Talking Expat Taxes #19

Yeah, sure. Thanks so much, Alex. It's a pleasure to be here.

I think a lot of what you said resonates with why we went on this journey with Italy is that it's just a country everyone loves. You know, it's Europe's strongest brand. Who wouldn't want to live in Italy? Um, and it just has so much substance in terms of, you know, art, history, culture, economics, that it just makes a lot of sense.

My own background, I spent most of my career in consulting, working with an international firm of lawyers and accountants. Ended up being, part of the senior leadership team for their Portuguese and Swiss offices. What we do is we pretty much advise companies and high-net-worth individuals, family offices on international tax, inheritance planning, passing wealth from one generation to the next.

But for a lot of these clients, we take them through a seven-step program to de-risk from life, and step number one was always get a second residency, ideally a second passport. Step number two, offshore banking, multiple currencies, and so on. So I've worked on the Golden Visa programs as a result, really for well over twelve, thirteen years.

Cut my teeth very much in the Portuguese program, where I was one of the pioneers of using a fund in Portugal for Golden Visa purposes and, in that capacity, probably raised now north of two hundred million euros. And we thought, you know what? Portugal's great. It's a wonderful place, but there are alternatives like Italy.

And Italy's had a investor visa or Golden Visa program since two thousand and twenty, but it was very, undersubscribed in that no one was really talking about it. And Dario Montagnese, the founder of Ariete Capital, and myself, I'm a partner in the business, we set the task of changing that, and it's going wonderfully well.

Um, it's a, a brand that, people connect with very, very easily. Um, so yeah, on, on to better things and no looking back.

yeah, that, I suppose we're very much generalists, okay? We're, we're not an immigration law firm. We're not a tax firm. We run the products that qualify for the investor visa or the golden visa, the innovative startups, et cetera. We work very closely with leading immigration firms and tax firms in Italy, just pulling the strings, making sure there's sufficient communication.

Um, so while, yeah, we can assist, it's very much from a quarterbacking sort of position and bringing in the right people for the right clients.

Italy like most of Southern Europe, it's wonderful when things go well, but you tick the wrong box or you make a mistake in, in that sort of bureaucratic system, it's a nightmare unwinding all of it. So you gotta make sure you're getting the right advice exiting your home country, but entering Italy as well

Yeah, exactly

Yeah. So i-in Italy, what we typically see are people that are in a retired, semi-retired position, looking for quicker, lower entry point access to Europe. What we liked about the Italian program, number one, it's Italy, everyone loves Italy. Number two, it's pretty quick. You know, especially after a legacy of dealing with Portugal for many years and the delays you experience there.

The fact that, you're getting three-month pre-approvals, holding the visa in six to seven months is just great.

And you actually get approved first before you invest, which is nice. Okay. In, in Portugal or Greece, for example, you'd invest first, you then wait for approvals two, three, four years sometimes.

And while you're waiting, rules can change, as we've learned the hard way in Portugal now. Exactly I think Italy is a lot more investor-friendly that way. Why it's generally semi-retired or retired people is they're typically not looking for European passports. Okay. There are people who are maybe fifty-five plus, so getting a European passport in ten to fifteen years' time, which is typically what it takes now in Europe, isn't going to change their life.

What they want is EU access immediately or as quickly as possible. Italy, as I said, within six, seven months you've got your visa. With that visa, you'd have full living, working, studying rights in Italy. Um, the ability to access public education as well as public healthcare, and the public healthcare is a big one.

You know, the Italian system is respected and essentially, um, you know, really good value. Um, as well as a permanent Schengen visa, which for American clients is less relevant in that your passport gives you that anyway. But if you're a South African or Turkish investor, just having a permanent Schengen visa and the benefits that brings you is relevant.

Clients that are looking at a legacy passport, it's more about getting something for their kids than for themselves. They tend to go the Portuguese route. 'Cause Portugal is probably still the only jurisdiction in Europe where foreign investment, not a donation, but an investment and a holiday a year. Yes, at the moment it takes ten years, probably more with processing time.

You can end up with a European passport. And that's-- And to me, that's the biggest distinguishing factor is if people are in it for the passport or in it for their kids, Portugal is the better option. If it's really just for themselves, then Italy is the better option in that your entry point's two hundred and fifty thousand euros as opposed to five hundred thousand euros in Portugal.

Um, it's quicker. It's Italy. Your government fees are significantly lower. You know, in Portugal that runs into the tens of thousands. In Italy, they're almost non-existent. So that-that's where I've drawn the line, draw the line. It's young families with kids, Portugal. Semi-retired, retired tend to go for Italy.

