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Staying in Italy for one year - the more than 90 days rule

I had made some previous posts about where I should stay in Italy for one year without a car, Florence or Liguria. Most responses were helpful, in that they gave suggestions, but there were more than a few that wondered how I was going to get around the Schengen rules. Although a quick Google search would have told them how, here's the answer:
https://it.usembassy.gov/u-s-citizen-services/local-resources-of-u-s-citizens/visiting-living/

Cin Cin

Posted by
18423 posts

Yes, there is the option of applying for what we casually call a "long-stay visa". But that's not a quick process and requires submission of quite a bit of paperwork, which I understand includes a lease for the length of the visa, proof of medical insurance and proof on income/assets. In 2015 I met an Australian couple who had obtained such visas. It took them either 3 or 4 trips (I don't remember which) to the Italian consulate before the officials were satisfied with their documentation.

Incidentally, without a visa the limitation is 90 days, not 3 months. I don't know why the State Department persists in referring to "three months".

Posted by
1901 posts

Since I am the nosy kind of person who would ask someone how they were staying over 90 days, can I ask another question? Why did you delete your posts? They would be exceedingly helpful for some future person looking for a base in Tuscany or Liguria, and all that discussion is now gone. I always do searches of questions before posting a new question, so it does mystify me when a thread is deleted for no obvious reason.

Posted by
16 posts

ACRAVEN -

I'm not sure why people on here continue to respond to a post outside of the original posts' purview, as you did here. I never stated it would be a quick or easy process, I simply responded to those who questioned that it could be done. And it can....period.

BTW - I changed the title to "90 days" for you.

Posted by
16 posts

Valadelphia -

I deleted because the responses were becoming repetitive and most didn't really answer the questions. They were mostly on how I was going to stay in Italy for more than "90 days" or told me Florence wasn't "their" favorite.

Posted by
1901 posts

Thanks for answering. I participated in both threads and of course you get all sorts of answers on a public forum, but I also saw some thoughtful responses about regional differences, pros and cons of staying in villages versus cities, public transport considerations.
It is the right of RS to allow posts to be deleted, but I find it annoying when I spend a lot of time answering a question (not saying that was the case here, but it has occurred) and it disappears--I think it results in more shallow responses and a hesitancy to engage.
You ultimately made a decision at least partly based on the discussion, so I don't think it was a worthless exercise.

Posted by
16 posts

Sorry for the additional full-on post, I don't know how to respond to one individual message. If someone wants to share how it would be appreciated.

Valadelphia - I never looked at it that way but you are correct. Posts should be kept as a resource to others. So, no more deleting for me. Thanks :)

Posted by
3766 posts

If you wish to send a private message, be logged into website, click the blue 'name of the person, and it will change screens. Here you can see a person's past posts as well as a link to send them a personal message. Keep in mind, you have the ability to set some parameters in your personal profile to receive email notices of when you receive a PM through this website, otherwise you only know if you are logged in and see it as a new alert in the top right part of your screen. If you don't get reply right away, it may have to do with their settings too. Sometimes people post on a thread '@XX(insert name), sent you a PM' to give them notice.

Posted by
21042 posts

....responses were becoming repetitive and most didn't really answer the questions. ..... Maybe they didn't answer your question but the responses may have answered other questions. Or perhaps raise issues you might not have thought about. This is a public forum often with a wide range of discussion and maybe not totally responsive to the original question. But that is the discussion part. This is not --- you ask one question and get one answer.

Posted by
16 posts

FRANK -

I apologized in a previous post but thank you for the scolding anyway.

Posted by
21042 posts

Well, I will give you credit. You do have a very pleasant way to encourage positive responses to future question should any other question arise.

Posted by
4 posts

Are people who establish residency under these guidelines considered tax residents and subject to Italian taxation of their foreign income and assets? That was my impression from having researched the temporary residency issues. Our daughter wanted to attend one of two US affiliated universities in Rome and we wanted to spend her first year living there, but the tax issues made us rethink that plan. The website link doesn't discuss taxation and I was wondering if this is a different residency status.

Posted by
9598 posts

Altahabana, You are indeed subject to taxation in Italy if you live there more than 180 days in a calendar year. It is complicated and you should consult an expert on taxation of US expats in Italy. There is reciprocity so you will not be double taxed by the US if you pay in Italy. There are expat forums where you can learn more and also may be able to find a tax professional to help you.

Posted by
4 posts

Thank you Laurel. My research included ex-pat forums and that is why I was pretty sure we would be considered tax residents under our plan. My concern was more the tax on assets rather than the tax on income which would consist of Social Security benefits and 401k pension distributions. I knew income would not be double taxed although I believe the flat rate tax in Italy for pension income is quite higher than the US rate. I just wanted clarification that the link in the OP wasn't describing a status that would not make us tax residents.

Posted by
16 posts

Altahabana -

Blockquote
Are people who establish residency under these guidelines considered tax residents and subject to Italian taxation of their foreign income and assets? That was my impression from having researched the temporary residency issues. Our daughter wanted to attend one of two US affiliated universities in Rome and we wanted to spend her first year living there, but the tax issues made us rethink that plan. The website link doesn't discuss taxation and I was wondering if this is a different residency status.

