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Capital protection and growth in one investment ?

By Daniel Shillito - Topics: Inflation, Interest rates, Investment Risk, Investments, Italy, Milan, Uncategorised
This article is published on: 12th September 2016


Investing with confidence is something many of us find difficult to accomplish.

Bad news sells, and the economic environment and uncertainty we hear around us and in the media, can combine to make us risk-averse, unwilling to invest and shy of putting our savings into a new investment.

However without investment, without some risk, your wealth cannot grow, and is in fact more likely to go backwards, as inflation or the average prices of goods and services all around us, continues to rise. Example, your bank may pay you 0.5% per annum interest and inflation may be running at 1% per annum. You are losing 0.5% per annum!

It’s why many of us stay invested in cash or one or two properties. It’s why many banks direct you to investing in government bonds or BTP’s (Italian government treasury bonds). There is a belief or expectation that the risk is low, but a regular income can be gained and that there is some protection or guarantee that we won’t lose our money. We need to be aware that the price or value of BTP’s on the market often fluctuates, and there is no capital guarantee. These investments rely on government liquidity, the balancing of the government’s budget, and their commitments to honor that debt to us, the debt-holders.

What if you could invest in the market (funds and shares) and yet still have some capital protection to know your money would be safe and would be returned to you later?
One such investment type is a structured product. They consist of a capital-protected portion (of up to 100% protection) plus the opportunity to share the growth earned along the way with the provider of the investment, usually over a fixed time period.

Some such products can be complex, but there are now more products in the European market that are relatively simple to understand and use, and which provide some level of capital protection. They might also provide a better result than the usual cash-like capital protected products you find in Italy provided by some local insurance companies.

For more information about capital protection and a specific opportunity in such an investment today, contact me by email or by phone on the number below.

*Please note the above is not specific financial advice but prepared for information purposes. We recommend you obtain tailored financial advice by consulting with your financial adviser about what is appropriate for you and your own situation.

Declaring your tax position in Italy (and post-Voluntary Disclosure program)

By Daniel Shillito - Topics: Income Tax, Italy, Milan, Tax, tax advice, Uncategorised
This article is published on: 2nd February 2016


This article could have been called “Tax Disclosure post Voluntary Disclosure..” but maybe that’s just too many disclosures!

From time to time I receive enquiries regarding the foreign assets and income of expatriates or new immigrants to Italy.

How should these incomes or assets be disclosed to Italian tax authorities? and how will they likely be taxed now and in the future? In some cases questions also arise about assets and income of previous years, and the taxes or penalties that might apply.

The Italian government’s Voluntary Disclosure program that provided reduced penalties for undisclosed foreign income and foreign assets may be over; however we continue to work closely with selected Italian commercialista to help you manage your financial situation and keep you informed of your general tax responsibilities.

We can certainly refer you to competent commercialista who have experience dealing with foreign-held assets and complex tax situations.

The followiing guidelines have been prepared with the help of our commercialista partners, and may help if you are in a situation where you have questions about your foreign assets or income, and you reside in Italy today.

Tax obligation
If you are an Italian tax resident, then you are taxable on your worldwide income and assets. This includes not only business or salary income, but also income earned on all assets you own that exist outside Italy, such as interest on bank accounts, rental income on property, private pension income, dividends and capital gains from shares or bonds and other such financial instruments.

Failure to disclose income or assets related to the past will still require payment of calculated taxes outstanding, as well as penalties for non-disclosure and late payment.

In general you are required to disclose all such foreign assets in the annual Quadro RW form – regardless of whether you received cash income from them or if you paid tax in another country already.

A rare few investments benefit from an exclusion to personally disclose (That is, disclose yourself in your own annual tax lodgement), including select Life Insurance Policies, however you need to request advice to be sure in these cases. Be sure to get in contact for more information.

Penalty for non-disclosure of foreign assets
The penalty for not disclosing your controlled foreign assets on your annual RW tax form is 0.75% of the undisclosed amount, for every year it is undisclosed going as far back as the Statute of Limitations time period allows.

Statute of Limitations (Tax)
The Italian tax authority’s Statute of Limitations indicates that you cannot be brought to account and taxed in relation to undisclosed income or assets (relating only to whitelist countries) once 5 full tax years have passed. This law does not apply to assets held in non-whitelist countries.