Okay

Mm.

Well, no, I think your clients that were in the program under the original NHR, it was always limited to 10 years. So for 10 years, they should still have it.

I think the things that stand out in Portugal, and you'll know as an advisor, you're sort of axe blows to legacy family wealth, income taxes is relevant, but the big ones are more inheritance tax, wealth tax, things like that. And in that department, Portugal still scores very highly. I mean, that's never changed and, and it hasn't been impacted by the NHR rules.

But quite soon after changing the NHR program, Portugal, the Golden Visa programs remained the same, but what did change were the nationality laws, okay? And those are always two separate distinct pieces of legislation, where in the past, after holding valid residency title for five years, you could apply for citizenship.

That five years has become 10 and doesn't include any processing and waiting time. So things aren't happening as efficiently as they should, so people are waiting a good few years just to get the visa. Then the clock starts ticking for 10 years. So you're looking at a, say, 12-year journey plus to

it's been a nasty surprise for a lot of people and people involved in the Portuguese Golden Visa. That said, there are, you know, a couple of groups and teams of lawyers that are ac-actively lobbying to, you know, change things and improve things. So, no guarantees obviously.

There's a long road to travel, but watch that, that space. Things could potentially change. All right? But Italy and Greece and Spain, for example, have always been 10 years towards the passport, but it's not seven days a year like in Portugal. You'd need to do generally 183 days a year if you want the passport.

So

Correct. So Portugal in terms of time spent is the same as the other countries, but the big benefit is you still have the seven days a year. So that's relevant to people who want to exit with a passport. But as I said, people 55 plus, semi-retired, you know, passports in 12 whatever years' time isn't

Correct.

No. So it's a 90-day cap in every 180 days pretty much.

yeah, it's, it's more optionality and flexibility they're looking for. Um, low entry point

Yeah, so Italy, um, we've been at it for, say, a year and a half going on two years.

Since about the end towards October, November last year, interest really did pick up significantly. That does tie in with laws changing in Portugal. But also we've very much been pioneers in the space in Italy at Ariete Capital of sort of taking a lot of lessons learned from what we did in Portugal and applying them to Italy.

You know, sort of realizing that your classic golden visa investor is not looking to shoot the lights out with this, with this, uh, investment. It's more about them looking at it almost as an insurance product. So the priority is capital preservation, some dividends and liquidity, currency diversification.

So we applied all those lessons we've learned in Portugal to Italy. So now we've got actually very robust, attractive options for clients, um, that are on par and can stand up with, you know, quite easily with what you're looking at in Portugal or what you're looking at in Greece, for example. So it's a mix of the Portuguese program being less attractive, but also the quality of the product we've brought to market in Italy.

So we've-- over the last six months, we're probably picking up ten new clients a month pretty much, which is pretty, pretty decent volume.

So I'm, I'm gonna focus on two of them in that they're by far the most popular, okay? There, there are a couple of others. Um, one would be a very significant donation or a very significant amount in government bonds. But what most people do is they put either €500,000 into an established operating business.

That could be as simple as choosing one listed company and putting €500,000 into that stock, okay? That's a lot of capital to, to put into a company, obviously, especially, especially, um, you know, an It- an Italian company like Ferrari or whatever it might be. Um, then the other option is €250,000 into a qualifying innovative startup.

That's the most popular route, um, especially for ourselves. But we've managed to design something that sort of helps people reconcile the risk that associates with a startup. You know, when you hear tech innovation startup in the same sentence, you'll think, you know, high risk, high reward, lucky if I get my money back.

Ordinarily, people would be right, but we've managed to put steps and procedures in place where, say, 75% of that amount is, you know, really well, well managed and looked after, that we've mitigated the majority of the risk. So, um, I'd say out of every 10 clients we pick up, one or two are doing the €500,000 route with us, which is something that invests into sort of the heart of the Italian economy, a mix of leading Italian equities and leading corporate bonds.

Eight out of 10

yeah, exactly. And then eight out of 10 are going through the innovative startup route

Yeah. So it's, it's an official government title you need to achieve. Um, there are three criteria you should meet. We meet all three. Um, having pre-approved and registered IP really helps. It can't just be a normal startup. It's, it's gotta be a startup that's doing something innovative and different, you know?

So the IP we've registered, it's a process of putting the code onto a hard drive into a sealed envelope, mailing that to the authority where they officially register it, and then you apply for innovative status, which is given to you.

Correct. Exactly. And there's, there's all sorts of startups.