Yes they can be, but taxation is very different depending on your visa type, if you work or not, or if you work for an Italian or US company. We will be retired and not working at all. All of our income will derive from US sources that was earned in the US, so will be taxed in the US. We will have to file in Italy, but because Italy and the US have a tax treaty with one another, we won't be double taxed. Here are a few links that helped me sort it out. Hope they help you.

https://www.theflorentine.net/2019/10/08/italy-tax-liability/#:~:text=If%20you%20are%20living%20in,income%20you%20earned%20in%20Italy.
https://www.irs.gov/individuals/international-taxpayers/us-citizens-and-resident-aliens-abroad
https://www.irs.gov/individuals/international-taxpayers/us-citizens-and-resident-aliens-abroad
https://www.investopedia.com/articles/personal-finance/012214/understanding-taxation-foreign-investments.asp
https://www.irs.gov/newsroom/irs-reminds-those-with-foreign-assets-of-us-tax-obligations-new-filing-deadline-now-applies-to-foreign-account-reports
https://www.euitalianinternationaltax.com/2019/08/articles/uncategorized/italian-tax-residence-for-individuals-a-refresher-and-look-at-open-issues-and-new-matters/
https://www.accountingbolla.com/blog/italys-elective-residence-visa-a-useful-guide-for-2020#gref

Posted by
4 posts

I understood that pension/social security income taxes due in Italy would be reduced by the amount of tax paid in the US. Not being subject to double taxation as I understand it means the full value of the income will not be taxed in both countries, not necessarily that tax will only be paid in one country. And my understanding is the tax rate for general income for Italian tax residents is 38% of income up to € 55,000.

The following quote from one of your links about foreign real estate and investment accounts is what gave me pause.

Once Italian tax residence is established, under any of the tests discussed here above, a taxpayer treated as an Italian resident individual:
is subject to foreign assets based taxes charged on the fair market value of foreign real estate (at the rate or 0.76%) or financial assets (at the rate of 0.2%), due on top of Italian personal income taxes,

I fully intended to get local tax advice, as suggested by Laurel and perhaps there is some give in what actually has to be paid but it seems that between the US and Italian taxes we would pay 38% of our pension income. There is a special tax rate of 7 % for foreigners who settle in specified regions of central and southern Italy in towns of less than 20,000 but that obviously won't benefit someone who wants to live in a major metropolitan area or in a region north of Abruzzo.

Posted by
45 posts

Altahabana, please post what you find out about Italian taxes on assets.

Posted by
2021 posts

Italian tax residents is 38% of income up to € 55,000.

Tax rates are progressive in Italy: you would pay € 6,960 + 38% of the income between € 28,001 and € 55,000.
If you earned € 55,000 a year, Thanks to this forum You'd have just saved € 3,680. Not bad.

Posted by
12173 posts

As Laurel correctly pointed out, if you reside in Italy 183 days in a calendar year or longer, you are subject to Italian Income tax.
There is a bilateral tax treaty between the US and Italy, therefore you won't be subject to double taxation.
The US requires US citizens residing abroad to file income taxes, even though many may not owe any US taxes.
This is the way it works for Non Italian citizens (as I presume you do not hold Italian citizenship otherwise you wouldn't need an elective residency visa).
Public Pensions (i.e. Social Security benefits) will be taxed by the US government but NOT from Italy (if you were Italian, they would be taxed by Italy).
Private Pensions will be taxed by the Italian government according to the income bracket (but they are not taxed by the US gov't).

Income tax brackets in Italy are high, and hit incomes at comparatively low levels compared to the US. These are the brackets for 2021 and apply individually (therefore separately for husband and wife if both earn income).
Euro 0-15,000=23%
Euro 15,001-28,000=27%
Euro 28,001-55,000=38%
Euro 55,001-75,000=41%
Euro 75,001 and above=43%
In addition to the above there is an additional local tax to be added, which varies according to municipality, but it's small.
Interest, dividends, short term capital gains are all taxed at a flat rate of 26% (In the US they are added to your income and pay according to your bracket.
Long term capital gains are taxed also at the same flat rate of 26% (in the US they are taxed at 15 or 20%, depending on total income)
There are some expenses that can be detracted from income tax (for example medical expenses) but there is no Standard Deduction like in the US.

There is also an asset tax for assets held overseas, they are called IVIE and IVAFE.
The former (IVIE) is a property tax on real estate held in a foreign country. It is equal to 0,76% of the value of the property calculated based on the price of acquisition. From this tax it is however possible to deduct the property tax you pay to the locality where the property is located. I don't know the details of how much one can deduct but it is possible that it won't amount to much since property taxes in the US, which could be deducted from the amount owed to Italy, are generally higher than 0.76% of the purchase price.

