9708 'residenza' versus 'resident for tax purposes'

I'll leave your big question for those more qualified than me to answer.

Unfortunately though, you're ALREADY subject to the complications of an Italian tax return as you are currently non-resident and you own an Italian home which you 'have use of', and which you don't rent out. This is the 'notional rental value' that the italian tax system treats as real income in such circumstances, and which as a non-resident you no longer have a tax free allowance to shelter behind - therefore requiring the notional sum to be declared and tax paid on it.

Of course, if you get the residenza you would qualify for prima casa, which would make that 'notional rental value' income dissapear ongoing ... but you're then back at your big question of whether the residenza would oblige you to start declaring other (non-italian) income etc. on an Italian tax return.

One thing though - if you do get residenza, check your potential exemption from filing an Italian tax return if you'll be a pensioner whose only income is their pension and it is taxed at source - I believe (sure someone will correct me if I'm wrong, guess it hinges upon whether a UK pension is considered identical to an Italian one in this context) that you may be exempt in that case, so all your problems may dissapear?

see:
[url=http://www.italyaccountants.com/it.html#Taxpayers%20who%20need%20not%20make%20income%20tax%20declarations]Italy Accountants - Notes on Italian income tax. Italy income tax. Income tax Italy.[/url]
[url=http://www.justlanded.com/english/Italy/Tools/Just-Landed-Guide/Money/Income-Tax-Returns]Italy Guide: Income Tax Returns, Filing and payment The tax year in Italy is the same as the calendar year. If[/url]
for more info.

incidently, the second site I linked to above says:
[quote]A married couple may file a joint tax return (both must sign) but are taxed separately, although payment is joint. .... A couple can use form 730 if their income is earned solely from land and/or property and the total amount is less than €2,840.51. Otherwise, they must use the Unico form.[/quote]
I hadn't known that previously and it goes against all previous advice here (and from the commercialista I spoke to in Italy) - which said that separate tax returns are required. I wonder if the quote above is still accurate (there is no date on the web page) and if so, whether the joint declaration option is specific to the 730 rather than the Modelo Unico? If so, using the 730 could minimise the cost for a holiday home owner - by only having to pay a commercialista's fee for one return rather than for two?

Well I now have my residenza and had the prima casa benefits, etc, that come along with it.
I am still under the illusion (probably wrongly) that I can have double residency and only pay tax in the country where I work full time which at present is Germany.
Therefore I can technically not be in Italy for the necessary 183 days in which one is considered to be a 'full time' resident although I have residenza with the comune. :veryconfused:
It is a puzzle which may only be answered by one of us being carted off to prison, which will probably be me. :eeeek::bigergrin:

Very many thanks for such pertinent responses Pigro and Iritalia; Sorry if they have provoked me into a further set of questions, but perhaps this thread might be useful to others like us.
We are taxed at source and have no other income. Perhaps the tax return is only triggered, in circumstances where having more than just pension income in the UK means the completion of a self assessment UK tax return - which then triggers the requirement for an Italian return under the dual taxation treaty. If we do end up completing Italian returns, will we pay tax at the Italian or English rate? It sounds like the Italian rate if we're to get the prima casa allowance. I had no idea that, as a non resident, I am subject, to tax on the notional rental value (I do hope this is currently classed as zero as we don't yet have doors, windows, or plumbing completed!). How is this tax calculated? Is it based on the catastal value (another can of worms?). From what you are both saying, it sounds like we should go ahead with our application for residenza; after all, when we're retired, and living half way up the mountain, filling in an Italian tax return should help to pass the time... Now I'll check the sites you have kindly pointed to and will see what I can find.

Tax residence is covered by the tax treaty. Having pension income sort of complicates/simplfies it because pensions can have special treatment often covered under a different treat. For example military and some other government pensions are often given "special" treatment.

A third issue is pensioners have a higher no tax zone in Italy. So between that and any other tax write offs you might have no Italian taxes to pay. Home improvements and even appliance upgrades can be covered.

Lupo, there is no "trigger" for Italy - all tax returns are on a "self assessment" basis, i.e. they don't send you a form, you have to decide if you are required to complete one, and go get it yourself.

