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Financial Advice for Resident Expats in Italy 

As far as expat destinations go, Italy is regarded as one of the most beautiful for its food, culture and breathtaking landscapes. However, being considered a high-tax jurisdiction, it is vital the financial aspects of your life in Italy are not overlooked and tax-efficient expat financial planning is made a priority, as investments you hold in other countries may form part of your taxable assets.

When arriving in any new destination, a lack of local knowledge and language skills is enough to deter anyone from attempting to navigate a new financial system. As a result, the simplest option is often just to leave assets in your country of origin, but this can be fraught with potential issues which as an Italian resident, include:

  • being responsible for reporting capital gains and dividends on individual assets in your annual tax return, with tax being due if you have taken income or gains from the investments or not

  • understanding a complex reporting process to declare capital gains and dividends, which requires the help of a 'commercialista' (local accountant) which incurs both time and financial commitments, but is essential to avoid costly mistakes

Tax-efficient investment structures in Italy

A locally compliant tax wrapper can help avoid these complexities by providing significant tax benefits and an investment vehicle to hold assets outside of Italy. As a result, they are typically used by high-net-worth Italians as well as expats.

In order to be locally compliant, are required to have a branch in Italy and the authority to act as withholding agent for Italian taxes.

Expat financial advice Italy

To benefit from tax-efficient products you will need to be a tax resident in Italy, qualifying by residing there for more than 183 days, having domicile or being registered with 'Anagrafe', an official record of the Italian population. In turn, you will then be entitled to:

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  • defer income and capital gains tax. This means switching securities within portfolios are not deemed chargeable events (which they are for direct investments), allowing taxes that would otherwise be due to remain invested, whilst allowing losses on other assets to be offset against capital gains liabilities (aka gross roll up)

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  • enjoy zero inheritance tax liability for beneficiaries

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  • hold an Italian financial asset which is not subject to IVAFE. Stamp duty is applied but only due when withdrawals are made and is withheld and paid on your behalf

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  • tax efficient withdrawals to provide regular retirement income 

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  • avoid tax reporting obligations as the insurance company withholds taxes and provides reports to the Italian authorities

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  • secure custody of assets by using a custodian bank, by which assets do not appear on the balance sheet of the insurance company or custodian bank, keeping them intact in the case of insolvency

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  • open architecture investment flexibility with the option to appoint overseas investment managers

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  • nominate beneficiaries who are not legal heirs, determine amounts payable to each in case of death (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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  • add additional insurance to cover investment losses and protect beneficiaries (if using the policy for inheritance tax planning)

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Tax incentives for new expats in Italy

Italy has introduced financial incentives to attract new residents. Attractive tax advantages are being offered to a wide range of people, from foreign nationals and high-net-worth individuals to retirees and 'impatriates', or those who have lived abroad such as students who have graduated, and are thinking of returning.

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The requirements for each type of resident differ and can be complex and exemptions may apply, so taking advice is essential but the options include, among others;

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  • attracting investment by 'new' residents and high-net-worth individuals who have been non-resident for 9 out of 10 years prior to moving to Italy, by applying a substitute tax on their foreign income up to €100,000 per tax year, with the ability 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 becoming tax resident

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  • exemption for 'impatriates' on 50% of employed and self-employed work for 5 years after tax residency has been acquired. The term 'impatriate' covers a wide range of human capital ranging from students studying abroad to high level managerial positions

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Choosing an expat advisor

As with compliant offerings in other countries such as Spain, Portugal and France, it is vital you speak with qualified advisors that are regulated to operate locally to ensure you get the best advice. It is also important that your advisor works on a fee-basis and does not take undisclosed commission from your investment, so don't forget to clarify the following points:

  • If fixed investment terms and redemption charges apply or the advisor is 'paid by the institution', ask for clarification on how much they get paid and how

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  • Look for firms offering fee-based investment advice with transparent, easy to understand set-up fees and ongoing charges that are fully disclosed and agreed upon before completion of business

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  • Other than set-up and ongoing management fees, advisors should be looking to reduce platform charges as much as possible, receiving remuneration only for the services they provide and not from institutions

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  • Ask for clarification on underlying fund charges. Your advisor should be reducing these as much as possible to give you every possibility of a positive outcome

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  • Look at the fund institutions being recommended and check regulations, track record and key statistics

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To speak to a locally qualified and regulated advisor in Italy and remove your expat investment concerns, get in touch today and we will get the local expertise you are look for.

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