Lo scudo fiscale

via roma Image
11/23/2009 - 06:49

Hi allThis post is mainly aimed at those of us who are foreigners RESIDENT here in Italy.As a British person resident here in Italy for 3 years with a house I seem to have got caught up in a mess.We have some savings back in UK bank for rainy day and who knows what the future holds, on which we have income tax on savings deducted as per UK residents.Seems that because we made a mistake here and have not declared via commercialista in Italy we must now pay a 5%  fine on CAPITAL amount held in UK. ( This 5% fine is an Italian figure assuming 1% per year for 5 years regardless of how many years as resident , our case only 3 years but still 5% fine.) Does not matter that we have been paying tax in UK, fine still due.I have always been aware of the European tax savings directive and the exchange of tax information between european countries and others but assumed perhaps wrongly that as continuing to pay UK tax on interest was OK.We have been informed that Italian tax authorities via this new scudo fiscale are really attempting to clamp down o tax evasion within Italy and there is a deadline of 15/12/2009 to pay these fines or else bigger penalties will be due.At this stage we have not been contacted by Italian tax authorities, our financial adviser here in Italy has told us about this situation and IF the Italian tax authorities get round to us we will then have major problems as the Tax authorities here are not to be messed with as life will be a headache.Anyone have any views on this, I do have more information of what we can do if we decide to pay fine and transfer the money here..  


Ouch! We were planning to do the same as you when we relocate, sounds like we need to rethink.Could it be that an existing ISA is not  a tax free savings vehicle? We never considered ourselves wealthy enough to have tax worries!Any advice gratefully received....  

IMHO I would be very careful about sticking my head above the parapet. The UK Inland Revenue sent out letters along similar lines a couple of years ago.  They were very intimidating and threatening. They did not actually apply to me as I was resident in Italy at the time but still had a UK bank account, however they scard the pants off me! I spoke to my accountant who told me to ignore it. Which I did and have heard nothing since. Why did I get the letter if it didn't apply to me? My accountant said the Inland Revenue employ these tactics as plenty of people pay up who actually don't need to - pure bully boy tactics. How does that work? You state you underdeclared X and agree to pay a fine of 30%. It is not looked into by the Inland Revenue (that is part of the deal) so plenty of people pay when they don't need to.I would agree that the taxman is defiitely being very thorough in pursuing unpaid tax at the moment but this Scudo Fiscale (as I understand it from the newspapers) is for people who have capital abroad and are not paying Italian tax on it. In this case if you declare it before 15/12/2009 then you can get away with a minimal fine (the 5%), own up to it and so long as you bring the money back to Italy the taxman will say no more. This does not seem to me to apply to you in any sense. I was always under the impression that you must declare the interest on savings even if you have paid tax on them in the UK so I am pretty sure you have done "wrong" there. There will be nothing to pay here (due to double taxation agreements) but it must be declared.Remember these "bigger penalties" will only apply to you if you have avoided or underpaid tax. I can't see that you have.I think if it were me I would make sure my interest was declared on my tax return for this year and find out what would happen if you declared last year's. Usually in Italy you will be fined and have interest charged on the fine but there should still be no tax due.As I understand it everyone who is resident in Italy must make a tax return regardless of where your money is or where you pay tax.I would get a second opinion from a recommended commercialista in your area.Or even a third.

Penny is right, if you stick your head above the parapet someone will take a shot at it. If you declare anything with either Tax authority be prepared to pay up. 'Least said, soonest mended', as my Nonna used to say. Just remember that there are probably bigger fish to fry out there and scatter gun tactics generally work with most; pretend you never received the letter. 

Hi Bunterboy,remember that once you have been physically resident in Italy for more than 6 months you will not necessarily be tax resident in the UK so may no longer be able to take advantage of ISA's. Have you checked the small print? Does it say only for UK residents? I would check with whoever you have your ISA with.

My understanding is that you declare ALL income (wherever earnt) and the double taxation treaty allows for tax already paid in UK so that you do not pay again in Italy.  Thus ISA that is tax free in UK would have tax payable out here!  As already stated the benefit of an ISA is only if you are tax resident in UK and normally liable for tax in UK only.  If resident in Italy and thus also liable for tax in Italy there is no benefit. Going back to the original post - the interest received on savings should have been declared on annual returns along with declaration of tax paid in UK and then there would have been no problem.  It is hiding money and avoiding tax (tax free accounts!!) that is the problem.

