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LOCONTE & PARTNERSWEALTH MANAGEMENT
***International estates in the Italian legal and tax system
Loconte & Partners – Studio Legale e Tributario 1
Loconte & Partners – Studio Legale e Tributario 2
CROSS-BORDER ESTATES
According to Italian international private law an estate is regardedas cross-border when one of the key elements is not Italian, i.e. when:
� The deceased person is resident abroad, the heirs are residentin Italy and the assets are located abroad;
� The deceased person is resident in Italy, the heirs are residentabroad and the assets are located in Italy;
� The deceased person and the heirs are resident abroad and the assets are located in Italy;
� Thedeceased person and the heirs are resident in Italyand the assets are located abroad.
Loconte & Partners – Studio Legale e Tributario 3
THE ITALIAN DOMESTIC LAW
The inheritance and gift tax – Legislative Decree n. 346/1990
� Each State must legislate on tax matters in its own Country -> inItaly the Legislative Decree n. 346 of 31 October 1990 regulatesinheritance and gift tax;
� In Italy the inheritance and gift tax is proportional to the value ofthe inherited or received assets, with different tax rates anddifferent no-tax allowances according to the relationship betweenthe deceased and the heirs.
Loconte & Partners – Studio Legale e Tributario 4
THE ITALIAN INHERITANCE AND GIFT TAX
� The current tax rates
Relationship No-tax allowances Tax rate
Spouse, ascendantsand descendants
1,000,000 eur 4%
Brothers and sisters 100,000 eur 6%
Relatives up to 4°degree of relationship
Not applicable 6%
All other people Not applicable 8%
People with a severe disability –Recognised by the law n.104/1992
1,500,000 eur See above
Loconte & Partners – Studio Legale e Tributario 5
TERRITORIALITY
The connecting criteria, provided by the article 2 of LegislativeDecree n. 346/1990 are the following:
� Worldwide taxation principle – If the deceased or donatorqualified as an Italian tax resident:
«The inheritance or gift tax is due on the worldwide inheritedassets»;
� The territoriality principle (lex rei sitae) – If the deceased ordonator qualified as non tax resident in Italy:
«If the deceased or donator qualified as non tax resident atthe demise or at the date of the transfer of wealth, theinheritance or gift tax is due only on the asset located inItaly»;
� Some assets (e.g. real estate located in Italy, shares in Italiancompanies) are irrefutably deemed to be located in Italy
Loconte & Partners – Studio Legale e Tributario 6
CASH, JEWELERY AND FURNITURE
According to article 9 of the Legislative Decree n. 346/1990 «inherited asset is deemed to include also cash, jewelery and furnitures for a value of 10% of the total value of the estate, even if they are declared for a lower value, unless there is an analytical inventory, drawn up according to the articles 769 and following of the Italian Civil Code, stating a different value».
� the assumption does not apply if there is an analyticalinventory;
� The increase of 10% is calculated on the value of the asset lessdeductible allowances;
� The assumption does not apply if the deceased qualified as nontax resident in Italy at the demise.
THE VALUE OF DOMESTIC REAL ESTATE
The value of property located in Italy, according to art. 14 of TUS (Italian IH and Gift Tax Act), must be determined as follows:
� Full ownership: market value as of the demise;
� Usufruct: difference between the market value of full ownership and the value of bare ownership as determinedaccording to a specific schedule;
� If the stated value is at least equal to the cadastral value, no further claims can be raised by the Italian Tax Revenue (art. 34, co. 5 TUS).
Loconte & Partners – Studio Legale e Tributario 7
THE VALUE OF FOREIGN REAL ESTATE
In case of property located abroad, the Italian Tax Authority,according to the Circ. 5/E of 10 January 1973, follows the criteriaof:
� The value stated by the taxpayer;� In special circumstances, the Value agreed by the Italian
Tax Authority with the foreign Tax Authority.
In any case International Tax Agreements in respect of exchange ofinformation are applicable.
Loconte & Partners – Studio Legale e Tributario 8
DOUBLE TAXATION ISSUES
Each Country can choose its own connecting criteria, as:
� Residence, domicile and/or nationality of the taxpayer,regardless the location of assets (worldwide taxationprinciple);
� Principle of the location of assets.
In case of cross-border estates,double taxation issuesmay arise.
Loconte & Partners – Studio Legale e Tributario 9
DOUBLE TAXATION MITIGATION
Generally speaking, Italy allows a foreing tax credit for inheritanceand gift taxes paid in another Country (art. 26 or 55, par.1-bis, ofthe Legislative Decree n. 346/90) when the same assets are taxed inboth countries;
The amount of the tax credit cannot exceed the amount of taxes thetaxpayer would have paid in Italy on the same assets.
