Thursday, February 20, 2014

A ruckus over 20% tax

There are many new things to learn about living in Italy, and one of them is how to assimilate into, and make sense of, our place in the ex-pat community.  Ex-pat is a word many object to, in that it implies a social class that differenciates ex-pats from immigrants. Although I am aware of the class distinction, for clarity I will use the word ex-pats.  So. Our ex-pat community here is mainly made up of English people who have lived in Umbria for a long time.  Most of them live out in the country, up in the hills above the Niccone Valley.  They are a fairly tight community and pass on information to one another, provide security warnings, and generally keep one another apprised of the events that are happening in the community.

We are on the peripheral of this group, not being English, not living up in the hills with kids in school, and not living here long.  This past week we were included in a bit of a wild fire ruckus in the ex-pat community regarding taxes. It seems that the former prime minister, Letti, before his departure from office, passed a law that said that any money transferred in from outside of Italy, would be subjected to a 20% withholding tax that the bank would impose and collect on the wire transfer. The reasoning of the government was that there are many ex-pats who are not paying money on investments made abroad, and it would be the job of the bank to withhold the 20% and then people would have to document at the end of the year, that the money should not have been with held.  Hope you followed that.  The US has a trade agreement with Italy that we are not subject to double taxation. So if we pay 20% capital gains tax on our investments in the US we should not have to pay the 20% here.  Now a big however, if you are a resident of Italy, which the Stoic One will be this year, you must pay Italian tax, and then deduct that from your US tax.  Oh, mamma can see the cost of accountants going up now.  Everyone was in a tizzy about this.  The Italians said, the law will never change, you will have to pay your 20% and they will never give you your money back in your life time.  I believed them.

So I called the best financial advisor in the world, Will Wolf (
and asked him about all of this.  We had an hour of financial therapy. I felt so much better talking to him.  Then this morning, miracle of miracles, the Italians "suspended" the law requiring the 20% hold back.  We live in a strange, global world.

Speaking of strange...

 Cigarette smoking reducing fertility should be the least of the negative effects, but I guess this is more scary than lung cancer!


  1. That is so tipical of Italy. They say something and then they turn around and change their mind - 360 degree. But what are we going to do. I love the country so I go along with this back and forth.

    1. Hi Mary Ann. I was very happy for the change of mind on this one. You are right what can we do, but shrug our shoulders. They are loveable.

  2. My husband and I have retired to the Lunigiana in northern Tuscany. We really appreciate your information on the tax since this has major implications. My husband who is Italian has been researching and it appears the law has been suspended until June. But it has been brought to Renzi's attention. We thank you for the info - Chris

  3. Hi Chris. Thank you for the comment. I had'nt read the June part but I knew that they had "suspended" it, whatever that means. Hope you are well and enjoying your retirement nonetheless!

  4. This was a main concern for many Italians, too. The idea of that law was something like "guilty unless proven innocent" which is pretty common here but totally unfair and frustrating. They'd have automatically taken 20% from every money transfer, and refund the money that wasn't subject to that law after the person's request and documentation.
    As a law, it was pretty senseless and I'm happy it was canceled! I work for an Irish company and I just can't send letters and debate every month to get the 20% of my net salary back.
    I hadn't read the June part either, I wish it won't happen.

  5. Thanks Jack. I talked to the Director of our bank and she said the banks had to idea how to implement this law, so she doubted it would be reinstated any time soon. Sometimes the burearcracy works in our favor! Thanks for your comment and supportive comments.

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