charges and if you are a resident, and have an account like this, then consider looking at the online banks in Italy. I am a fan of Fineco bank, with whom I bank with myself. They have excellent terms and conditions and low charges. There are others as well such as Che Banca. Just make sure it is a separate ‘banking group’ to your main bank!

Other than this there is not much more we can do to protect ourselves from a banking crisis in Italy. A banking crisis will evolve from a political crisis and we should see that slow train coming from some way off. I will keep you posted. So no need to lose sleep about it, and concentrate more on getting back to our ‘bella vita’ in ‘il bel paese’.

Central Banks in Italy

By Andrew Lawford - Topics: Banking, Central Banks, Italy
This article is published on: 29th April 2020

29.04.20

Dear All

There is but one topic of conversation in these strange times, and as the crisis unfolds I decided it was worthwhile looking at how the Italian government is responding and considering where we might be heading.

I have decided to produce a pre-recorded webinar in order to provide you with some useful information on the support available to businesses and have even tried to bring a modicum of humour into the arcane world of central banks and economic policies.

Please see the link below for my latest (in truth, my first) webinar.

Savings Bank Account Comparison in Spain

By Chris Burke - Topics: Banking, Barcelona, Saving, Spain
This article is published on: 5th March 2019

05.03.19

The most efficient way of losing money is to keep it in a current account. Many years ago offset mortgages were introduced, which were a great way of saving interest being paid on your mortgage. Effectively, any interest on savings you had in an account that was linked to your mortgage account, reduced the mortgage payments by that amount, more or less (most simplified explanation). So, if you had a mortgage of €250,000 and savings on a linked account of €50,000, each month it’s almost as if the mortgage was only €200,000 and you would only pay interest on that amount.

To understand why current accounts are the main way to lose money, let’s suppose,for example, you have €50,000 sitting in a current account for a rainy day. Inflation has been running at around 3% lately (that’s the increase in the regular items we buy). Therefore, just for your money to KEEP UP with that, it needs to grow by €1,500 per year. Over a period of 4 years that’s €6,000.

Therefore, it is very important that you have this money working for you, especially after the hard work it took you to earn it, both to keep up with inflation so it keeps its purchasing power and to grow to build your wealth.

The very least you should do is have the money in a savings account, or similar. So what are the current bank savings rates in Spain? Well, they will guarantee to lose you money every year, but they are better than having money sitting in your current account:

  • 1.5% ING – interest rate per annum, deposit term 1 month
  • 0.5% WeZink (Banco Popular) – interest rate per annum, paid given monthly
  • 0.3% BNP Paribas – interest paid quarterly

Another way of keeping your money safe and perhaps earning a larger return if you are lucky, in sterling, is having UK Government backed Premium Bonds (annual prize fund interest rate of 1.4%). Did you know that you don’t need to be British OR live in the UK to have these?

If you would like to explore other options, then feel free to get in touch and we can discuss what will work for you AND your money, giving you flexibility along the way. Knowledge and advice will help you plan your finances.

Potential Catalan Issues

By Chris Burke - Topics: Banking, Barcelona, Catalonia, Currencies, Elections, Investments, Spain
This article is published on: 5th October 2017

05.10.17

It seems Catalonia and Spain are continuing their loggerheads and head jutting, but what most people are starting to consider are their OWN assets and issues being a resident here, particularly if you are not Catalan. I have received many emails this week from worried clients and contacts, about having their money here and what they can/shouldn’t do.

See below my 5 TOP FINANCE TIPS for the current predicament and indeed some of the areas we help people with.

Spain’s stock market has taken a severe hit this week, with two of the Catalan banks, Banco Sabadell and Caixabank down 6.3% and 6.7% respectively. Indeed today Banco Sabadell is holding an emergency meeting, Thursday the 5th October, to approve relocating their headquarters out of Catalonia.

Therefore, as an emergency communication to my clients and contacts I thought it would be useful to know what you should be thinking about and the main questions that have arisen this week:

1. Personal Money in banks
Any money in a bank, unless used to live on a day by day, is devaluing in real terms. If Spain reacts to Catalonia declaring independence, we have no idea what might happen. In the last crisis, banks made it difficult to move and even limited the money you could take from your bank account. If you have ‘excess funds’ in accounts in banks, you may want to consider other options so you still have full control of your money and no worries.