Some Countries have signed International Tax Agreements againstthe Double Taxation also covering inheritance tax matters.
Loconte & Partners – Studio Legale e Tributario 10
DOUBLE TAXATION TREATIES
The international Tax Agreements on inheritance and gift matterssigned by Italy are seven, of which:
� Six are based on the first OECD Model (Denmark, Israel,Greece, Sweden, United States and United Kingdom);
� One is based on the new OECD Model (France)
According to above Agreements the general criteria to avoid thedouble taxation are the following:
� International information exchange;
� Principle of tax domicile (habitual abode, center of vitalinterests, nationality or mutual agreement between competentAuhtorities).
Loconte & Partners – Studio Legale e Tributario 11
DOUBLE TAXATION TREATIES
The mechanism provided by International Tax Agreements in orderto avoid double taxation are:
� Tax exemption: assets are only taxed in the State where theyare located (Sweden, Greece, Israel and Denmark);
� Foreign tax credit (United States and France): a tax credit isgranted in the Country of residence for taxes paid in theCountry where the assets are located.
Loconte & Partners – Studio Legale e Tributario 12
THE INTERNATIONAL TAX AGREEMENT ON INHERITANCE TAX BETWEEN ITALY AND USA
The International Tax Agreement between Italy and USA on inheritancetax has been signed in March 1955 and includes cases where the deceasedis resident in a Country and the asset is located in the other Country.
� Territoriality rules : art 3 of the International Tax Agreementdetermines where the asset is deemed to be located if an individual iscitizen or domiciled in one of the contracting States;
� Tax credit: art 5 of the International Tax Agreement provides that, ifthe same asset is taxed in both contracting States, a tax credit shall begranted by the State of residence or citizenship of the deceased;
� Exchange of information: art 6 of the International Tax Agreementprovides that Italy and US must exchange information on theinternational estates.
Loconte & Partners – Studio Legale e Tributario 13
EXAMPLE
� The deceased is resident in Italy at the demise, heirs are USresidents and the inherited asset is composed by a property inNew York and some shares in a US company.
� According to the Legislative Decree n. 346/1990, if thedeceased had his last tax residence in Italy, the inheritance taxis due on his worldwide transferred rights ans asset (worldwidetaxation principle )
� In case of double imposition a tax credit shall be granted by theState of the residence of the deceased
Loconte & Partners – Studio Legale e Tributario 14
TAX ISSUES – ITALY/USA
Whether the deceased was resident in Italy or the asset was locatedin Italy, the heirs, within 12 months from the opening of thesuccession and regardless of their tax residence, must file with thecompetent Office of the Italian Revenue a declaration of succession.
� If the deceased was resident in Italy: the declaration should befiled to the competent Office in relation to his last residence.
� If the deceased was resident in USA: the declaration should befiled to the Rome Revenue Office.
Loconte & Partners – Studio Legale e Tributario 15
LONDON42 Barkeley SquareW1J5AWTel +44(0)207409501
london@studioloconte.it
MILANOVia Fratelli Gabba, 320121Tel +39.02.45476250Fax +39.02.45476251milano@studioloconte.it
NEW YORK350 Park AvenueNY 10022Tel +1.9174384351
newyork@studioloconte.it
PADOVAGalleria Porte Contarine, 435100Tel +39.02.45476250Fax +39.02.45476251padova@studioloconte.it
BARIC.so della Carboneria, 1570123Tel +390805722880Fax +390805759312bari@studioloconte.it
ROMAG.Battista Martini 1600198Tel +39.06.45682450Fax +39.06.45682452roma@studioloconte.it
Avv. Angela Cordasco
angela.cordasco@studioloconte.it
LOCONTE & PARTNERS
WEALTH MANAGEMENT
***
Wealth management in Italy: new opportunities for foreign
investors
Loconte & Partners – Studio Legale e Tributario 1
Loconte & Partners – Studio Legale e Tributario 2
Wealth Management
Investing wealth - A 2018 Global Wealth Report
• Driven by accelerating economic and equity market performance in key regions,
global HNWI wealth grew to 10.6% to surpass US$70 trillion threshold for the first
time;
• High net worth individuals around the world enjoyed investment returns above 20%
for the second year in a row, with clients in Asia-Pacific (excl. Japan) and Latin
America realizing the best returns compared with other regions;
• While overall asset allocation remained largely stable since the 2017 WWR,
enthusiasm for digital currency broke out in 2017 with 29.0% of HNWIs globally
saying they had a high degree of interest in purchasing or holding cryptocurrencies
and 26.9% saying they were somewhat interested. Despite the growing fervor, wealth
management firms have to-date been ambivalent about offering guidance, with only
34.6% of HNWI saying they had received cryptocurrency information from their
wealth managers;
• With disruptive trends challenging record wealth growth, wealth management is
poised for renovation.
