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Moving to Italy? Then Plan Your Finances Carefully

The thought of moving to Italy to live the Mediterranean life is too much of a temptation for some people, myself included.

You buy the house, and restructure it at your leisure. You take you time over deciding when to move permanently to Italy, or you just buy a house and book the first ticket out and start the process of work, renovation, and lifestyle changes, immediately becoming an expat in Italy.

In both scenarios, in my experience, I rarely find those thinking of moving to Italy give enough consideration to the expat finance issues surrounding a move to another country. As detailed in my previous article  –  Expats in Italy: The Top 3 Financial Concerns – financial planning basics seem to be forgotten when in pursuit of the dream.

Who can blame anyone for failing to look at the minutiae when such wonderful prospects are ahead of them? However, what most people fail to realize before moving to Italy is that the financial system in Italy is different in many ways to the systems of other countries around the world (especially those in Northern Europe and the USA) and a little forward planning is very worthwhile.

One of the first issues to understand is that the notion of tax free income in Italy does not exist. Unlike the UK, as an example, where everyone is entitled to a personal allowance before paying tax, in Italy this does not exist and income tax in Italy is payable from Euro 1. So, if you intend moving to Italy on a small income/pension then it pays to examine expat taxation matters such as how much tax you will have to pay when you become a tax resident.

You Can’t Choose

Choosing where to pay tax is not an option for expats in Italy either. It might be convenient for you to continue to pay taxes in your home country but as a resident (that is someone who spends 183 days or more a year in Italy) then you are liable for taxes in Italy and the tax system here is one which applies taxation to worldwide income and assets so everything needs to be declared. If you don’t do this, it is considered tax evasion and penalties can be applied for any failure to accurately declare assets abroad. This is a lesson that a lot of UK based property rental owners, who were paying tax in the UK but failing to declare the income in Italy, found out to their chagrin in 2012.

Also the idea that you continue with the things that you have always done in your home country, may not apply in Italy. Take the UK ISA or the French Assurance Vie for example. They are tax efficient accounts in their respective countries but once you relocate to Italy a different set of taxation rules apply and the tax status of the accounts are not recognized by the Italians tax authorities. For this reason it can be useful to look at other Italian compliant saving/investment solutions as a means of reducing your tax liability.

The notion of doing your tax return yourself is also something which is not really heard of in Italy. There are people who make their declarations themselves, and whilst the accounting and tax rules are not that much different to other European countries, you almost need a degree in Astrophysics to navigate your way around the accounting process. My advice is to bite the bullet and get a professional to do the job for you. Read on, however.

The Mistakes of Italy’s Accountants

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A word of warning! Commercialisti, Italy’s ubiquitous tax accountants, are very rarely held accountable for any errors they make, and it is not uncommon for them to make mistakes. If they make errors then you are liable for the resulting taxes or penalties. In other words, you pay for their mistakes. This may seem unjust, but that just the way it is in Italy.

An efficient system of accountability and compensation simply does not exist in Italy and therefore it is wise to try to understand and learn a little about what to declare and how, before you make your annual tax declaration.

My advice, generally, is that if a commercialista ever tells you not to declare assets or income, get it in writing. If they refuse to do so, then find a new commercialista.

Transferring Money

Lastly, expats who regularly use money transfer services  to move money from one currency (USD/GBP/SEK) into EURO through their banks should almost, by default, be considering a better money transfer option.

At the Spectrum IFA group we work with a foreign exchange currency conversion company who save expats considerable sums of money over and above the bank rates for regular and lump sum payments. Saving money in this way can go towards paying taxes, flights, or other expenses associated with living in Italy.

Restructuring Your Finances Need not Be Painful

All in all, restructuring finances need not be that difficult. It just takes time and some thought. At the Spectrum IFA group we work with Expats in Italy to streamline their finances, ensure they are tax complaint, look at ways to save money, and ensure that their investments/savings are working to the maximum effect for each of our clients. Everyone is different in some way no matter how many similarities there may appear to be.

Time, care, and patience are essential assets when examining your finances if you are planning to live in Italy. Preparing now may well help you avoid unpleasant and potentially expensive surprises in the future.

If,  as an expat living in Italy, you would like more information on any of these issues or other financial planning information you can contact me, Gareth Horsfall on [email protected] or on call me on 333 6492 356.

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Beppe Grillo recently moaned about Italy’s expensive banking costs and I too would confirm that having a bank account is by no means cheap here,

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How To Learn Italian – Tip Number Three

Here goes with the third tip in this How to Learn Italian series which is aimed at anyone who is learning Italian or thinking about learning Italian, either for pleasure or for business.

As mentioned before, these tips are the product of my own personal experience at learning Italian as well as what I have observed from teaching English in Italy for over ten years.

On to the tip.

Pinzimonio, Vegetables and Olive Oil from Tuscany

Elsewhere on BlogfromItaly.com, I’ve asserted that slow food can be quicker to prepare than so-called fast food. Pinzimonio, and Italian starter is one prime example. Something similar accompanied by ‘dips’ often appears at barbecues and dinner parties, but it’s something which can be served every day.

Italian food

To round off the weekend, we ended up at a local restaurant this Sunday evening. The place, called Il Quadrifoglio (four-leaf clover), is located merely