Tax reporting or TAX PLANNING!

I know that you might, myself included, be waiting in anticipation for this years Italian tax bill.  So, whislt we wait I thought I would question what we doing with our hard earned money.  Is sufficient tax planning taking place or are we mainly reporting the facts without paying sufficient attention to whether we are making the most of the tax saving opportunities in Italy and overseas? 

I was recently asked by a prospective client, if I was a commercialista because it was not clear given that I write so much about tax and the changes in tax laws in Italy. The answer is NO, I am not a commercialista.

My basis for writing about the changes in tax laws is founded on 2 very simple principles. 1. I actually enjoy reading about it.  2. I believe that expats in Italy should know this information. Whilst it is quite freely available on the internet, it is a question of finding what is relevant to expat life in Italy and then translating it into a language you can understand so that it can be shared through this blog, by newsletter, word of mouth and also on the internet.

One of my other biggest concerns is that I hear, all too often, that commercialisti have incorrectly reported assets or do not understand the legislation relating to different overseas assets. I think it is important that people have a basic understanding of the tax laws in Italy before relying on someone else to make your tax declaration, which you are often then liable for if any mistakes have been made.

Which brings me back to the difference between tax reporting and tax planning.

Tax reporting is the process of providing your commercialista with information relating to your income and assets, once a year, which they report to the Italian tax authorities and, on which, your tax bill is prepared. 

(Interestingly, I was speaking with a very successful, and now retired Australian friend in Perth when he was last in Italy.  His advice was always to know your business/affairs and the tax laws surrounding it better than your accountant does.  In his opinion, no accountant had never been proactive enough to help him reduce his tax bill or plan effectively and, in his opinion again, where they had offered advice it had often not been very good advice)

Tax planning is about looking for ways around the tax system/s (legally, of course) and trying to establish ways you can save money by restructuring your assets, taking advantage of the income tax rates, capital gains and losses, the pensioners tax credit, inheritance tax planning, and also establishing whether it is more tax advantageous to hold assets in one partners name or another. In essence, tax planning is a very important arm of financial planning. And that is exactly what I am. A financial planner.

A commercialista is not authorised to provide financial advice, by law. Their role is to take your financial information and make sure it is reported correctly. A good commercialista may spot some financial planning opportunities but would ultimately need to refer you to a financial planner to analyse the possibilities in closer detail.

As the reporting season for 2013 will soon come to a close, take note that if you think you might be paying too much in tax in Italy, or even overseas, then it is worthwhile looking at your financial affairs to see if you can structure them differently to make best use of the possible Italian and cross border tax opportunities that exist, or ways to pay less tax in the first place.

If you would like to discuss this then you can contact me on gareth.horsfall@spectrum-ifa.com or on cell 3336492356