Regarding who you pay tax to - well, all you have is pensions, and they have already been taxed in UK. Worst case would be that Italy viewed you as tax resident and taxed your pensions, in which case you're right and the Double Taxation treaty would apply (I thought you'd be able to set the UK tax against the Italian one, but See [url=http://www.direct.gov.uk/en/MoneyTaxAndBenefits/PensionsAndRetirement/StatePension/DG_10026714]State Pension for Britons living abroad : Directgov - Money, tax and benefits[/url] ... which says that you'd get your pension gross and pay Italaian tax on it.

The notional value thing is indeed based on rendita catastale. See this thread [url]http://www.italymag.co.uk/forums/legal/7094-sorry-vague-2.html#post65834[/url]
for more info (but I'd advise having a mug of hot coffee on hand to keep you awake!). There are also other, newer threads concerning it but that one has both the explanation of why it is chargeable, and the formula used to calculate it.

Regarding whether the notional value is taxable whilst the building is not habitable, the concensus appears to be 'no' - see [url]http://www.italymag.co.uk/forums/property-sales-rental-advice/6120-filling-italian-self-assessment-tax-return-nothing-declare-4.html[/url]

bet you're looking forward to retirement and an end to all these non-resident/holiday home nuicances ... I know I am (pity I'm only 44) :masked:

Just been to the very helpful websites suggested by Pigro, which seem to confirm that where all taxable income from employment, or pensions, in England is deducted at source, there is no need to complete an italian tax return. I take this to mean, in effect, that it's possible, in a range of circumstances, to have residenza status in Italy without necessarily becoming involved in Italian taxation procedures

All superbly helpful Pigro many thanks for this additional info and I am feeling considerably less anxious. Yes, we are looking forward to it immensely, although my Italian builder/friend/mentor did say I'd have to be 'born again' to complete the work on the house by myself (quite a perceptive comment, but I think he's come to depend on this project and doesn't want it to finish). Anyway I might re open the "before and after thread' soon and post a couple of pictures.

[quote=lupo;90891]Just been to the very helpful websites suggested by Pigro, which seem to confirm that where all taxable income from employment, or pensions, in England is deducted at source, there is no need to complete an italian tax return. I take this to mean, in effect, that it's possible, in a range of circumstances, to have residenza status in Italy without necessarily becoming involved in Italian taxation procedures[/quote]
please use these forums & web links only as a "starter for 10" on potentially complex stuff like this (particularly from amateurs like myself!)... it's so dependant on the two countries respective judgements on where you are domiciled and resident. Note also that, while all in English, some of the websites I linked to are providing info mainly from the perspective of a tax payer resident in Italy - important to keep the context of the articles in mind.

Even if reading this stuff has cheered you up a bit, I'd stll try to consult the UK revenue AND an italian commercialista - OR, if you have the cash, a cross border tax specialist - before actually moving. The trick is in choosing the best domicile for your needs (and then convincing all concerned to accept it).

Good advice Pigro and yes, context is always a caveat. In fact I rather suspect that it's the UK who are more inclined to decide which country you do a tax return in and I think i've already decided that I need to talk to a commercialista. Still, just giving it an airing makes one feel 'less alone' as someone once said, on some other thread.

The revenue in April 2008 published a new IR20 Guide to Tax for Non-residents. It is downloadable here. Essential reading for all considering residency in Italy.

[url]http://www.hmrc.gov.uk/pdfs/ir20.pdf[/url]

[quote=NickZ;90886]Tax residence is covered by the tax treaty. Having pension income sort of complicates/simplfies it because pensions can have special treatment often covered under a different treat. For example military and some other government pensions are often given "special" treatment.

A third issue is pensioners have a higher no tax zone in Italy. So between that and any other tax write offs you might have no Italian taxes to pay. Home improvements and even appliance upgrades can be covered.[/quote]

I seem to have got the idea from somewhere that you don't pay tax on your pension if it is under 5000 euros. Does anyone know if this is the case ? Also with married couples does this apply to both ?
Robert

Do you mean in Italy?

The no tax zone for pensioner I think is higher then 5K. I want to say 6K per person. It wouldn't be just pension income but all income. But it's also a sliding scale so the higher your income the less benefit you get.