Anirban Bose, Capgemini, Global Wealth Report 2018
Loconte & Partners – Studio Legale e Tributario 3
Wealth Management
Investing wealth - A 2018 Global Wealth Report
Loconte & Partners – Studio Legale e Tributario 4
New Opportunities - Italian Real Estate
Italian Real Estate –A «brick-solid» market
Loconte & Partners – Studio Legale e Tributario 5
New Opportunities - Italian Real Estate
Italian Real Estate – Foreign Investments
Source: Cushman & Wakefield: Italian Investment market Overview, 2018
Loconte & Partners – Studio Legale e Tributario 6
New Opportunities - Italian Real Estate
A constantly evolving market
New investment opportunities inspired by changes in society,
technology and business strategies.
• Logistics
• Housing for seniors and nursing homes
• Co-working and shared office spaces
Loconte & Partners – Studio Legale e Tributario 7
New Opportunities - Italian Real Estate
Logistics
Loconte & Partners – Studio Legale e Tributario 8
New Opportunities - Italian Real Estate
Logistics
• Increased reliance on e-commerce;
• Reduction in the distance between distribution hubs and inner cities (a function of product
demand, cost of transportation, and development of electric/green vehicles etc.)
• Competitive market which rewards speed, precision and flexibility;
• Development of «last mile» delivery distribution points;
• According to CBRE, in Italy the share of investors preferring logistics is on the rise: 20%
in 2018, rising from 8% in 2016 and 14% in 2017;
• Development of the retail sector fosters and is supported by the development of logistics;
• Quality tenants and well structured lease contracts are crucial to investments in logistics.
Loconte & Partners – Studio Legale e Tributario 9
New Opportunities - Italian Real Estate
Source: Cushman & Wakefield, Real Estate Market 2018
Logistics
Loconte & Partners – Studio Legale e Tributario 10
New Opportunities - Elderly care
Ageing population: a European trend
The demographic old-age dependency ratio (people aged 65 or above relative
to those aged 15-64) is projected to increase significantly in the EU as a whole
in the coming decades. Being about 25% in 2010, it has risen to 29.6% in 2016
and is projected to rise further, in particular up to 2050, and eventually reach
51.2% in 2070. This implies that the EU would move from four working-age
people for every person aged over 65 years in 2010 to around two working-age
persons over the projection horizon.
(The 2018 Ageing Report)
Loconte & Partners – Studio Legale e Tributario 11
New Opportunities - Elderly care
Loconte & Partners – Studio Legale e Tributario 12
New Opportunities - Elderly care
Factors
- Ageing population;
- Compression of wages/income;
- Young family members are unable to care for family elders (from occasional
assistance to around the clock care). This is often due to academic
commitments, the need to work full hours, etc.;
- Emigration of young adults;
- National and especially regional subsidies to structures designed to provide
elderly care;
- Inadequate coverage: as of 2017, 18.5 beds/1000 inhabitants vs. optimal
estimated coverage (EU estimate: 50beds/1000 inhabitants).
Loconte & Partners – Studio Legale e Tributario 13
New Opportunities - Elderly care
The Italian market for elderly care
▪ Case di Cura: (Retirement homes) – typically designed to host self-sufficient or
partially self-sufficient elders. Nursing staff is present at all times but medical staff
need not be. Generally real estate designed for such purpose features diversified
lodging solutions (different sized rooms, with different services, etc);
▪ RSA: (Long term care) – structures designed to host non self-sufficient elders with
specific medical needs. Design and construction generally favors function and
efficiency. Higher operating costs due to more stringent operating requirements;
_______________
▪ Accreditamento: The act by which the region authorizes a private entity to provide
services on behalf of the national healthcare system (SSN) on the basis of an
agreement between the public administration and the entity/structure;
▪ Improved legal environment: Faster payment of invoices (180 days - Decrees
351/2012 - 35/2013) and increased budgets dedicated to elderly care.