2. Business Bank Accounts
If your business account is with a Catalan bank, but you have a personal one that is not, you CAN move money into this. However, you have to be careful and follow these guidelines:

‘In order to avoid problems with the consideration of dividends it would be preferable to do a loan agreement between you and your company and to file a form through la Generalitat, in order to demonstrate the date of the loan and the content of the agreement. There is no stamp duty to be applied and it is not necessary to go to a Notary, but it is better to have this document done, just in case, if in the future somebody asks about this amount.
Source: Silvia Gabarro, GM Tax.

3. Currency
Anyone with sterling Money will have felt the pain of the currency weakening since the Brexit vote. Analysts have been saying for months that this is very undervalued, and built on worries about the UK leaving the EU. However, there are still fundamental issues within the EU, including the real major problems of the Italian banks, the fragile Spanish economy and a few members who are heavily in debt and unlikely to ever be able to repay this. Now we also have the Catalan Independence problems coming to a head within Spain, this could be compounded. Then in May next year we have the Italian elections which could be interesting to say the least.

Therefore, it could be argued before the Euro weakens any further, a good time to transfer money into sterling from Euros.

4. Existing/Investments
Many Catalan/Spanish banks whose client’s money is invested have more of an emphasis on their own funds or Spanish funds, than a non Spanish bank/investment would. We call this being more ‘Spanish Centric’. If the Spanish stocks are booming then this is fine, however if not the case this could be very dangerous to your investments, whether personal or corporate.

The larger the stock market, the closer correlation (it does the same as) to other large stock markets. Therefore, if your money is invested with a truly global bank/investment firm you will not put your money so much at risk to this.

5. Relocation
Believe or not, some businesses and people are relocating due to the current predicament, and some companies share prices have even gone up by 20% on revealing this news to the press!

You may or may not want to consider this, or be in a position to, but your personal and corporate finances do not need to worry if you have them set up correctly. Companies’ savings and your personal money can be with a ‘Portable bank/institution’ that acts like a balloon. Wherever you go, you pull your balloon along with you happily. Then, when you want to access some of the money, you let some ‘air’ (money) out and adhere to the local rules of where you are. No need to open up bank accounts in different countries, or go through the extensive administration. Just tell us you want your money and after some due diligence you shall receive it, wherever you are and knowing the process is legal and compliant.

Banks start plans for Brexit

By Chris Burke - Topics: Article 50, Banking, BREXIT, europe-news, Spain, United Kingdom
This article is published on: 22nd March 2017

22.03.17

After U.K. Prime Minister Theresa May set a date to trigger the formal mechanism for quitting the EU, within weeks some of the worlds Big investment banks will begin the process of moving London-based operations into new hubs inside the European Union.

The biggest winners look likely to be Frankfurt and Dublin. Those people familiar with the plans, asking not to be named because the plans aren’t public, include the Bank of America, Standard Chartered Plc and Barclays Plc. To ensure continued access to the single market they are considering Ireland’s capital for their EU base. Meanwhile, Frankfurt is being eyed by Goldman Sachs Group Inc. and Citigroup Inc respectably others said.

Dublin shares similar laws and regulations as its U.K.neighbour and is the only other English-speaking hub in the EU. Whilst Frankfurt is a natural pick, given a financial ecosystem featuring Deutsche Bank AG, the European Central Bank and BaFin.

Executives want to have new or expanded offices up and running inside the EU before the U.K. departs in 2019. With banks increasingly expecting a so-called hard Brexit – the loss of their right to sell services freely around the EU from London.

It is thought London could lose 10,000 banking jobs and 20,000 roles in financial services as clients move 1.8 trillion euros ($1.9 trillion) of assets out of the U.K. after Brexit, according to think tank Bruegel. Other estimates range from as much as 232,000 jobs to as few as 4,000.

