11523 Taxing )ension in Italy

I believe the Agenzia delle Entrate use an "official" exhange rate for each year, which I think is published maybe on their website - the commercialista should know. I'm afraid the rate they use is unlikely to work in your favour.:no:

If noone comes up with a definitive answer for you, send me a pm and I will phone my commercialista in Lucca for you

[quote=MargaretM;109066] British Tax Authorities agree we are resident in Italy and therefore our private pensions must be paid to us gross, and we must pay Italian Tax on them.
![/quote]

With the dual taxation arrangement for EU countries is it not possible to choose to pay the tax on your private pension at source ie in the UK as you can with all other forms of income? Or are private pensions exempt from this agreement?

This article suggests that you have the choice and should choose whichever tax regime is to your benefit - I doubt if it would be the Italian one!!!

[url]http://www.shelteroffshore.com/index.php/offshore/more/expatriate-tax-saving-and-uk-pensions/[/url]

[quote=anne2;109081]With the dual taxation arrangement for EU countries is it not possible to choose to pay the tax on your private pension at source ie in the UK as you can with all other forms of income? [B]Or are private pensions exempt from this agreement?[/B][/quote]

Correct, last time I read the agreement only Government/local authority pensions can continue to be taxed in the UK if fiscal residency has been established in Italy.

[quote=Ghianda;109082]Correct, last time I read the agreement only Government/local authority pensions can continue to be taxed in the UK if fiscal residency has been established in Italy.[/quote]That is also what our UK Accountant told us, after talking to HMRC.

Can anyone tell me what, if any, personal allowances are available in Italy?

It is certainly extremely confusing!

Taken from the following Inland Revenue publication - they refer to "ANY UK PENSION" [url]http://www.hmrc.gov.uk/pdfs/ir20.pdf[/url]

5.2 If you are not resident in the UK, we will generally tax you on any UK pensions or on
earnings from employment the duties of which are carried on in this country. Where
your duties are carried on partly in the UK and partly abroad, an allocation, based on
days worked in the UK and days worked abroad, will normally be made to ascertain the
earnings for duties carried on in this country which are liable for UK tax. We will not tax
you on earnings from an employment which is carried on wholly abroad (see paragraph
5.5). See paragraph 5.4 for the position if you become resident in the UK part way
through a tax year and 5.9 regarding overseas earnings taxable on the remittance
basis. In some cases you may make a claim under a double taxation agreement for
exemption from UK tax on your UK pension, or on earnings arising in this country (see
Chapter 9 and in particular paragraphs 9.3, 9.4 and 9.6).

Hopefully you will soon find a way through this fiscal minefield!

I have read all of that stuff, and our UK Accountants have spent a lot of time discussing the matter with the Centre for Non-Residents, and they are adamant that we pay UK tax on properties we rent out in the UK, but Italian tax on our Pensions.

With the type of pensions we have we can choose in any year to take anything between zero and an upper limit. Since we don't need the upper limits to live on at the moment, and in the current economic climate want our funds to recover some of their value, then we want to take what we need to live on in the most efficient way. Hence trying to get all the information together before deciding how much pension to take in May.

[quote=MargaretM;109083]That is also what our UK Accountant told us, after talking to HMRC.

Can anyone tell me what, if any, personal allowances are available in Italy?[/quote]

The Agenzia delle Entrate produced (for 2007) a booklet "Guida al nuovo sistema di tassazione dell'irpef". Within it are examples of the various detrazione and riduzione available. However, i would say that the system has been designed to be as complicated as possible. I used to do all my own returns in the UK, but have resigned myself to the services of a commercialista whom I trust to a) know the rules, b) stay up to date.

Happy days.

[quote=anne2;109081]With the dual taxation arrangement for EU countries is it not possible to choose to pay the tax on your private pension at source ie in the UK as you can with all other forms of income? Or are private pensions exempt from this agreement?

This article suggests that you have the choice and should choose whichever tax regime is to your benefit - I doubt if it would be the Italian one!!!