Loconte & Partners – Studio Legale e Tributario 14
New Opportunities - Elderly care
The Italian market for elderly care
▪ A growing market with some successful first movers (for example, ORPEA group
with more than 750 facilities, 77,100 beds and 50,000 beds with an infrastructure
extending across several European countries);
▪ A rapidly growing market: between 2006 and 2015, RSA investments totaled 30
million Euros growing to 230 million between 2015 and 2017;
▪ Significant recent investments (e.g. 2016 - Fondo Personae managed by
Serenissima SGR and promoted by Orpea, specialized real estate investment fund
open to Professional and Qualified Investors only);
▪ Experts report return rates a high as 7% pre-tax (see ThreeStones Capital);
▪ New, tailored legal solutions to allow elders to provide for themselves financially;
(However…)
▪ Tenancy “quality” and operation standards are of paramount importance for
continued profitability;
▪ Medium to long investment time frame;
▪ Regulatory and legal complexities.
Loconte & Partners – Studio Legale e Tributario 15
New Opportunities - Elderly care
Loconte & Partners – Studio Legale e Tributario 16
The sharing economy - Co-working
As society changes so does the real estate market: Co-working
- Increased digitalization and decreased dependency on physical resources (space,
infrastructure, staff, etc);
- Downsizing of existing businesses;
- Flexibility to pursue attractive markets as these move across the country/countries;
- Economic crisis and unreliable cash flow vs. fixed real estate/utility costs;
- Change of perspective: from a society based on absolute ownership to a sharing
economy;
- Vacancy rates drop;
- Diversification and multiplication of independent tenancies reduces risk;
- Reduced risk in turn reassures banks and facilitates lending;
- Smoothed out cash flows for landlords (increased reliability and predictability);
- Affordability for SMEs, increased services and utilities;
- Stimulating working environment; increased networking and synergies between
enterprises/workers.
Loconte & Partners – Studio Legale e Tributario 17
The sharing economy - Co-working
As society changes so does the real estate market: co-working and flexible offices
Credit Suisse Report, February 2018
Loconte & Partners – Studio Legale e Tributario 18
The sharing economy - Co-working
The Italian co-working numbers
▪ According to godesk.it (2018 survey), there
are 551 co-working spaces in Italy;
▪ According to mycowo (mycowo.com)
Milan has the highest concentration of co-
workings spaces;
▪ Coworkers are 53% freelancers, 39%
entrepreneurs and 8% others;
▪ 62% male and 38% female;
▪ “indispensable” services are high speed
internet, printing hardware, meetings
spaces and…coffee.
Loconte & Partners – Studio Legale e Tributario 19
Conclusions
The Italian Real Estate market
▪ New asset classes and market segments;
▪ Depending on the investor’s profile, investment strategy, needs and level of risk
aversion, the choice of the actual investment instrument will differ;
▪ Direct investments (as a person or through an SPV) vs. indirect investments;
▪ Optimization of liabilities and overall tax burden;
▪ Wealth management: balancing several factors:
▪ Decision making and propensity for direct management;
▪ Ease of disinvestment;
▪ Divisibility;
▪ Overall risk;
▪ Family relationships, skills, ambitions and desires;
Loconte & Partners – Studio Legale e Tributario 20
The Art Market
Italy and the Global Art Market
Loconte & Partners – Studio Legale e Tributario 21
The Art Market
The numbers of the global art market
▪ Sales in the global art market increased 12% from 2016, reaching $63.7 billion in
2017;
▪ The US market was the largest, with 42% of total sales by value. China came
in second with 21% and the UK third with 20% - combined the three markets
totaled 83% of the global sales by value;
▪ Dealers at the highest ends (sales at over $50 million) experienced a marked
increase in sales, while lower end sales saw a decline;
▪ Auction sales of fine and decorative art totaled $28.5 billion in 2017;
▪ US, UK and China auction sales totaled 74% of overall sales;
▪ The largest sector by value was Post War and Contemporary art (46%) followed by
Modern Art (27%);
▪ The market for European old masters rose 64% due to the sale of a single Leonardo
da Vinci painting (for $450 million, in the absence of which, the sales would have
fallen to 11%).
Source: The Art market 2018 – An art Basel & UBS Report
Loconte & Partners – Studio Legale e Tributario 22
The Art Market
Loconte & Partners – Studio Legale e Tributario 23
The Art Market
Loconte & Partners – Studio Legale e Tributario 24
The Art Market
Art & Technology
The Online Market:
• Estimates suggest that the online art and antiques reached a new high of $5.4
billion in 2017, representing 8% of the value of global sales and up 10% from
2016;
• The online market has increased 72% over the last five years;
• Online sales have expanded the buyer base: 45% of the online buyers were new to
the business in 2017 (new online buyers totaled 40% of top tier houses buyers);
• Most of the traditional dealers recognized the potential of the online market.
