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Italian Taxes

 
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PC Parrot



Joined: 11 Dec 2009
Posts: 459
Location: Moral Police Station

PostPosted: Mon Sep 03, 2012 3:39 am    Post subject: Italian Taxes Reply with quote

It seems, in addition to asking for the usual taxes on property owned in Italy, Italy is now asking it's residents (both Italian & non-Italian) to pay a type of wealth tax on property (0.75%) and liquid assets (0.1%) held outside Italy ...

Have I understood this correctly?

Under the old rules, living in Italy would have entailed twice as much tax as living in France .. under the new rules, it would entail 4 times as much
- France's version of the wealth tax doesn't kick in until your net worth exceeds Eu 1,300,000

French taxes Eu 2,500 v Italian taxes Eu 10,500 ..

With taxes like that, who apart from the poor or the rich is going to live in Italy?
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Teacher in Rome



Joined: 09 Jul 2003
Posts: 1286

PostPosted: Mon Sep 03, 2012 7:39 am    Post subject: Reply with quote

The IVIE (tax on property abroad) is, apparently, nothing new. (It's also something that has existed in other EU countries for years.) But as far as I know, it's never been enforced in Italy. What I have heard, is that British people in my region are being asked to "interview" to discuss their assets overseas.

True to Italian form, what happens at the interview is the usual mix of bumbling and confusion. The Guardia di Finanza (financial police entrusted with hunting down assets and extracting payment) have no concept that things work differently in the UK: that one might pay for a house by cheque 20 years ago and not have retained the cheque stub; that one doesn't pay "property tax" per se on a house in the UK, but rates / council tax and so on. Will the tax be worked out on original cost or today's value? Lots of questions that nobody really knows the answer to. "Making it up as we go along" seems to be the rule of thumb here.

There's not much in the way of fair application, either. From someone I know who has been "interviewed", the authorities say that they're going for the Brits first, then later they'll start approaching other EU nations...

They seem far more interested in the comings and goings of your bank accounts. What money has been transferred overseas (though it's perfectly legal to transfer money without declaring it); what accounts are held overseas and so on. Apparently you need to pay 30 euro "tax" for each bank account you have outside Italy. But whether you need to pay a tax on the money inside that account, I don't know. Frankly, it would cost less for me to do that than it would to have the money in Italy as "income" where the tax would be much higher.

One thing is for sure. The Italian government are desperate for cash, and keen to go after the tax evaders. Many Italians have siphoned off their money overseas, which is why these laws are being enforced. Unfortunately, that also means that non-Italian residents are being caught up in it.

I'm not sure how all this will pan out. Monti is leaving government next year, which may well mean that by then, the appetite for chasing assets abroad will have waned. (Especially if there's any arm-wrestling going on behind the scenes and the whole thing will be quietly dropped.) Or you could see rich Brits and foreigners giving up their residency in Italy and going somewhere more lenient... Who knows.

Why your interest PC Parrot?
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PC Parrot



Joined: 11 Dec 2009
Posts: 459
Location: Moral Police Station

PostPosted: Mon Sep 03, 2012 10:27 am    Post subject: Reply with quote

We've been slogging it out in the UAE for over 10 years and will be looking to retire or semi-retire to France or Italy within the next 2 to 5 years ...

We would prefer Italy but you get so much more property for your money in France than you do in Italy ... and you pay less tax .. under the new rules, you pay much less tax in France ..

We had been going to do some reconnaissance in Umbria this December (Spoleto, Todi, Assisi, Spello, Gubbio etc ) but now it will be strictly tourism ..

With the money we would save not paying Italian tax, we could afford to have a Eu 7,500 holiday in Italy every year and be no worse off !
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Teacher in Rome



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PostPosted: Mon Sep 03, 2012 8:02 pm    Post subject: Reply with quote

Whether France or Italy is a very personal choice. I've lived in both countries (though France a very long time ago) and if all things were equal, would choose Italy in a heartbeat. Less "cliquey" here as I've heard, and not so many second homers. (Meaning you're more likely to see your neighbours year round rather than just for three weeks in the summer.)

I think it also depends on how much house you want! I'm not a great fan of huge piles - not least because they cost a fortune to heat in the long, cold Italian winters. I also hate housework, and that's probably just as much a reason if I'm honest. On the other hand, it's very much a buyers market now in Italy, making it a great time to buy a house. (Why Umbria though? I live further over in Le Marche and think this is a much more beautiful region - and it has coastline!)