So, for example, any undisclosed income or assets relating to the 2009 calendar year and whitelist-only countries, will no longer be assessable for tax by the authorities, as from 1 January 2016.

As countries around the world implement the OECD’s Automatic Exchange of Financial Account Information Sharing Agreements, it is ceratinly an important time to consider your overall tax situation and review disclosures where necessary.

You and your Will as an Expat

By Daniel Shillito - Topics: Italy, Milan, Uncategorised, Wills
This article is published on: 5th May 2015


Changes to European law could override your Will decisions

A Will is a legal document that sets out your wishes including the distribution of your assets when you die.  Making a Will is the only way you can ensure that your assets will be distributed according to your wishes. However ‘fforced heirship’ in place in some countries (like Italy) takes precedence over your will! Descendants can take a share of your estate according to the new European laws, regardless of what your current Will states.

Who prepares my Will?

You can prepare your Will yourself or have a solicitor or other estate planning specialist prepare one for you.  Your Will is an important legal document and if strict legal requirements are not met, the Courts may deem it invalid and it may then be contested or result in your wishes not being met.

What are the new rules?

The objective of the new European regulation (Regulation No 650/2012 on jurisdiction, applicable law, recognition and enforcement of decisions etc) is to facilitate cross border successions and make it easier for European citizens to handle the legal aspects of an international will or succession. The rules are applicable to successions from 17 August 2015.

The new rules are designed to ensure that the treatment of European estates upon death (succession) is treated coherently, under a single law and by one single authority, and to avoid duplicate proceedings and or conflicting judicial decisions in different countries. The EU wants to ensure that in relation to succession matters, there is a mutual recognition of decisions amongst countries in the European Union.

One important choice available to every European resident according to the new rules, is that you can choose whether the actual law applicable to your estate should be that of your ‘habitual residence’, or that of your nationality.

At this stage the UK, Ireland and Denmark have opted out of the new regulation with the result that the parts of the Regulation which seek to simplify the complexities of cross-border successions will not apply. However for UK nationals living in Italy what all this means is that if no action is taken UK expatriates resident in Italy risk seeing their succession being subject to Italian laws rather than English laws.

As you may know the Italian law contains detailed rules about who is entitled to inherit property and it is not possible for an individual simply to decide who should benefit from his or her estate on death. In the case of citizens from European countries who have accepted the new regulation, the Italian forced heirship system will now apply after August 2015 by default, if no such election of country is made.

English law, on the whole, does not contain restrictions and people are free to decide who should inherit their estates on death. The fact that the UK has opted out means that in the absence of a will, or with a badly worded will, technical difficulties and bureaucratic hold-ups will arise, increasing the risk of disputes between beneficiaries and executors, as well as costly delays.

The new rules do not significantly impact any of the tax issues concerning the successions. However the Italian press are reporting that the Government intends to increase the rate of Italian inheritance tax and reduce the thresholds below which no tax is payable.

Something to Review

As a general rule, you should review your Will every three years or whenever there is a major change to your personal and financial situation such as getting married, separated or divorced, entering into a De Facto relationship, having a child, changing your country of residence, or if your Executor or Beneficiary dies or your financial circumstances change. Changes in law are also an important natural trigger to review your current Will instructions and the impact of the law thereon.

If you are in Italy and would like to know more, or be put in touch with a Wills or succession specialist to review your will, we can help. Please enter your details in the form below and we will respond to let you know how we can assist.

Please note that this article has been prepared to provide general information only and it does not represent legal advice. The author and The Spectrum IFA Group do not provide legal advice to clients however we work with and refer clients to qualified and licensed legal professionals, where required.

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Italian expats and disclosing foreign assets or income

By Daniel Shillito - Topics: Investments, Italy, Milan, Residency, Tax, Uncategorised
This article is published on: 16th January 2015


Italy’s new Voluntary Disclosure opportunity – a sneak peek
The Italian government will soon release details of a new Voluntary Disclosure initiative for those with undeclared foreign assets and income, giving them a chance to save taxes and significant penalties.

We don’t yet know exactly when it will come into force. However, everyone agrees that considering the delays so far, the implementation date of this new initiative is likely to be quite soon.