Source: The Art market 2018 – An art Basel & UBS Report
Loconte & Partners – Studio Legale e Tributario 25
The Art Market
Changing the rules of the game
With law no. 124/17, several provisions of the «Code of cultural heritage and
Landscape» have been modified to improve the regulatory framework of the art
market.
• Law no. 124/17 is the result of a compromise between those who wish to maintain
restrictive provisions in place to protect Italy’s heritage and those who believe that
easing restrictions would, in fact, serve the purpose of adding value to works of art
and strengthen an important market;
• Specifically, the law addresses (i) the criteria according to which the state may
restrict export of works of art; (ii) the duration and effectiveness of certain
documents pertaining to the circulation of said works of art.
Loconte & Partners – Studio Legale e Tributario 26
The Art Market
Changing the rules of the game
Specifically:
• The temporal limit beyond which the works of a deceased artist may be subject to
restrictive and protective action by the state has been increased to 70 years (from
50) calculated from the year of creation;
• In any event, the state may exercise its powers in the event of works of art of
extraordinary value. However, the state must issue the appropriate «notice» within
60 days starting from the day of filing of the communication by the owner stating
that the piece is to be shipped out of the country;
• For some works of art valued at under 13.500,00 Euro, the exporting procedure is
based on the owner’s «self declaration» and no longer requires an export license;
• New and updated criteria for the offices charged with the release of circulation
permits (Ministerial Decree December 12th, 2017) and a 5 year long «passport» for
circulating works of art.
Loconte & Partners – Studio Legale e Tributario 27
The luxury market
The strength of «Made in Italy»
Source: Deloitte: Global Powers of Luxury Goods 2018: Shaping the future of the luxury industry
Loconte & Partners – Studio Legale e Tributario 28
The luxury market
The strength of «Made in Italy»
• Out of the top 100 luxury companies, 24 are Italian;
• Sales are highly influenced by currency exchange rates;
• Italian companies are predominantly family-led and the overall performance recorded by
Deloitte has been strongly influenced by the top three players: Luxottica, Prada and Giorgio
Armani (accounting for almost 50% of the 2016 sales);
• Declines in sales of the largest players have been met with a variety of solutions, some of
which are consistent with the changes recorded in other sectors:
• Development of retail network;
• Restructuring and optimization of brands and distribution network;
• Development of internet based sale solutions.
• Consistent signs of foreign investors’ interest: merger between Luxottica & Essilor, Chinese
investments and interest (coupled with growth of consumer base and e-commerce platforms).
Loconte & Partners – Studio Legale e Tributario 29
The luxury market
Luxury market trends
• From physical products to digital experiential (Deloitte 2017);
• From standardization to personalization (Deloitte 2017);
• Emerging technologies and consumer perception;
Loconte & Partners – Studio Legale e Tributario 30
The luxury market
Loconte & Partners – Studio Legale e Tributario 31
The luxury market
Luxury and technology
• Younger, tech-savvy,
generations are now
leading the consumer
base;
• Personalization of
experience and product;
• Artificial intelligence,
personalized high-end
and shopping, voice-
controlled shopping and
augmented reality;
• Online e-commerce
platforms (to cater to
new market segments
and world regions).
Loconte & Partners – Studio Legale e Tributario 32
The luxury market
Luxury Pavilion – a bridge between Italian luxury brands and consumers
• Luxury Pavilion – the response from Tmall to the needs of young Chinese millennials;
• 28 brands, 6 are Italian;
• An opportunity for Italian luxury brands to increase the consumer base.
LONDON42 Barkeley Square
W1J5AW
Tel +44(0)207409501
london@studioloconte.it
MILANOVia Fratelli Gabba, 3
20121
Tel +39.02.45476250
Fax +39.02.45476251
milano@studioloconte.it
NEW YORK350 Park Avenue
NY 10022
Tel +1.9174384351
newyork@studioloconte.it
PADOVAGalleria Porte Contarine, 4
35100
Tel +39.02.45476250
Fax +39.02.45476251
padova@studioloconte.it
BARIC.so della Carboneria, 15
70123
Tel +390805722880
Fax +390805759312
bari@studioloconte.it
ROMAG.Battista Martini 16
00198
Tel +39.06.45682450
Fax +39.06.45682452
roma@studioloconte.it
Alessandro Negri della Torre
a.negridellatorre@studioloconte.it
LOCONTE & PARTNERSStudio Legale e Tributario
Member of
www.loconteandpartners.it
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