Top Tax Tips For Expats In Italy

Here are my top tax tips for living or moving to Italy.

1.  Beware of the DIY approach.
   Always discuss your tax situation with an experienced and knowledgeable commercialista.  Taxes in Italy are not that much different to other countries around Europe and you might be surprised at just how little you have to pay.  The DIY’ers rarely find the tax breaks and end up paying more than they need to. AI can help you do research, but it also makes mistakes…we should know because we have discovered some of them!
2.  A Tax Residence of choice does not work.
   Just because you are spending months in another country does not mean you automatically qualify for the residency in that other state, when in fact you are actually spending more of your time in Italy and even more so if you are registered as resident in Italy. The double tax treaty will not cover you in this case.
3.  Don’t think you can hide. 
   If you an Italian tax resident (i.e you spend more than 183 day here a year), then the Guardia di Finanza can find you.   There is always a paper trial, utility bills, mobile phone records, airline tickets, credit card and bank statements, as well as visual evidence from neighbours, gardeners, cleaners etc.  It is much better to be ‘in regola’ and know that the knock on the door is highly unlikely.
4.  Don’t rely on a double taxation treaty to protect you. 
   A double taxation treaty is merely a statement saying that you cannot be a tax resident of 2 countries at the same time.    So, you have to be resident in at least one country in any one year.    The Italian’s will assume that you are Italian tax resident if there are any signs of regular/permanent establishment in the country.
5.  Be very wary of trying to be non resident anywhere. 
   If you are claiming to be a non-tax resident anywhere then you could misunderstand the rules of the countries that you are living in.   It is possible but most countries will deem you to be tax resident even if you spend less than 6 months of the year in the country.  They just find it hard to accept that you can be non-resident anywhere.
6.  Don’t forget to register your presence. 
   Some people move to Italy and then decide not to report that they are living here and try and live under the radar.  It is illegal to NOT complete tax returns and a criminal offence in Italy.  Even if you are paying tax on pensions in other countries, have assets overseas or income from other sources, the tax code in Italy states that as a tax resident you are liable to taxation on your worldwide income and assets.   However you might get some double tax treaty relief’s from Italy for paying taxes in another country already.
7.  Tax favoured investments in one country do not necessarily apply in Italy. 
   Tax favoured investments in one country may not be recognised as a tax free account in Italy and are therefore taxed on income and capital gains.   You might need to re-examine all your old investments and replace then with tax efficient investments for Italy
8. Building bonuses.
   There is no personal tax free income allowance in Italy, but they do operate a system of deduction and detractions from income to try and reduce your tax liability.  One of the biggest tax breaks is building bonuses.   If you are thinking of moving to Italy, buying a property and spending money on it, then you can probably detract a number of the expenses (to certain limits) against your tax bill.  In most cases the tax credit will be spread over 10 years.
9.   Watch out for tax free lump sums from pensions
   If you are eligible to take a tax free lump sum from your pension, then in Italy that same lump sum could be taxable and therefore it might be advisable to take it before you become resident in Italy. You might also consider restructuring your pension funds.
10.  Don’t be worried about tax planning in Italy. 
    Life in Italy is great.  Taxes are not that different to those in other European countries. Plan early and do things properly   I often tell clients that for a few hundred euros more, it really is not worth taking the risk.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.