Tax Reporting or Tax Planning?

REPORT /rɪˈpɔːt/ verb gerund or present participle: reporting give a spoken or written account of something that one has observed, heard, done, or investigated.   PLANNING /ˈplanɪŋ/ noun the process of making plans for something.

TAX REPORTING OR TAX PLANNING WHAT SHOULD YOU DO?  I am often contacted online for help on calculating Italian tax liabilities for English speaking 'stranieri' living or thinking of living in Italy, but I have a confession to make:  I am NOT a commercialista.  I am a financial planner. I do share a lot of the knowledge that they have, I need to for my work but I confess that I have no idea about the taxable benefits of planting apricot trees on arable land in Umbria (if there even are any??) nor do I know much about running an artisan table manufacturing firm in Tuscany. These are just outside the scope of my knowledge. But what I do know a lot about, and am constantly informed about, is the tax law as it applies to most 'stranieri' who are living in Italy. I know about pensions held overseas, rental property held outside Italy, tax efficient investments in Italy, running a small simple business, how different types of income are taxed and what things you can do to try and mitigate tax liabilities in Italy.  I am also constantly informed about changes in tax law to ensure that you, my client, are ahead of the pack in terms of planning for your future in Il bel paese.  THE DREADED COMMERCIALISTA One of the biggest concerns is that I hear, all too often, that commercialisti have incorrectly reported assets or do not understand the legislation relating to overseas assets. I think it is important that you have a basic understanding of the tax laws in Italy before relying on someone else to make your tax declaration for you which you are then likely to be liable for if any mistakes have been made.   My basis for writing about the changes in tax laws is founded on 2 very simple principles. The first being that I actually enjoy reading about it (please do not hold it against me) and the second point is that I believe that people should know this information. Whilst it is quite freely available on the internet, it is a question of finding what is relevant to 'stranieri' life in Italy and then translating it into a language you can understand so that it can be shared through this newsletter, by word of mouth and also on the internet. __________________________ GETTING IT RIGHT FIRST TIME  The difference between tax reporting and tax planning   Tax reporting is the process of providing your commercialista with information on all your income, assets and gains once a year, which they report to the Italian tax authorities and, on which, your tax bill is prepared. 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,  if you can benefit from the retirees tax credit, inheritance tax planning, and also establishing whether it is more tax advantageous to hold assets in one persons name or another.    In essence, tax planning is a very important arm of overall financial planning. A commercialista is not authorised to give you 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 it in closer detail.   As we near the dreaded Brexit day, with just a few months to go you might be needing to make some decisions yourself. Seek advice before you do so.  Don't just jump in before looking at the implications, but make sure you plan your finances well before the big day: some operations take time to investigate properly and formulate correct advice. Leaving  it until the last minute will likely mean that you are left with limited or no options.

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POTENTIAL TAX ON MONEY TRANSFERS OUTSIDE THE EU And I couldn't end this blog without out some of the latest musings from our Italian M5S and Lega coalition friends. Since we are on the subject of Brexit it makes for interesting reading but also for our other English speaking 'stranieri' friends in Italy, of which there are many of different nationalities.  The Lega have made a proposal (yet to be approved) that all money transfers out of Italy to ex-EU countries (of which the UK will shortly become one) will be subject to a tax of 1.5% on the amount, for any transaction over 10 euros, excluding commercial transactions. The funds raised from this tax would be allocated to an infrastructure fund. (Not another fund I hear you cry. The famous funds that seem to never find their way to the ultimate destination).  Whilst I don't see this proposal affecting many people, since anyone living in Italy is likely to be bringing money into, and not out of the country, it could catch some people in the trap, such as anyone who decides to repatriate to their home country outside the EU, anyone sending monies back home to support families in education or for other living expenses.   It is one more potentially nasty surprise as a result of this coalition.