I'll see if I can find it.

Thanks Nick our sole and permanant home is in Italy.
A

7500 under age of 75 if you've received the pension for the full year
7750 75 and above.

If you want to do your head in (and/or confirm the potential need for professional advice, the following is, I believe, the current double taxation agreement between Italy and the UK: [url=http://www.opsi.gov.uk/si/si1990/Uksi_19902590_en_2.htm]The Double Taxation Relief (Taxes on Income) (Italy) Order 1990[/url]

Among its contents are, I believe, the provision that if you are a UK citizen residing in Italy and receiving a pension from the UK state or a pension derived from employment in that state, you do not have a choice about where it is to be taxed: you will be taxed in the UK. The same applies to income accruing to a UK national which is derived from property in the UK

However that does not necessarily mean you that should not complete an Italian tax form, as it is likely that few UK citizens choosing to retire in Italy will not have additional sources of income (such as interest on saving accounts, or dividends, however small) which should be taxed in Italy - and in the taxation of which Italy may need to take your full world-wide income (including pensions) into account.

Happy hunting!

That is not right.

Artcie 18 states: (1) Subject to the provisions of paragraph (2) of Article 19 of this Convention, pensions and other similar remuneration paid in consideration of past employment to a resident of a Contracting State and any annuity paid to such a resident shall be taxable only in that State.

Pension paid in cosideration for past employment is taxable in the state of residence only. The pension paid to "the resident of a contracting state" (so Italy) shall be taxable only in that state (so Italy).

You are also incorrect on rental income. The treaty does not restrict Italy from the right to tax rental income earned in the UK.

(1) Income derived by a resident of a Contracting State (so Italy) from immovable property (including income from agriculture or forestry) situated in the other Contracting State (UK) may be taxed in that other State.

So the UK may tax and they do. But there is nothing here that limits the right of Italy to tax. This right for Italy to tax its residents on their worldwide rental income is leglislated in Artcile 67 paragraph c letter f of the 1986 Tax code (TUIR).

The tax treaty at no point suggests that only the UK can tax. Compare this to Artcile 19 where a pension received from goverment service is only taxed in the place where the employment took place.

If rental income was only taxable in the UK, as you suggest, then Article 7 would say that rental income is only taxed in the state of source.

This is unfortunately not an answer to all these questions, but I am also in the process of considering applying for residency in Italy - but cannot seem to get a clear piece of advice regarding my tax position. The last comment that has concerned me - I currently do some work (remotely) for a company in the UK and pay tax at source, whilst living in Italy. I have been advised that, if I become an Italian resident, my NI contributions will come to Italy and would therefore effect my UK state pension (having not yet qualified for the min nunber of years work to achieve basic state pension rights). Is this true ? Or can I apply for Italian residency, continue with this work (being taxed in the UK), but also enjoy the benefits of cheaper utilities in Italy. Grateful for any comments please.

Residency doesn't matter. If you're working in Italy then your employment income is subject to Italian tax. That's pretty straight forward. For example consider temporary worker that stays in Italy for two months while working. That person wouldn't likely have any sort of residency but would be taxed in Italy. There are exemptions to this. Visiting sales people and other business persons for example.

The problem is are you considered to be working in Italy ? :veryconfused: I've no idea how remote working is handled.

JulieD - you are providing services under contract for a UK company and being paid and taxed by the company in the UK, where you actually carry out the work is irrelevant.

You can continue to work for that company and be paid and taxed in the UK and register your residenza at the Anagrafe in Italy, but from the moment you do so will be liable to complete a tax return declaring your worldwide income in Italy. You will not pay tax in Italy nor will your NI contributions be transferred as the double tax agreement allows you to be taxed only in one country.

Charlotte Oliver

From the original question, I just wanted to clear one thing up. The "prima casa" is a one-off tax reduction on the purchase tax paid. So, if you did not request it when you purchased the house, then becoming a resident does not affect this as it happened subsequent to the purchase.

It gets a bit confusing because there are various concessions for residents (e.g. reduced utility bills) that are nothing to do with the prima casa tax concession.

The other time this prima casa status has an implication, is in avoiding capital gains tax when you sell your house. There are other ways to avoid it, if you meet the various criteria.