Tax efficient savings
Submitted by karenr on Tue, 04/05/2011 - 03:16In reply to A newbie all over again! by Annec
Still useful?
Submitted by SirTK on Wed, 04/06/2011 - 04:43In reply to A newbie all over again! by Annec
As far as my understanding goes, one of the great advantages of the offshore bond was the ability to withdraw up to 5% of original capital value without triggering a chargeable event. if annual income is not needed, the 5 percent allowance is rolled over to subsequent years so a cumulative withdrawal allowance can be built up over the years. And this is not deemed to be "income", so doesn't affect Age Allowance. Another advantage is the ability to assign the bond to someone else (e.g. a non-taxpayer), also without triggering a chargeable event. Both of these mean that the offshore bond should still be a very useful tool if used properly. Unless I am out of date? Terry
Tax efficient vehicles
Submitted by Gareth on Fri, 04/08/2011 - 12:20In reply to A newbie all over again! by Annec
To answer the first question: So what would be a tax efficient savings vehicle for UK citizen resident in Italy? If you are a UK citizen resident in Italy then you can use a pension savings vehicle which would allow you to contribute up to approx €5000 euro a year, tax free. If it is lump sum you wish to invest then it is merely a case of managing your investments in line with the income and capital gains tax rules as there are no real tax break accounts, like the UK ISA. As for the second comment about the 5% withdrawal limit. Yes, this does apply in the UK, but Italy does not subscribe to the same rule, so if you are an Italian resident for tax purposes you would not get the same benefit and it would be deemed income. If you are a UK resident for tax purposes then this would still apply. However, remember that the 5% rule is tax deferred and not tax exempt, so that you may do so for 20 years but then at that point you would have to pay tax on the cumulative withdrawals. As for assigment without a chargeable event this is again true. However, the reason for the posting was that because of the new legislation likely to come into effect soon (and dependent on your residency, i.e to which set if tax rules you fall under), these events may become reportable to the country in which you reside. So the simple answer is that your residency is key. If you are spending more than 183 days a year in Italy then for all intents and purposes you could be considered Italian tax resident and fall under the laws of this country. If you spend less than that time plus time in another country i.e UK, then you may fall under the rule of that country instead. The idea of the European Savings Tax Directive is to harmonise and make transparent sources of income. This does not mean that individual countries rules will not apply, it depends on your own situation. Lastly, if the offshore Bond is used correctly, i.e for Inheritance tax purposes, it is still a good tax planning tool. However the myriad of uses is being slowly withdrawn. I hope that helps.
Unless.....
Submitted by SirTK on Sat, 04/09/2011 - 03:33In reply to A newbie all over again! by Annec