The Effects of Brexit on Investing, Doing Business, and Living in Italy
When the United Kingdom voted to leave the European Union in 2016, the shock waves reverberated across the EU member countries and around the world. Considered the least likely outcome of the vote, UK and its European compatriots were left in a state of confusion – what would this mean for the stability of the economy, and how would things like taxes, investments, and trade be affected in the long run?
The answer to this question is, of course, deeply complex. As the UK works toward its inevitable goal of seceding from the EU, the wheels are still in motion and no definitive outcome has yet come to light. If you are living in Italy and are concerned about the future, legal support is imperative. A lawyer can help you understand your options, work with you to make sure you comply with legal expectations, and help you understand the road ahead.
Immigration and the EU
Around 1.3 million UK citizens live and work in other nations throughout the EU, creating serious concerns about the ability to maintain residence after the Brexit process is complete. While some of these individuals have resided in other nations long enough to be considered permanent residents, many have not. If you are living in Italy, it's critical that you are clear on your rights as a resident, or what steps you need to take to ensure a legal path to post-Brexit residency. If you are concerned about maintaining legal residency after Brexit, an Italian lawyer can help you be sure you are protected as the UK exits the EU.
Registration and Residency
Currently, in Italy, any British individual who has registered as an Italian resident will be permitted to remain in Italy and take advantage of the permissions that affords, like the use of the Italian healthcare system. Registration for residency by EU citizens should be completed in the first eight days for those who plan to spend more than three months in Italy and must be filed with the Resident Register for one's chosen municipality, or Ufficio Anagrafe del Comune. The process for final approval can take around 45 days, as the Italian government needs to verify all information provided.
Those who have lived in Italy for less than five years can apply for temporary residency, which will allow for a further five years of valid residency. Those who have surpassed five years in Italy can apply for permanent residency. UK citizens will need to go to the police station to get a Italy-specific residency permit; until 31 December 2020, an existing EU residency certificate will remain in effect.
Under current laws, EU citizens who have been living in Italy for four years are eligible to apply for citizenship. Those who meet these requirements are encouraged to apply by 31 December 2020. The naturalization process for non-EU residents is 10 years – a measure that will apply for UK residents in Italy after this date.
Currently, freedom of movement for EU members is still permissible. While there has been a push to end freedom of movement at midnight on 31 October, this has not been finalized. EU law will continue to dictate this until legislation is put forward that states otherwise.
After the withdrawal of the UK from the EU is complete, UK citizens will have to go through the same immigration channels as anyone from a non-EU country. This means applying for a visa, being approved, and, once in Italy, applying for a permit to stay. Those who have not successfully applied for residence in the past should consult an attorney to ensure accuracy of a visa application.
Without an approved application, British citizens will be permitted to stay in Italy for no longer than 90 days in a 180-day period.
Financials in Italy
Due to the strong uncertainty concerning how Brexit will eventually unfold, many countries are taking matters into their own hands to ensure citizens and UK expatriates are protected during this turbulent time – and Italy is no exception.
Currently, even with the exit decree, UK banks can continue operating as normal in Italy, much like the other branches of non-EU banks that exist throughout the country. However, any banks operating under the freedom of service regime will need to stop doing so immediately, as soon as the UK formally withdraws from the EU. In order to minimize the stress on clients, banks are encouraged to close out any activities that are no longer approved as quickly as possible. If necessary, banks are permitted to execute new contracts with clients to remain compliant with banking regulations governing non-EU financial institutions.
In many ways, taxation won't change significantly. Double taxation will not apply due to existing tax treaties between Italy and the UK, as the EU is a relatively new institution and reciprocal agreements pre-date this. However, taxation on the transfer of property due to separation or divorce may see increases. Currently, this qualifies for a 100% exemption for EU residents, but when Brexit goes through, these kinds of transfers may be taxable.
Customs taxes may also apply to UK citizens who remain in Italy. As EU member states, moving items back and forth between the two countries has never resulted in additional taxation, but after Brexit, taxes may apply.
VAT will also be applied differently for UK citizens who remain in Italy. Currently. VAT of 22% applies to legal and notary services for residents of Italy and other EU countries. However, after Brexit, this extra expense may not apply to UK citizens due to a concept known as "territoriality." Those who are citizens of non-EU nations lack territoriality and thus will no longer be subject to VAT on attorney services – including legal aid related to citizenship and residency.
Residency and Income Tax
It is important to note that freedom of movement has allowed British citizens to come and go from Italy without significant restriction. However, those who live in Italy after Brexit may choose to make Italy a permanent or semi-permanent home as the process of moving back and forth may become more complicated. Those who live in Italy for longer than 182 days in any calendar year will be considered Italian residents for tax purposes and thus will be subject to Italian income tax laws.
Residents who may find themselves facing a changing tax situation due to Brexit are encouraged to speak with an attorney or tax accountant.
Succession and Estate Planning
There will be few, if any changes, regarding succession and estate laws for UK citizens residing in Italy after Brexit. As the UK made the choice to opt out of EU Regulation 650/2012, and EU-specific regulation regarding the transition of property in the event of death. As such, there are no significant changes on the legal front for those who are managing estates of Italian residents as UK citizens.
Effects on the Exchange Rate
While individual economies are reflective of the state of trade and commerce in each particular country, the economy of Europe is partially driven by the presence of the EU. As all EU member countries use the Euro as a sole form of currency – ironically, all except for the UK even prior to its departure plans – the changes in trade with the UK may have strong effects on the Euro's exchange rates.
The performance of the sterling pound has been lackluster as of late, with many analysts pointing fingers at the effects of Brexit. This can provide benefits to those using the Euro, as the currency will go much further in the UK than in years past. However, for UK citizens living in Italy, it may be best to switch currency from pounds to Euros prior to the finalization of Brexit to avoid a comparative loss.
The Importance of Legal Support
Whether you are new to Italy as a UK citizen or have been living in Italy for decades, advice from an attorney specializing in immigration is essential. As the Brexit process proceeds, a qualified lawyer can help you understand your rights related to residency, banking, taxation, and business activities. An attorney can be your resource in establishing residency before any applicable deadlines to ensure you are as prepared as possible for a post-Brexit life in Italy.
If you are concerned about your future in Italy as a UK national, we are here to help.
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