Financial Advice for Resident Expats in Italy
Italy is regarded as one of the most beautiful expat destinations for its food, culture and breath taking landscapes. However, as a high-tax jurisdiction it's crucial not to overlook the financial aspects of your life and tax-efficient expat financial planning is made a priority, as investments held in other countries may form part of your taxable assets.
In a new destination, a lack of local knowledge and language skills can deter anyone from navigating a new financial system. The easy option is leaving assets in your country of origin, but this can be fraught with potential issues which as Italian resident, include:
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responsibility for reporting capital gains and dividends on individual assets in your annual tax return, with tax due regardless of taking income or gains from the investments or not
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investments being subject to IVAFE (Imposta Sulle Attività Fiinanziarie Estere), a wealth tax of 0.2% on overseas financial assets which must also be reported and paid annually
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a complex reporting process to declare capital gains and dividends requiring a 'commercialista' (local accountant), incurring both time and money but essential to avoid mistakes
Tax-efficient Expat Investments in Italy
Locally compliant tax wrappers help avoid complexities, provide tax benefits and an investment vehicle to hold assets outside of Italy which are typically used by high-net-worth Italians and expats. Compliant, advisors must have a branch in Italy and authority to act as withholding agent for Italian taxes.
To benefit you need to qualify as Italian tax resident by residing there for more than 183 days, having domicile or be registered with 'Anagrafe', Italy's official population record. You will then be entitled to:
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defer income and capital gains tax. Switching securities in portfolios aren't deemed chargeable events (they are for direct investments), so taxes otherwise due can remain invested, whilst allowing losses on other assets to be offset against capital gains liabilities (aka gross roll up)
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zero inheritance tax liability for beneficiaries
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hold a financial asset not subject to IVAFE. Stamp duty is applied when withdrawals are made and withheld and paid on your behalf
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tax efficient withdrawals to provide regular retirement income
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avoid reporting obligations as insurance companies withhold tax and reports to the Italian authorities
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secure custody of assets by custodian banks, where assets don't appear on the balance sheet of the insurance company or custodian bank, protecting them in the case of insolvency
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open architecture investment flexibility and access to overseas investment managers
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nominate beneficiaries who are not legal heirs, specify amounts payable to each (avoiding standard Italian probate) and change beneficiaries if required
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avoid benefits being seized by the Italian authorities
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use additional insurance to cover investment losses and protect beneficiaries (if using for inheritance tax planning)
Tax Incentives For New Expats in Italy
Italy has introduced financial incentives to attract new residents, offering tax advantages to a wide range of people from foreign nationals and high-net-worth individuals to retirees and 'inpatriates', or those who have lived abroad such as graduated students who are thinking of returning:
The requirements for resident differs and can be complex and exemptions may apply, so taking advice is essential but options include, among others:
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attracting investment by 'new' residents and HNW individuals who have been non-resident for 9 out of 10 years prior to moving to Italy, applying a substitute tax on annual foreign income up to €100,000 with the option to include family members at €25,000 each
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offering professors and researchers 4 years of 90% exemption on income from employed and self-employed work from the point of being tax resident
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exemption for 'inpatriates' on 50% of employed and self-employed work for 5 years after tax residency begins. The term 'inpatriate' ranges widely from overseas students to high level managerial positions
Choosing an Expat Advisor
As with investments in any country, it is vital you speak with qualified and regulated advisors to ensure you get the best advice. It's also crucial your advisor works on a transparent fee-basis and not by taking undisclosed commission from your investment, so always clarify the following points:
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If fixed periods and redemption fees apply or the advisor is 'paid by the institution', confirm how much they get paid and how
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Look for fee-based investment advice with transparent and understandable set-up and ongoing fees that are fully disclosed and agreed before continuing
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Advisors should look to reduce platform charges and receive remuneration only for the services they provide and not from institutions
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Clarify underlying fund charges. Your advisor should minimise these to give you every possibility of a positive outcome
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Do due-diligence on funds being recommended and check regulations, track record and key statistics
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Take a look at our page on 5 simple questions you should ask you expat financial advisor
To speak to a qualified and regulated advisor in Italy and remove your expat investment concerns, get in touch and you'll get the local expertise you are looking for.