Avoid Bank Charges

By John Hayward - Topics: Bank Charges, Banking
This article is published on: 20th March 2017

20.03.17

A number of banks have a variety of current accounts. It would appear that customers are not always advised by their bank what is the best account for them. For many expatriates, especially those buying and selling property, when money is paid into or from a bank account, the charges made by banks can be huge. It is quite common for charges to be made on both the money entering the account, after a sale of a property, and then again on the same money when a new property is purchased and money is transferred to another party. Some banks have accounts which do not attract fees. There will almost certainly be conditions such as a minimum deposit into the account each month. However, and for many retired expatriates, these conditions are not likely to be too difficult to satisfy. You may even be paid interest on balances or receive bonuses on direct debits. Make certain that the account you have is the best for you.

Paying too much tax on pension income

When submitting an annual tax return in Spain, there are (at least) two ways of calculating the tax due on UK sourced income. One way is to tell your accountant how many pounds you received and the accountant will convert this into euros using the exchange rate from the previous 31st December. For example, the exchange rate used for annual tax returns submitted in June 2017 will be based on the rate as at 31st December 2016. The problem is that, with fluctuating exchange rates, one could be paying tax on money that was never received. Let’s say that each month from January to November you received monthly income based on an exchange rate of 1.15 but then by 31st December it had increased to 1.20 euros to the pound. Your tax bill will be based on 1.20 even though you had only received 1.15 for 11 months. The alternative way of submitting the return is to ignore P60s etc. and simply submit evidence of exactly what euros you received through the year. If you are not certain, talk to your accountant.

Obtain proof of your current address

More and more often, financial institutions will be asking for evidence of where you live. In so many cases, all bills are put in the name of only one partner and in these days of online banking, people are no longer sent bank statements and not all companies accept printouts from the internet. Make certain you have a bill (not mobile phone) in your name or obtain an updated Padron certificate.

Italy – Thinking about taxes?

By Gareth Horsfall - Topics: Banking, BREXIT, EU Select committee, Italy, Tax
This article is published on: 14th February 2017

14.02.17

Tax in Italy can seem complicated but with careful financial planning it needn’t be.

A summary

As a fiscally resident individual in Italy you are subject to taxation on your worldwide income (from employment, pensions or investments), assets, realised capital gains and the capital itself.  The rates depend on the types of income you generate and which assets you hold.  This means you are required to declare all your financial affairs no matter where they might be located or generated in the world.

Tax on Income

If you are in receipt of a pension income and it is being paid from a private pension or occupational pension provider overseas or you are in receipt of a state pension then that income has to be declared on your Italian tax return.  Certain exemptions apply for Government service pensions.

It is a similar picture for income generated from employment. This is a slightly more complicated issue that depends on many factors. If you have any questions in this area you can contact Gareth Horsfall on gareth.horsfall@spectrum-ifa.com

Investment income and capital gains

Interest from savings, income from investments in the form of dividends and other non-earned income payments are taxed at a flat percentage rate.  The same applies to realised capital gains.

Some wealth tax may apply on the value of your investments each year as well.  This is charged on the capital value as at the 31st December each year

Property Overseas

Property which is located overseas is taxed in 2 ways. Firstly, there is the tax on the income itself and, secondly, a tax on the value of the property.

1. The income from property overseas.

Overseas net property income (after allowable expenses) is added to your other income for the year and taxed at your highest rate of income tax in Italy.

2. The other tax is on the value of the property itself.  

The value on which this is calculated is the equivalent of the Italian cadastral value of the overseas property.   The value, on which the tax is charged, depends on whether the property is located inside the EU or not.   A credit may be applicable depending on where your property is located.

Taxes on Assets

1. Banks accounts and deposits 

A fixed charge is applied, per annum, per bank account, held overseas.  Minimum balances apply.

2. Other financial assets

The wealth tax on other foreign-owned assets (IVAFE), covers shares, bonds, funds, cryptocurrencies, gold, art or other portfolio assets  that you may hold. The tax is charged on the value as of 31st December each year.

Placing your assets in a suitably compliant Italian investment structure can help reduce taxes and adminstrative burden and aid in your financial planning in Italy.

You might pay more than you need to?

This is a general list of the taxes that could affect you when resident in Italy.  If you haven’t conducted a financial planning exercise before moving to or since moving to Italy, you could be paying more than you need to.  Our experience is that most people are.

We can, in most cases, identify a number of financial planning opportunities for individuals looking to move to, or already living in Italy, to protect, reduce, and avoid certain taxes.