What’s it all about?
Essentially, it’s about encouraging Italian residents to come forward and declare previously undeclared foreign assets and income.

That is, those assets held abroad by Italian residents (property, shares, bank accounts etc.) that have never been declared to the Italian authorities, and upon which no tax has been paid.

This is an opportunity to review your own financial situation and ensure you are tax compliant and up-to-date with Italy’s tax rules, when it comes to overseas based assets and income.

The law is of course aimed at primarily Italian-born citizens who have maintained businesses and assets abroad for a long time, and have never bothered or seen fit to declare such assets to Italian authorities. Penalties for non-disclosure, added to accumulated back-taxes can add up to significant sums and with the increasing rate of information-sharing between governments, the chances of being discovered for not disclosing such assets or income today, are much higher.

Through this latest Voluntary disclosure initiative the government clearly hopes to encourage those with foreign assets and foreign business-owners who have been evading Italian taxes, to come clean and declare what ought to be subject to tax, from the last 5 tax years.

Many foreign-born residents are often unwittingly caught in the net – recent arrivals to Italy may not have received good advice previously about their tax obligations relating to foreign assets. Some people living here may believe that since the business was started or the asset was purchased years ago, when they were not Italian resident, they should be exempt or not required to make declarations of these assets or business activities.

Unfortunately this is simply not the case. You are taxable on your foreign-held assets in Italy.

The Quadro RW form provides the format to disclose your foreign assets as required by the Italian government of all its permanent residents. It’s a part of the Unico tax form and it’s required annually.

Your commercialista may have been preparing this for you – are they aware of your assets and income abroad? One very common example is property you own that is currently let (rented out to someone else) back in your country of birth.

The Voluntary Disclosure initiative about to be launched in Italy will reduce penalties applicable for late-lodgers and forgetful lodgers for a limited time, encouraging you to bring your tax affairs into compliance and up to date.

Current indications are that penalties for not disclosing foreign assets will be 0.5% of the value of assets not disclosed, calculated for each year that you have not disclosed them (going back 5 years). This applies if your assets are held in a white-list country (one which has an information sharing agreement with Italy). Non white-list country assets will incur a penalty of 1.5% of the asset value.

Ordinarily, penalties that apply for non-disclosure today are generally between 3 and 15% of the asset value. Hence the voluntary disclosure initiative will represent a large discount of the penalties otherwise payable.

Returning to our foreign property example, you may have received tax allowances and tax deductions in another country for mortgage interest you paid and property expenses. However, if you are an Italian resident, then generally speaking these expenses are not tax deductible in Italy in the same way. Hence you may well have outstanding tax to pay, based on your foreign rental income. If such a situation could apply to you then you must get advice from a qualified Italian-tax specialist.*

Italy has had voluntary disclosure periods before, so what’s different this time?
First of all, tax amnesty initiatives are usually always different to those that come before – the devil is always in the detail. Many would argue that the latest initiatives are typically less attractive (or provide less tax discounts) than the previous ones, and that the latest initiatives find greater opposition from consumers and other groups that feel no need for non-disclosing taxpayers to receive any such discounts.

Enforcement resources are stronger than ever in many European countries today, including Italy and this is supported by ever-increasing technological advances in data-matching and information sharing between governments. It is hard to recall a time when such significant momentum existed in support of various government actions to enforce compliance with tax laws around the globe.

There are many more details to consider if this could apply to you and of course the official commencement of the regime is yet to occur. When more details arise I will summarise the additional details for you here, and of course you can contact me to discuss your options and overall situation confidentially.

Do you need to be put in touch with a qualified tax advice specialist in Italy regarding your options under the proposed voluntary disclosure regime? Such advice is essential to avoid either misinterpreting the law or even overpaying your taxes.


Is your wealth keeping up with inflation

By Daniel Shillito - Topics: Inflation, Investments, Italy, Milan, Saving, Uncategorised, wealth management
This article is published on: 15th December 2014


How to Create a Great Financial plan for your life

Part 2. Is your wealth keeping up with inflation, especially with interest rates below zero?

Is your money in the bank?

This is a continuing series aimed to provide you with some thoughts, ideas and strategies when considering and planning for your financial future.