One, you know, one is like sort of door-to-door cash delivery. Another one is a different take on gelato companies or, you know, there's all sorts, but those are like full-on business risk. We've managed to structure a sort of hybrid tech innovation, AI business, um, and investment house, you know. So it's, it's working very nicely.

Um, it's a product we launched towards the end of October, um, last year with 60 available slots, 55, 56 of the slots already taken. So it's essentially, it's essentially sold out. Um, it's been so, so well-received that we're in the process of putting in place some- something of a bigger scale, but essentially a copy-paste

uh, the business we've launched in Italy, two of them, Ariete Capital and Ariete Tech, are both

golden visa-qualifying companies that people can invest into. Ariete Tech is the innovative startup at 250. Ariete Capital is, you know, an audited private investment company that, goes pretty much 50/50 into bonds and equities, like really just choosing legacy blue-chip equities, the sort of Italian companies that have stood the test of time: Pirelli, Brunelli, De'Longhi, Brembo, et cetera, et cetera.

And then doing the same thing on the, the corporate bond side: Unicredits, the energy company, the telecoms company. So super simple, super plain vanilla.

Correct.

Well, yeah, exactly. Well, we don't give any sort of investment advice. We are a qualifying investment, so we'll talk about why we've started these businesses and why we've invested in them ourselves. Um, the, the client should always have an immigration lawyer to handhold them through this process. So we'll typically introduce two or three options to the client, who can then speak to, speak to all of them and choose who they like the most.

And that's important. You know, the lawyers have to be completely arm's length in that they represent the client and make sure we're legit, we are who we say we are. Um, we do indeed qualify for innovative status, all that sort of thing. Okay? So there are no conflicts of interest there.

But what's nice, as I said about the Italian program, is you get approved first, okay?

And that approval is, is a request for a nulla osta, which is almost a letter of no impediment. It's the authority saying, "We're happy about you as an individual and profile of investor, and we're happy with the company that you're going to choose. Green light, proceed, go ahead." Um, so clients don't have that sort of surprise of investing into a company thinking it qualifies and then, oh, oops, your, your, your visa's rejected because you chose a dud of a company

So these have to be proper operating businesses. They can't just be passive holding companies that, you know, own a property and do nothing else.

in theory, I suppose someone could set up a company in Italy, use it to acquire significant real estate assets, but that would be €500,000, not two fifty to qualify.

business would have to do more. It would have to operate the asset. Maybe it's a small boutique hotel or something like that, you know. But that's, that's a lot of work a-and a big journey for, for a visa when there are much simpler, cleaner options available

company wouldn't be an innovative startup.

Correct. As I, as I said, there's the €500,000 option, which is investing into an operating

be as simple as choosing one listed company.

but yeah, as long as it's an operating established business in Italy, but you can only choose one

So we, we send out an engagement letter, okay? Uh, LOI, a letter, a letter of intent to proceed.

There is an onboarding fee that we charge, okay? Most of that fee we use to undertake a KYC process on the client, you know, source of funds, source of wealth. We'll check, you know, if we're limiting, for example, the first startup to 60 people, you, you wanna make sure it's 60 great people.

You know, not anyone where we're gonna open up the news in a couple years' time and, and the wrong individual got their visa through Ariete Tech, for example. That's not good for any of us. So we put in that extra layer, that extra gate. Um, it is a bit more paperwork and work, but it keeps everyone safe for long term, okay?

Um, in parallel, we would then introduce you to immigration lawyers. They would start collating the documents on the investor as an individual and their dependents, as well as the company they've chosen, and submit that to the authorities for their pre-approval, okay? The pre-approval process takes up to 90 days.

It was quicker. It is slowing down a bit as volume has picked up. But I've got to say, the Italian authorities are, are very open to receiving feedback and improvements and, you know, engaging directly with the private sector, which has been very positive. You know, that's really good.

once that nulla osta, the, the pre-approval letter's issued, the client then uses that letter to get a two-year investor visa from their home Italian consulate, and they need to come to Italy on that visa and enter Italy on that visa.

And once they've done that, they then have a matter of days to make the investment. Once they're in Italy, they'll be registered at a local municipality or police office as well. Um, then the investment's made, and then they've got a three-year golden visa from then on. That's renewed every three years, so long as they retain the investment.

There's no need to visit Italy or anything at all. They just need to retain the investment

Yeah. Correct.

so spouses are included, children below 18 as well. Okay, Portugal, the dependency age is a bit high. In Italy, it's a, it's a hard cap, a hard stop at 18 for the initial application. Um, dependents or s- or parents can be included as well, so long as they're older than 65, but you need to show full dependency.