The latter tax (IVAFE) is a wealth tax on the value of financial assets other than real estate (savings accounts, checking accounts, mutual funds, stocks, bonds, IRA etc.). It is equal to 0,2% of the value of the assets. So it's about $2000 for every million in assets.

So a couple receiving $3000 a month each in private pensions ($36000 each a year) should expect to pay at least $15000 more in income taxes per year compared to the US (assuming living in a US State with no income taxes). To that add $2000 for every million held in assets.
In spite of paying so much in extra taxes that is still not enough to get you cover by the Italian National Health Service. You will need private health insurance for that, or you can buy into the Italian NHS by paying a flat amount per year. That amount is based on your income, based on this formula:
Income in Euro:
0-20,658=7.5%
20,658.28-51,645.69 (max)=4%
Therefore if your income is euro 51645.69 or anything above, you will pay the maximum which amounts to Euro 2,789 per year, or about $270 a month (not too bad compared to an ACA insurance plan in the US)

Posted by
60 posts

Sounds like you would only want to live there 182 days not 183.

Posted by
7405 posts

The financial aspect is a consideration. As a dual citizen, I spend half the year in another EU country and do count the days. Reading the tax treaties is important. There are Facebook groups for expats in Italy. In my country, we have one for legal questions, another for tax questions, and one even for passing the driving test. Another good source is overseas American groups. AARO, Association of American Residents Overseas, just did a series on taxation. The difficulty for Americans to get bank accounts in the host country due to FATCA is another subject that comes up a lot. The FB closed groups are helpful.

Posted by
21042 posts

What if you did 180 days (July-Dec) and then 180 days (Jan - Jun)? Assuming that the taxing system is built on a calendar year. You could probably get a good 11.5 months that way.

Posted by
12173 posts

Yes.
It is possible to stay 182 days or less in one calendar year and the next 182 (or less) in the next calendar year and owe no taxes to Italy.

Income Tax returns in Italy are due on September 30 (or November 30 if done electronically) after the end of the tax year. So If you plan to stay in Italy only one year (and not return for the next 6 years), there is also another possibility, which I will not delve into any further (a nod is as good as a wink to a blind horse).

Posted by
4 posts

Thank you Roberto for clarifying some of the questions I had, in particular my question about which country would tax US social security retirement benefits.
If US real estate taxes are deductible against the 0.76% wealth tax on foreign owned real estate it would reduce most Italian tax liability to zero or close to it.

Posted by
1650 posts

Lots of great info here, but a word of warning. If you're called in front of "the authorities," saying "but I read it on the internet" is not going to work as a defense. I'm sure there is an entire industry of lawyers and tax accountants devoted to these matters, and frankly you're going to need to hire one or more of them. If for no other reason than it gives you plausible deniability and shows you made good faith efforts to "do the right thing." Even though the agreements you sign with them will specifically absolve them of any liability for what may happen. IMHO, of course.

Posted by
7405 posts

It's ok, you don't need international bilingual lawyers and accounts for a year abroad. I'm surrounded by visa holders and duals who are retired on pensions and investments. It's rare that someone can't figure it out and asks for the name of an accountant who knows the two systems. There are little pitfalls here and there but savvy research can save you from them-- such as how to avoid paying duty on your own possessions you forgot to pack but want to ship later.

One guy needed his five-year old computer but since he's been in the country over a year, he'd have to pay duty on it. Little stuff... don't need a lawyer.

I'd just split my year over two half years instead of 184+ days in one calendar year to avoid complications.

Posted by
16 posts

I'd just split my year over two half years instead of 184+ days in one calendar year to avoid complications.

Couldn't agree more. My original plan was to stay one year but after learning about all the tax stuff, forget it. I'm staying for 183 days then moving on. I'll be retired and don't want to deal with all of that. :)

Posted by
1820 posts

I'm not ready--although I've been tempted often in the past few years--to jettison the US of A just yet. And the hoops to jump through for residency seem daunting and quite 'taxing'...

My perfect scenario is to relocate somewhere on the Eastern Seaboard, and spend winters in Italy, up to 89 days. Will be trying it out maybe in 2023. Next April/May will be a fact-finding trip starting in Zurich, ending in Rome.

Posted by
12173 posts

The accounting firm below, based in Vicenza, specializes in tax and legal matters for American citizens living (or planning to move) in Italy. You can click in the 'Translate' window for google translating the site in English. They can also do a scenario calculation for you before you go.
http://www.fatcacittadiniamericani.com/
This is another one.
https://www.accountingbolla.com/
The firm below does similar things. They are based in Florence.
They charge 500 euro for a scenario calculation for you.
https://fiscomania.com/
I've contacted them for my case, in the event I decide to move back when I retire. But it appears that it would be a rather expensive proposition for me, potentially costing me at the very least $30k in extra taxes per year.
For someone who plans to stay just a few years, I wouldn't bother, unless you decide to go in a southern region in a small municipality. In that case there is a new law passed a couple of years ago which allows you to pay only 7% tax.
Financially it is much wiser to stay under 182 days a year in Italy. Portugal is a much more attractive option for foreigners tax wise.