In the second part of this original series about “How to Create a Great Financial Plan for your life” let’s look at another fundamental planning (and savings) principle: How will inflation affect me, and how will my savings look after me in the future?

Sooner or later we do have to consider tomorrow: what happens in the future when perhaps we are not working and our income is not what it used to be?

In the first article of this series I wrote about the risk of relying on the State or government pension to fulfil your future income and cash lump sum needs.

A good adviser will suggest that you do not put all your eggs in one basket when saving and planning for the future.

Aside from pension plans, most of us realise that we need to keep a level of savings in reserve, and preferably this is a growing reserve, within a longer term financial plan.

Everyone knows that saving money after income taxes, state social charges and living expenses, is not an easy thing to accomplish. However what many people do not realise is that unless your hard-earned money is invested wisely, that savings reserve could in fact be going backwards, and literally declining in value, especially when compared to the current inflation rate.


What is inflation and the inflation rate?

Very generally, the definition of inflation is “A rise in the general level of prices of goods and services in an economy over a period of time.” When prices rise, your Euro/dollar/pound/Lire can buy fewer goods and services.

Inflation acts like erosion, reducing the buying power of your money, over time.

Consequently, you have lost some of your buying power. It just doesn’t feel like a loss because you don’t see the loss when looking at your bank balance.

If someone you knew kept $50,000 in cash hidden away for 15 years, and the average inflation rate over that time was 5% per year: then after 15 years the purchasing vaue of that money would be equal to approximately $23,160 – or in other words after 15 years you can only buy goods or services worth $23,160.

In the short-term a bank is a good place for your money. However when considering your needs for retirement or for the next five years or so, it will pay to consider where in fact you are choosing to save your money, and hopefully, attempting to grow your money (or at least keep pace with inflation).

Banks will pay you interest, however this income is taxed directly in your hands and may not keep pace with inflation whatsoever.

In June and September this year, the European Central Bank (ECB) has cut deposit interest rates from zero, to negative 0.2% (or -0.2%). This means that Italian banks (and all European banks) have to pay the ECB to hold their money! This reflects a determined plan by the ECB to encourage lending and bank investment within the economy, and to encourage investors in Europe to invest in the wider economy!

It also means that banks have little or no incentive to pay interest on cash deposited with them by their customers. Your bank statements will be telling you this story.

Accepting Risk to earn a return on your money

It is widely recognised that a key to all investing is to diversify your risk.

Diversification or by holding a variety of asset classes that maintain differing levels of risk within those asset classes, you can spread your risk in a broad fashion, such that volatile movements or poor performance in one area, has a much reduced or negligible impact on your overall portfolio or wealth.

Uncertainty and volatility are normal for investment markets. However your first strategy to deal with such volatility is effective diversification. Just like keeping all your savings in the bank is not diversified, neither is keeping 100% of your money in property, or in shares.

In this low interest rate environment, commentators widely recognise that investors have to make the decision: do they simply continue to hold cash on deposit and accept the cost involved, or do they take on some additional risk to earn a return?

This is indeed a dilemma in particular for risk-averse investors, when at present low risk investments other than cash may not be returning attractive or high levels of income or capital growth – this is normal however, since low risk investment cannot expect to earn high rates of return. This is the risk-return trade-off at play. A higher level of risk is rewarded with higher rates of return. Low levels of risk produce relatively lower levels of return.

However we can be more confident that investing in assets other than cash has a much greater prospect of generating returns in this environment – considering that interest rates at the ECB are negative!

In a future article we will look at the various asset classes and consider how you can use them to your advantage as an investor today.

Milan Business Lunch December 10th

By Daniel Shillito - Topics: Business Lunch, Italy, Milan, Uncategorised
This article is published on: 3rd December 2014


Milab Business Lunch

BLM 2014 Christmas Aperitivo is here.

This is a great opportunity to build new relationships, and meet people you haven’t met before.
Expect lots of fun and a surprise guest!

Let’s celebrate Christmas and the launch of BLM!



December 10, 2014 at 7.30 pm

Bioesseri Winebar & Restaurant
Via de Amicis 45, 20123 Milano

Your aperitivo cost is 25 euro to be paid on entry. This includes 3 drinks and all food and surprises.

REGISTER HERE .. for great networking, and surprise guest