Italian Flat Tax Regime - Retiring to Italy with 7% Flat Tax
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- Опубликовано: 9 сен 2024
- Many individuals from around the world consider the idea of moving to Italy and want to figure out how to make sure that they can enjoy Italy to the fullest. For those who would like to move to Italy and earn a pension from abroad or would like to retire in Italy, the 7% Flat Tax Regime may be an interesting option to consider to minimize any impact on your retirement funds. In this episode of the Italian Real Estate Podcast hosts Marco Permunian, an Italian attorney, along with a video podcaster and dual citizen expat, Rafael Di Furia known for his project Not Your Average Globetrotter, @RafaelDiFuria, along with special guest, Italian Attorney Andrea Permunian discuss the 7% flat tax regime in Italy and some of the important details to consider.
Italian Real Estate Podcast EP 39:
Italian Flat Tax Regime - Retiring to Italy with a 7% Flat Tax
For help with buying a home in Italy and more information about Italian Real Estate Lawyers visit IREL's website
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To contact Italian Attorney Marco Permunian and his team you can use the contact form on the Italian Real Estate Lawyers website italianrealest...
Also to see more from Rafael Di Furia about life in Italy and life as a dual citizen check out his RUclips channel and website:
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Http://RafaelDiFuria.com
Moving to Amatrice which has been hitten so heavily by the earthquake 7% flat tax are not attractive enough when your house can be destroyed and you can wait years before get it repaired. Go and visit Amatrice and talk to the locals and then consider if you really want to move there and buy a house.
LOVE ITALY 🇮🇹 BUT ,I ll only stay 90 days per year. Thank the lord I can afford to own my own Property and occupy it for just three months out of the year. Lots of other fantastic places to live and When a country wants to tax a retiree We have choices..
Thanks to the three of you. The best video explaining the recent changes regarding taxes. I am 61 and considering it with my Italian born life.
Thank you for the excellent presentation. Exactly what constitutes a “Pension” for the purpose of qualifying for this specific tax regime ? More specifically, does recurring U.S. Social Security payments and/or a having structured payment schedule from a traditional IRA constitute a “pension” ?
Many individuals who spend lengthy careers in both public or private sector jobs are able to successfully accumulate the monetary assets necessary for a comfortable retirement. However, for a number of possible reasons, this doesn’t always include a “pension”. 401k’s, 403b’s are but one example of how some plan for retirement funds.
Pension is the equivalent of the SSA for tax purposes. I don't know about 401k, I took the money out LOL. I am not a CPA either
What is the benefit of 7 % tax, if I need to pay USA tax anyway. USA tax will be larger than italia tax.
Foreign income exclusion of about $100k, but is SS "foreign"?
@@michaelgill8689 On retirement you cannot apply the FEIE (the first E stands for Earned and retirement is not part of an Earned income) only the FTC
Wish someone could answer this question
What if you have income in addition to your pension? Example: You have $50,000/yr of rental income and $30,000 of social security. The social security is taxed at 7%, but what about the rental income?
Thank you, Rafael, for asking about the dual-citizenship income tax question; this answered several of my questions! 😅 Phew!
Why the discrimination against US citizens regarding the requirement to live beyond the 9 years to 10 years to qualify for an Italian passport.
My understanding, and I'm certain I also heard this in a prior episode is that the US and Italy have a reciprocity agreement to avoid double taxation, therefore those of us (example) with dual citizenship, will be paying taxes on our retirement income (pensions, social security, investment income etc) to the IRS and if so, again, my understanding is there will be no income taxes due in Italy unless money is earned in Italy. I'm surprised this important detail wasn't mentioned in this episode.
It is not as you say. The agreement explains WHERE you are supposed to pay taxes depending on WHERE you reside and WHERE the income comes from. I am an Italian and US citizen (primarily Italian) living in the US. When I got my Italian pension I started paying taxes in Italy, but because of the agreement you mentioned, I am supposed to pay taxes in the US (which is much better because the rate is lower) and not Italy. This is why I filed to the Italian payer (INPS) request to receive my untaxed pension and at that point, I'll pay taxes in the US. I am planning to move to Italy with my wife-to-be. When this happens we'll have to file taxes in both Italy and US; the US taxes and filings are based on citizenship NOT just residence (exactly like North Korea LOL), while in Italy is the worldwide income to be taxed, like most countries). For the income generated in the US (SSA and other stuff), I can elect to pay the 7% flat rate for 10 years to the Italian government. Then I'll file taxes in the US which generates a tax liability, BUT I can elect to take the FTC (Foreign Tax Credit). This is why the Feds give you an automatic extension to file. It's a dollar-by-dollar exemption. Let's say I have to pay 10,000 Euro in Italian taxes and only 4,000 dollars in Federal Taxes. I can deduct from the Federal taxes $4,000 (part of the 10,000 Euro or 11,000 Dollars paid in Italy), reducing my tax liability for the US to ZERO, but paying the full amount in Italy. After the 10 years I'll have to pay full taxes in Italy and still can deduct the FTC. This is what both CPAs in the US and Italy told me, so take it with a grain of salt. Also, my reasoning is based on solely retirement income. I am working on getting a second opinion just to be sure, but I think they are correct based on my reading of IRS stuff. In other words, you don't pay double taxes but pay the taxes where you reside fiscally (in this case Italy).