It's not something you could fudge. You know, you need to show that, "Look, if I move to Italy, um, there's no brother or sister left back home that can take on responsibility to look after my parents. As you can see, I give them a monthly allowance. I cover their medical expenses," and so on. So, so there's a real onus of proof when it comes to dependency.

Um, and then, yeah, it's, it's, uh, it- it's, it's a really good program in that, I mean, you, you touched on it earlier. It's Italy, number one. Number two, it's quick. Number three, it's pre-approval before investment. Um, number four, your government costs are really low. And number five, all the value it brings you in Italy for €250,000, G8 economy, you know, the capital of art, history, culture in Europe,

the right to live there, work there, study there, access public education and healthcare with Schengen travel rights.

It's a very attractive proposition

can, correct. It, it might make it easier in that you, you've got a, an inve- a running investment. You'd already have your Italian tax number, you know, things like that, which are steps you need in the process of, you know, making any investment i-in Italy. So it could help a little bit, but, um, you know, not-- I w- I wouldn't say that's a driving factor or, or a motivation behind doing this

th- I think golden visa programs you need to accept are fickle by nature. You know, they're put in place to raise a certain amount of capital. They're then removed or the bar shifts higher. It becomes a bit more expensive, for example. Um, and you've seen that in multiple programs. But once you're in, you're in, and you keep the residency rights.

What could change, like we saw in Portugal, is then a separate law that is naturally, that naturally impacts on what the clients want is changed. So in Portugal, the separate nationality law was changed from five years to 10 years. The golden visa investors keep all of their residency rights and benefits of the visa, but then that step to a passport takes a little bit longer.

But they're always two distinct separate laws. Of course, you can argue that the government created false hope and false expectation, sort of dangled a five-year carrot in front of them, even though it was a separate law, and then shifted it further away. And I think there's grounds for people to feel misled and,

poorly represented.

Um, in Italy, I think that's less of an issue because people aren't in it for a passport. They know what it is from day one. It takes 10 years, and you need to commit to 183 days a year.

know, so, so you know that that's not what it's about from the beginning. What it's about at the beginning is that residence and the perks of the residence and the Schengen travel and all that sort of stuff that it brings you, and that won't change.

Once you've got it, you keep your investment, you've got it.

the message generally with golden visa programs is if you, if you like it, get it while you can. I mean, I saw it in the past where, you know, South Africans wanted to do Portugal, for example, and they said, "I'll, I'll do it next year when the rand recovers some ground and is stronger against the euro."

Well, that recovery never really happened, but if it did happen, Portugal the next year m- shifted it from €350,000 into a fund to €500,000 into a fund. So even if the rand recovered a little bit, well, it's still gonna cost you a whole lot more because,

entry point changed

these things often, you know, they can change and actually go back to a way that's more advantageous for you, for you as well. You know, it doesn't mean it always gets worse, you know? Um, in Portugal, we saw the funds, for example, go from €500,000 to three fifty for a couple of years, then back up to 500.

You know, so things can-- it can go both ways. And, and, and I think possibly it's a matter of time, you know, when Europe, I think will, will realize that what they offer more than anything else is lifestyle, quality of life, standard of living. You know, you don't really have much in the way of natural resources.

Your industry's incredibly expensive and not competitive. Your tech scene is so far behind. But what do people want about Italy? They want the lifestyle. They want the art, the history, the culture, all of that sort of thing that your, your passport or, or the right to reside in, in Europe is your most valuable asset, you know, in, in many ways.

And, and I think more and more countries in, in Europe are gonna realize that and, and become quite competitive with it

I mean, you've got an aging population as well that needs the funding, that needs the Social Security support, that's no longer gonna be productive. You gotta bring in new ideas and new blood and entrepreneurs and all that sort of thing

Yeah. A-and, and when you look at the, the sort of four tax packages I-Italy has in place to attract international people, can sort of see the direction of thought, you know, and the way it's going. So I wouldn't give up hope, Alex. You know, p- possibly in a couple of years m-maybe you can, you can use that great grandparent

Yeah

Okay, so Italy has four separate regimes running in parallel to their standard baseline regime, you know, which is on a sliding sc- scale starting at, say, twenty-three percent going up to forty-three percent. When you add in regional surtaxes, municipal surtaxes, it could be as high as forty-seven, forty-eight percent.

So like most of Southern Europe, pretty tough tax regime. The four regimes in parallel are there to attract a mix of ultra-high net worths, high net worth retirees, sort of working professionals, as well as freelancers, digital nomads. Okay, so the one that's very spoken about and publicized is the flat tax regime, which is a three hundred thousand euro a year, um, flat tax plus fifty thousand euros per family member.

