Many people who pursue Italian citizenship often ask themselves whether dual citizenship will automatically qualify them to pay taxes in Italy. An Italian citizen’s personal income tax liability depends on whether the individual lives in Italy for more than half a year. In other words, if you obtain Italian citizenship and decide to spend more than 183 days in Italy, your income will be subject to personal income taxation. On the other hand, if you do not live in Italy, you will be exempt from paying personal income taxes. However, if you are registered as a resident in a municipality in Italy or own property in Italy, you will be required to pay personal income taxes by law.
This article will guide you through the most essential aspects regarding taxation, which you need to consider if you are thinking about relocating to Italy.
Moving to Italy: establishing residency
If you decide to relocate to Italy as a dual citizen, you will need to establish your residency in the country. In order to do so you will need to fill out a form and submit it to the municipality where you have chosen to reside. The local police will then verify that you are living in the property where you have established your residency. By law, they have up to 45 days to verify this. Once your residency status has been confirmed, you can access several services, including registering with a general practitioner and receiving medical care. Being an Italian resident will also allow you to pay a reduced tax (2%) when you purchase a property in Italy, and you can also enjoy reduced property municipal taxes.
Resident and non-resident taxes in Italy
As briefly outlined in the introduction, if you are an Italian citizen and live in the U.S., it is very unlikely that you will need to pay taxes in Italy. More specifically, if you do not generate income in Italy, you will not be required to pay taxes. On the other hand, if you have established your residency in Italy, you must file tax returns with the federal government each year you reside in Italy. In addition to this, Italian citizens who live in Italy for more than 183 days are considered tax-resident individuals. In other words, all their foreign income will be taxed in Italy regardless of where they earned it. More specifically, they will need to declare all their foreign income on their tax return, known as “dichiarazione dei redditi,” which is provided by the Italian Revenue Agency (“Agenzia delle Entrate”). The tax return document has two versions: “Modello 730 ordinario” and “Modello 730 precompilato”. The former is blank and thus must be filled out with all the relevant information, whereas the Italian Revenue Agency automatically fills out the latter. Many individuals in Italy use the latter, which contains their information and eligible deductions; in fact, the Italian government offers a number of deductions on a number of expenses, such as tuition expenses for secondary education, social security contributions, medical expenses, charitable contributions and family allowances, among others. The deadline to submit your tax return is November 30.
Filing your tax return in Italy
Italian residents are subject to a national income tax, a regional income tax and a municipal income tax. As a general rule, the higher the income, the higher the tax rate is applied. A tax return will list an individual’s financial details, such as annual income, assets, and the number of family members in the household. A tax return will take into account income and assets which refer to the year before the tax return is filed; in other words, filing your tax return in 2023 will provide an overview of your financial situation in 2022.
To file a tax return, you will need your “Certificazione Unica (CU)”, a document summarizing your earnings. In particular, it specifies your source of income, whether you are employed or self-employed, and if you receive a state allowance. In the first case, you will receive the document from your employer. In the second case, the individual or company that commissioned your work will provide you with the necessary paperwork. Finally, if you are unemployed, you can obtain your Certificazione Unica from the National Institute for Social Security, known as “Istituto Nazionale della Previdenza Sociale” (INPS). In particular, this applies if you receive a redundancy pay (named “cassa integrazione”) or other unemployment benefits.
You can file your tax return and pay your taxes online or by mail with the Italian Revenue Agency. Many people decide to seek the help of a commercialista (a certified public accountant) or a tax assistance center (“Centri di Assistenza Fiscale” or CAF) to do so. Accountants are experienced professionals who help individuals and companies file their tax returns; however, they tend to be more expensive than tax assistance centers spread all over Italy, which provide individuals with assistance regarding tax-related issues.
Once you file your tax return, the Italian Revenue Agency will assess your financial situation and give you a refund for the deductible expenses you incurred, if applicable. You will not receive a total refund of your deductible expenses; for example, you will receive a 19% refund of the total amount you spent on medical expenses only if the expenses you incurred are greater than 129.11 euros. In addition to this, you will need to provide proof of payment of the deductible expenses you incurred. Similarly, deductible expenses for medicines are accepted only if you provide a receipt.
The Italy/U.S. treaty to avoid double taxation
While under Italian law only Italian residents are liable for taxes, the U.S. tax their citizens regardless of where they live. However, Italy and the U.S. has signed various treaties to avoid or to reduce double taxation.
Your Italian Codice Fiscale
Regardless of whether you are required to pay taxes in Italy or not, if you live in the country, you will need a Codice Fiscale. This alphanumerical code is similar to a social security number in the United States. The Italian tax code is a mandatory requirement to open a bank account, sign an employment contract, obtain a mortgage, access the health system and file tax returns, among other services. Having an Italian tax code does not imply any tax duty, rather it allows you to perform some basic financial activities in Italy.
Conclusion
We have just outlined the most important aspects regarding taxation which you need to consider if you are thinking of relocating to Italy. As previously explained, if you spend less than 183 days of the year in Italy, do not own property or other significant assets, and are a resident of another country, you will not need to pay any taxes in Italy. If you work in Italy, you will be required to declare your income, and you will need to pay income tax on the amount you earn.
If you are registered as a resident in a municipality in Italy or you own property in Italy, you will need to pay taxes by law. It is worth pointing out that if you are an Italian citizen living abroad and you do not have any assets in Italy you can avoid Italian tax resident status by registering with the A.I.R.E. (the Registry of Italian Citizens Residing Abroad). Finally, as mentioned above Italy and the United States have tax treaties to protect their citizens from dual taxation, and each individual circumstance is unique. Therefore, if you have any doubts regarding taxation it is advisable to consult with a dual citizenship taxation specialist.
If you would like further information regarding taxation, please contact our team at [email protected].