PS Remember that if you reside outside the US, you might be subject to both FBAR and FATCA. The FBAR especially has a very high penalty in case of omitted filing. I know there are a few differences if you have only one citizenship, but I did not explore the issue because for now it is not my intention to renounce the US passport. Pay also attention to Totalization Agreements between the countries. Thanks to that I was able to get my Italian pension earlier than expected, but I know of people paying social security taxes in both Italy and the US (depending on where they live and for what company)
@@roadrunner156 That's really interesting Angelo, and depressing. All I've ever read and heard online is that, basically, if you aren't earning any income in Italy (have a job) you don't pay Italian taxes. I'd love to hear more about your research once you find out, if you wouldn't mind.
@@3onthebeach sure it's not a problem. What you read online is mostly bogus stuff. Many think you can have residency in Italy just by buying a house or apartment. It's absolutely not true. Keep in mind that I'm only looking for my situation, which might be much different than yours. By the way all income you mentioned should be taxed with the 7% flat tax rate in Italy which can be used against federal taxes using the FTC. But only for 10 years
@@roadrunner156 L'importante è che poi quando vai in pensione resti la, e non torni a piangere qua che non riesci a campare se la pensione non ti assicura di poter pagare una buona assicurazione sanitaria, a beneficiare di un sistema che si regge su soldi che qui non hai versato, dopo aver fatto il figo che la paghi meno tasse.
Benvengano gli americani, che non hanno scelto di nascere in un paese che mette i soldi davanti alle persone, ma chi ha scelto di non voler contribuire al welfare del paese, versando i soldi altrove, resti dov'è.
@@Flash-ml3tl come ti permetti di insinuare che non ho versato contributi in Italia!! Ho versato un sacco di soldi per circa 30 anni in Italia, per cui non posso usufruire del 7% di flat tax, in più ho pagato oltre 15 anni di contributi negli USA (sulla cui pensione potrei usufruire del 7%).
Awesome. I’ve been waiting for this. Thank you. I’ve been researching for months
there are many interesting comments already. But than no replies from the team. Hope you can reply to all, as will be useful info.
Also a question from my side. If someone wants to retire in Italy, but not in these regions-towns that allow the 7% tax on pension, what will be the tax to pay on pension? I suppose pension, and any other income, will be taxed following normal Italian income taxation, correct? or there is also a special tax rate, even if higher than 7%?
What would be the benefit of moving to Italy then applying for citizenship compared to applying for citizenship first before moving?
It is not only to the earthquake regions but to any town in south with not more than 20.000 inhabitants. it is limited only for 10 years and then they apply the 43% if pension is more than 50.000. They should apply the 7% for life!! Or at least for life for the Italian citizens returning!
Do dividend etfs count as pension?
Not sure this 7% tax is any real benefit. As a UK citizen, even if I stay over 183 days in Italy, and I'm an Italian tax resident, I'll still have to pay UK taxes on my UK pension, and any UK rental income for that matter. Even with a Dual Tax Agreement, my UK taxes may even be less, so would pay more by moving to Italy?
There are a bunch of European countries where this not even applicabld at all. My pension will be taxed in home country regardless where I live or if I change citizenship. I'm just happy we have a mutual agreement to avoid double taxation. Common sense and I just envy those who can benefit.
Great information. Thank you
Love all the content. QQ. I am considering early retirement at 44. I have disability retirement through US military. It is tax free in U.S. but does it get taxed in Italy? I can’t find much on the topic. Thank you.
Just came across this video, I think I am following you on your channel about PR?
Gentlemen, thank you very much for doing this episode. I wanted to live in Puglia before I knew about this 7% thing and now, more than ever I want to live there after my recognition is finalized. If you wouldn't mind though, can I ask a few questions please? First, we know that Andrea is an attorney, but is he or does he have connections to an accounting firm that handles taxes in both countries? Also, does this 7% rule apply to Americans who are still responsible for paying taxes to America even though they are not living full time in the country? Is it a true 7% overall tax burden, or is it just that the Italian government only wants 7% and we still pay our regular income tax to the American government? Thanks again for doing this episode. -Joe
You still have to pay taxes in America. 401k + IRA money taken out is taxed at ordinary income rates. Dividends + long-term capital gains are usually taxed lower (0%, 10%, 15%, 20%). Money you still earn in the US is also taxed.
But you can then exclude up to $120,000 of your US earned income when figuring your Italian taxes. This is the Foreign Earned Income Exclusion tax law.