That's valid for 15 years. Okay? So that's obviously targeting your ultra-high income or your ultra high net worth, uh, individual. Um, then they've got the seven percent, um, tax on all foreign-sourced income. It's a lit- it's limited for ten years, but that's directed mainly at retirees who want to live, let's say, in the south of the country, so more sort of, um, rural developed parts of the country.

Um-

believe so, and I believe there's, like, an actual list of qualifying areas that people can look at. Um, so what you do see though is that Italy, how you become tax resident is your standard sort of 183-day count rule, or you can elect to be tax resident. Um, as you know, a lot of your clients probably don't spend more than two, three months in any one location.

You know, they're very mobile with holidays and, um, work trips and, and things like that. So a lot of people would relocate there, make it their points, their central point of economic interest, but not really spend more than two, three months a year there. But that's the home they always return to, where they build up a lot of substance, and they can take advantage quite nicely of the first two regimes, the flat tax or the 7% on all sourced, on all foreign sourced income.

They are limited, but 10, 15-year limitations are, are good amounts of times.

No, but, but I do think it refers, you know, it's definitely targeting retirees. So it probably refers to passive sources of international income, possibly

Correct.

Um, then there's the Impatriate regime, which brings in a younger crowd, your, your entrepreneurs, your business owners.

That's a, a fifty percent exemption on all Italian employment or self-employment income. So your first fifty percent of income is tax-free. It's sixty percent if you have minor children, and that's capped at six hundred thousand euros. So that's very attractive. You're seeing a lot of, young digital nomads, IT engineers moving to Italy for those reasons, and that it's, you know, one of

to live, work, play, you know

I'm, I'm not 100% sure, sure on that, on that part of it

And, and, and what you find as well with moving to, to Europe, especially with the costs Americans are used to,

day-to-day living costs come down quite dramatically, especially if they're happy to live outside of capital cities.

y- like Europe's really good value in, in that sort of way.

and then lastly, well, the, the repatriate regime is limited to five years, I believe. And then there's another flat, um, regime of five to 15% on Italian self-employment income. Um, it's under a revenue cap. I've, I've got... I can't recall the exact number, but that's clearly targeting your freelancers and your small operators.

But I'd say most international people moving to Italy would look and look into falling into the, the first three. Your flat tax for ultra-high net worths, your 7% for your retirees, um, sort of white-collar workers, business owners that have retired, and then your younger entrepreneurs, your digital nomads who look at the 50% exemption on, um, the, the exemption on the first 50% of, uh, self-employed income

think, you know, the fact that Italy's launched those four regimes in a relatively short amount of time, sort of shows the way they're thinking and the direction of travel, you know, where they see the future value and opportunity coming, you know, to the company-- to the country. You know, are, are they looking at it, you know, Italy should become almost the, the Disney World for the international rich who move here, spend your, your pension savings.

We offer you everything you could possibly want with good healthcare, safety and security. You know, it's such a beautiful country. Um, it just-- To me, to me it's a very smart strategy

Yeah, I think, um, there are clients who want to save on legal fees, um, and try-- They're like, "Well, this is just administration. It's just paperwork." And, and in some ways I suppose they've got a point, you know, if you're applying for visas and things like that. But it is the sort of thing where, you know, things can be quite bureaucratic.

The right documents need, are needed in the right format with the right certifications. The right boxes need to be ticked. And if you make an error, it can cause all sorts of delays in a, in a bureaucratic system. So I think the immigration lawyers are absolutely worth the money. Okay? It's, it's

Exactly. Like

you know? Um, then I think come in knowing that it's not about a passport. Okay? This is-- If you're gonna walk away with a passport from the Italian program, it's gonna take... It becomes a plan A, not necessarily a plan B or a plan C. You need to uproot the family, move to Italy, which for some people is, is a great experience and a great adven- great adventure.

From what we're seeing with our clients, most of them are on the other end of, of their life journey. Um, what else? I think don't rush the selection process. You know, t- so it's worth an extra, extra week or two of contemplation and looking at your options. But at the same time, don't, don't take too long because golden visa programs, as we were saying earlier, are here today and gone tomorrow

Thank you

Email is great and, you know, whether, whether we work with a person or not, we're always happy to sort of share our experience, share our, share our network in Italy, um, so that people can get the warm welcome there that, you know, we've experienced and it's as positive a situation for them as possible.

So no need to be shy. If, if people who see this have any, have any queries, um, send through an email, you know, we turn those around generally in a day, max two days. Um, and we'd be happy to have a sort of no strings attached chat to see what the right option is for you and then point you in that direction.