 i certainly agree with many of the sentiments above but not that the Italian finace police could ever be equated with the UK inland revenuefor a start they are a very well numbered military force.. and are more like the equivalent of the customs and excise in the UK...  with virtually no one to answer to as regards who they investigate and bring a case against...  what i would think here is that the only ones safe from their clutches are the real criminals.. most politicians and their connections .. obviously valentino (the doctor) was not criminal enough.. they are also paper heavy investigators.. unlike the Uk... which uses computers more.. these people have the capacity to set thousands of staff looking through paperwork continuously for anomalies..basically a couple of years back Mr Prodi of the past government instituted new laws allowing them to widen their search... i wrote a fair bit about it back then.. it starts with your codice fiscale,... a powerful control of what people do in their lives.. for instance your phone mobile or not has this attached... and Italy has the ability to listen to all phone calls and is regarded as the most listened to population anywhere...  which is why when you phone up to ask the price of a bag of pellets say..the shop keeper tells you he doesn't discuss that sort of thing on the phone... (true story)you then have residence... every time you move here you have to declare your change of residence.. to carry out many purchases requires your C.F. ie the car...  Mr Prodi and his friends worked out that they had a huge database of who was spending what and where and when .. and they now use this to decide how income,tax returns and spending all line up...so for all those planning to keep their heads below the parapets.. its a bit late.. living here is pretty well bound to reveal all... and the only thing sad about it is that still they use a sledgehammer to crack the little nuts whilst letting the big fish carry on free of any worries..  thanks to Mr Prodi the finance police here are much more powerful but he and his friends will be forever safe from their controls ... anyway they are not an organisation i would ignore.. 

I have a bit of sympathy for keeping your head below the parapet, (because it is not guaranteed that l'agenzia will choose to investigate you), but being non-resident (ie. not having enlisted on the anagrafe of the comune in Italy) isn't enough to avoid their clutches.http://www.nuovofiscooggi.it/attuali...idenza-fiscaleWhat that link explains is the (post Feb 2009) accord between the Comuni and the agenzia delle entrate.

I agree with Adriatica wholeheartedly. I wasn't suggesting you do nothing but get good advice before you hold your hand up. Your financial adviser's advice may not be the best way forward for your circumstances as you haven't actually avoided tax at all, just not declared everything in the proper manner.I must admit I assumed an ISA would work as KarenR describes but again you need an accountant's advice.Fillide - that is a very useful article. Thanks.

Q &A  from HMRC..

Q. What happens if I go abroad?

A. You can only open an ISA if you are resident and ordinarily resident in the UK for tax purposes (ask your Inland Revenue office if you are in any doubt about this).Crown employees, such as diplomats or members of the armed forces, who are working overseas and paid by the Government are eligible to open an ISA. Their spouses or civil partners can also open an ISA.If you start an ISA in the UK and then go abroad, you cannot continue putting money into the ISA (unless you are a Crown employee working overseas or the spouse or civil partner of a Crown employee working overseas).  However, you can keep your ISA and you will still get tax relief on investments held in the ISA. When you return, you can start putting money in again (subject to the normal annual limits).

Hmmm - it says "when you return". This implies your period abroad is temporary which if you become permanently resident in Italy it is not. I personally would not rely on that meaning you will still benefit from tax free interest and definitley check it with an accountant and preferably one that knows about Italian tax rules too.

Interesting but I still can't see the italian tax man saying "Oh - it's tax free in the UK. That's alright then. You don't have to pay it here then." I may be being pessimistic but I've had enough dealings with the Italian tax man to know they take everywhere they can! You need specific advice as to how it would be treated in Italy not the UK.

For info, we are not pensioners or retired. I am unemployed here ( small business failed ) wife is an employee here. we own a house and are both registeered as resident here in Italy.As I understand the situation :-If registered as resident here in Italy then also automatically resident fiscally, therefore subject to Italian taxation laws. you are on the guardia di finance radar.If holding funds abroad ( uk our case ) and the uk bank has your address as abroad then automatically european savings tax directive active and your details yearly are sent central somewhere and then off to relevant tax authorities. Guardia di finance has your name again ( amongst thousands of others admittedly).As resident  and hence fiscally resident  you must declare yearly via commercialista all income from all sources. ( this we missed out on hence fines now due).Lo scudo fiscale is a shield if we decide to bring money in and pay fines, our bank here sorts all paperwork and pays fines and issues us a certificate  ( scudo fiscale)if we get a visit by guardia finance we show cert. and they go away ( in theory).sorry must dash, a knock on the door. 

Uk ISAs, you are allowed to hold them dormant BUT, as in Italy you must declare all income ( interest recieved and paid) you will be taxed on untaxed amounts.Next year here in Italy you will also be required to declare any land or property abroad, though they are saaying this does not necessarly mean extra tax liability.For us I think we must pay the fine, the annoying thing isthat if we had known all this 3 years ago would have brought everything here at better exchange rate and earned a better rate of interest here, we have now earned hardly any interest ( and paid uk tax on it ) and now face an extra 5% fine. Part of the joys of living in Italy, you have to learn the hard way.Still trying to get my understanding correct on one point, you are allowed to keep abroad 10,000 euros per person but not sure if you still have to declare or not this amount, will try to find out.My advice is for those thinking of living here, you must always think about the addresses you use for things but obviously still pay taxes due.To those that are or have been thinking to take residence here to pay less tax when purchasing a house here as holiday home really need to sort out the situation as long term will cost you more in income tax fines, assuming you have not delared income, work , houses abroad.One more problem almost paid for, now I must get on and sort out leaking roof left for the second time by what must be one of the worst builders i have ever dealt with.Will keep you informed when I have more info.