FYI I'm not a CPA or accountant, so get professional help! 😄
@@traveltirement The FEIE is only for "earned" income; pensions, SSA payments are not part of that, but you still can claim the FTC
@traveltirement in Thailand 401k and IRA are free of any tax both in USA and Thailand. I moved $200000 from my Ira. Last year from the u s a to thailand and pay zero taxes. It's called the USA Thailand tax treaty and it's saved me almost $100000 us dollars 💸 I absolutely love Italy. But i'd be out of my freaking mind to live there full-time.
@@roadrunner156My understanding is that FEIE is applicable on your US 1040 filing. It does does affect your Italian filing. I hope that I am wrong however because that would lower my Italian IRPEF.
@@SEnricoPIndiogine Ok I've done a lot of research (not on Facebook, but with CPAs). The FEIE will be applied to the 1040 BUT only if it's earned income (the first E in FEIE means exactly that); so if you have income from WORK you can claim it; if you are retired like in my case, you cannot. You can however claim the FTC (which has some weird rules) which means Foreign Tax Credit (a credit for taxes paid to a foreign government). The good thing of FTC is that if the amount is higher than the taxes due to Uncle Sam, you can carry forward the excess for up to 9 or 10 years. In some cases both can be claimed. To be honest I agree with @DavidWilliams-qr5yj You should stay away from the Italian tax system as much as you can. I am still receiving notifications for "unpaid" taxes and paying tax pros and lawyers to take care of that; I am too old to deal with this nonsense. Keep in mind if you reside fiscally in Italy, you MUST pay taxes there (and also in the US, but you can claim either FEIE or FTC, to offset, at least in part, the American side). In the end, depending on your income, you will pay 2-3 times the taxes you would have paid in the US for the same income. One of the few advantages of living in Italy is going away fast. Healthcare used to be excellent, but now it's quickly approaching the 3rd world level of service, especially in the South. This is why I decided not to go back
Nice information guys thank you 👍
Not sure if this has been asked. During large periods I plan to travel will it be compulsory to be at your Italien address over a certain time.
What about lump sum amounts is that also taxed? And what is the benefit ?
My "comune" has 20,001 inhabitants WTF! 😡
Hahaha! Good one!
Is it Only Pensions from outside Italy or do Any other Non-Italian Income Incomes also apply to the 7% Flat Tax?
Example IRA's, Social Security, Rental Income.
As they said, pension. Why would you think it applies to anything else if they clearly say pension? .
I think that the first 2 apply but not the last one.
Amatrice I would not choose 😮
Are there property taxes?
How do you establish your address in Italy? if I want to just rent in a village in Pulia for example how do I do that?
Anyone know how the US would tax a law enforcement pension if they wanted to move to a location in Italy where this 7% tax scheme is applicable?
I understand the property taxes are significantly lower in Italy as well. Considering the property tax & only a 7% pension tax, this seems like a very beneficial program and something to consider for me!
Unfortunately, the US government will tax you wherever you go, so if your pension is taxable there, you’re on the hook no matter where you reside. There is a foreign income exclusion that won’t apply in your situation, and there’s a mutual foreign tax credit, which means you can apply taxes paid in the Italy to your Italian tax bill, and vice versa.
How much can you take out of your pension at 7% in any one tax year? For instance,can you take the full amount?
Are they talking about taxing American social security?
What about starting one or several internet businesses in Italy vs. doing LLC's in USA (in the Carolina's)?
Depending on your visa, that could be illegal.
Does it apply to early retirees, or people on passive income?
Does living in the isalnd of Capri qualify?
You guys left out an important point: pension isn’t taxed, but what about other income? I have a nice pension, but I also have substantial rental income.
the 7% flat tax rate applies to ALL foreign income for a period of 9-10 years, of course if you qualify for it
For someone who has obtained recognition as an Italian Citizen before Retiring and who Collects a Pension from another Country like the US and moves to Italy in Retirement, does the 7% Tax Scheme still Apply to the People listed above if they move to one of the areas listed as well as less than 20K Residwnts?
When they ease up on their gun laws ill move to Italy!!
(And if you do not renounce your non-Italian citizenship), I imagine you would be paying taxes to both countries? Something I haven't been considering. As I was just made aware of the obvious: If you renounce your non-Italian citizenship and your income is from that government,(not private insurance, company pension), you will have no income to pay taxes on to either government.
I'm not an expert, but have heard that tax treaties between countries make it so one never pays more than what the full US taxes would be in totality. But would still prefer to hear it from an international tax attorney.
@@peterchirico2153 Thank you for that! My brother just mentioned the obvious problem with my statement: (See edit)
Whats the tax rate after the 7 years?
9 years, not 7 years. We would go back to the normal tax brackets, starting at 23%.
What counts as private pension?
If you work or worked for a Company that gives you a monthly pension when you retire such as Fed ex Or Ups as an example
@@MrGrand2000 Would our USA, IRA or Roth accounts count ?
What about pulling out from your RRSP?
@@peterchirico2153that is what I want to know. I want to wait until age 70 to request SS benefit but can use my IRA and 401(k) until then. Would that still allow me the 7% rate?
Funny how this question is never answered by the team!