But I think that France is a lot more stable than Italy. I'd be very wary of putting all my savings into a country which plays fast and loose with its residents bank accounts. (Though you could probably get round that one by never taking out Italian residency.) Although Monti is the sober sort of politician that Italy undoubtedly needs right now, his eventual replacement might be one of those right-wing clowns, and that could make things nasty for foreigners here.

The thing is, Italy is an unpredictable choice. Certain things are great here, others are grim. The cost of living is astronomical, thanks to petrol prices - now the world's third highest (after Norway and Turkey if you were wondering). It might get a lot better - it might get gradually worse - it might implode in an instant! (Though I like to think that's not a realistic option.) In my opinion, the only way you can live serenely in a place like Italy is to go with the flow, not make too many plans in advance, and enjoy it all while you can. And there is an awful lot to enjoy, despite all the negatives. Maybe the Italy / France question comes down to a matter of temperament and risk-acceptance.
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PC Parrot



Joined: 11 Dec 2009
Posts: 459
Location: Moral Police Station

PostPosted: Tue Sep 04, 2012 4:22 am    Post subject: Reply with quote

Having invested everything we had then saved in an old building in Istanbul that required major, major restoration work, I doubt very much the France v Italy question is one of temperament and risk acceptance ..

And having lived amongst Turks and Arabs for the last 16 years, I really don't think that the very European way of life of Italy is going to be more of a challenge than I'm used to ... to survive here, you really have to develop a monastic level of patience ...

For me, it is purely down to finances ... don't forget we would be retired teachers and as such we wouldn't have the type of annual income sloshing around that could swallow up an extra Eu 7,500 tax a year without any coughs and splutters ...

We would aim to have a house + an independent income (generated from other assets) of Eu 2,000+ per month after taxes, which would be further supplemented in 15-20 years time by our respective state pensions ....

However, what in France would be a post-tax income of Eu 2,000 would in Italy be a post-tax income of Eu 1,350 ...
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Teacher in Rome



Joined: 09 Jul 2003
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PostPosted: Tue Sep 04, 2012 7:19 am    Post subject: Reply with quote

My "appetite for risk" comment was more in relation to the stability differences between France and Italy - not directed at you personally! Italy (like Turkey) is far more prone to natural disasters - flooding, earthquakes and volcanoes; its government far more likely to bring in draconian regulation (and its population far less likely to do anything about it) than France, for example.

As far as taxes are concerned, you have an option if you go for Italy. Just don't become resident. Or, if you do, set up a business in the UK and funnel funds into Italy for your living expenses. That way, the business gets the (very low by comparison) tax in the UK. My understanding is that you can earn �589 per person monthly in the UK without incurring either tax or NI. Dividends get taxed at 10% and corporation tax at 20%. If you earn any income in Italy, that gets taxed in Italy. I have no idea what happens with pensions, but assume they will also get taxed in the country of origin - not in Italy.

The taxes aren't in themselves that high here - it's the social security / NI (INPS). It sort of breaks down like this:

For every 100 euro earned
- 25% INPS, leaving you 75 euro
- 20% roughly on that 75 euro, leaving you 60 euro.

You can obviously offset that tax rate by tax allowances if you're a freelancer, like I am. So petrol, insurance, maintenance, road tax for the car (half of all costs); utilities bills (half); professional fees such as for your accountant - and you need one!; health costs; mortgage tax relief; any building incentives such as green energy in your house etc etc. But there's no personal tax threshold for freelancers.

Then there's IMU and IVIE. IMU is the "first house" tax. Lower if you're a resident. Your comune decides how much you need to pay, and average is around 200 euro a year. I live in a small house, and pay 11 euro a year. Nobody knows if the comunes are going to increase that rate in December to make up for the June payment shortfall. (See what I mean about making it up as you go along!) IMU used to be called ICI, which was axed about four years ago, and now reintroduced.

If - based on today's costs - there were two of you living here with an income of 2000 euro per month and nothing to pay on a house, you'd be very comfortably off. (Especially if you live like an Italian, rather than like an expat: so eating locally / seasonally, not buying fancy bottles of wine, going for a stroll rather than sitting in bars - that sort of thing.) But if all that money were to be taxed in Italy on freelancer rates, you'd obviously have far less.
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PC Parrot



Joined: 11 Dec 2009
Posts: 459
Location: Moral Police Station

PostPosted: Tue Sep 04, 2012 2:36 pm    Post subject: Reply with quote

There's no escaping the residency aspect, but it's worth looking into the feasibility of setting up a company and the tax implications .. even if it transpires that there's nothing doing, it's worth looking into ..

Avoiding the 'wealth tax' alone would give us back Eu 5,000+ a year

Who knows, maybe that trip to Umbria will turn out to be part reconnaissance after all ..

Thanks
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