[url=http://www.shelteroffshore.com/index.php/offshore/more/expatriate-tax-saving-and-uk-pensions/]Expatriate Tax Saving and UK Pensions[/url][/quote]

The article is disingenuous in suggesting that you have an option of where you are taxed. A moment's thought would reveal that, if it were true, then fiscs would be in trouble very quickly! We would all opt to be taxed nowhere. Most, if not all, fiscs have very precise rules about who falls within their taxing powers i.e. it's not optional whether you are taxed. You can of course arrange your affairs to genuinely, or artifically, remove or bring you within a partricualr fisc's rules. Where the income or capital is subject to a claim by another fisc then, if it exists, the specific Double Taxation Agreement must be consulted to discover the correct treatment of the income or gains. Pensions are covered under Article 18 of the UK/Italy DTA

Here is a link to the DTA
[url=http://www.opsi.gov.uk/si/si1990/Uksi_19902590_en_2.htm]The Double Taxation Relief (Taxes on Income) (Italy) Order 1990[/url]

and a link to HMRC's guidance
[url=http://www.hmrc.gov.uk/manuals/intmanual/intm354740.htm]DT Agreements: Italy - Income from a UK source paid to a resident of Italy[/url]

Enjoy!

Sinalpha (particuarly) but also everybody who has contributed to this rather technical thread, thanks a million! It has been an education. Keep it going with arguments, facts, and observations, Please...never consider that such an important subject has been 'done to death', remember that people 'like me' who have no personal interest are likely to say "there is an interesting thread about this stuff.." to people (in Italy) to whom it really matters.

[quote=sinalpha;109113]

....and a link to HMRC's guidance
[url=http://www.hmrc.gov.uk/manuals/intmanual/intm354740.htm]DT Agreements: Italy - Income from a UK source paid to a resident of Italy[/url]
![/quote]

I read the result of this link with some surprise, as I thought the DTA, CFR etc. all said that UK state pensions must be taxed in the UK.

Clicking 'next page' produces the answer. Your UK state pension can only be exempt from UK tax if you are an Italian national as well as an Italian resident.

[quote=bosco;109165]I read the result of this link with some surprise, as I thought the DTA, CFR etc. all said that UK state pensions must be taxed in the UK.

Clicking 'next page' produces the answer. Your UK state pension can only be exempt from UK tax if you are an Italian national as well as an Italian resident.[/quote]Sorry, they are talking about UK Government Pensions here, which are not the same as NIRP. NIRP is the UK state pension most people get as a result of National Insurance contributions they have made during their working life, UK Government Pension are pensions paid to people who were EMPLOYED by the Government. So if you are a UK National with a UK Government Pension it is taxed in the UK, if you are an Italian National it is taxed in Italy.

Hope this makes sense.

My husband receives a pension from his company in England. We were asked whether he wanted to pay tax in the UK or in Italy. We went to a commercialista in Italy and he told us that we would be better off with UK tax. We took that option. It is taxed first then paid into our bank account in Italy in Euros. He worked for a bank in the UK so it is not a government pension.

[quote=MargaretM;109170]Sorry, they are talking about UK Government Pensions here, which are not the same as NIRP. NIRP is the UK state pension most people get as a result of National Insurance contributions they have made during their working life, UK Government Pension are pensions paid to people who were EMPLOYED by the Government. So if you are a UK National with a UK Government Pension it is taxed in the UK, if you are an Italian National it is taxed in Italy.

Hope this makes sense.[/quote]

Correct - Article 19 2(a) provides the power under the DTA to tax a pension paid in respect of services rendered to the State e.g. a Civil Servant and Art 19 2(b) gives the escape clause for nationals of the Contracting State who are in receipt of such a pension and who are (tax) resident in the Contracting State.

In other words, if you are in receipt of something like a Civil Service pension and are a UK national and resident in Italy then your CS pension will be taxed in the UK. But, if you can play the Italian nationality card (and are resident in Italy), that trumps UK taxing rights and the pension is taxed in Italy.

An interesting question occurs (! OK: for some of us! :laughs:) as I write this as one whom is entitled to hold either an Italian or UK passport. If I have exercised my 'entitlement' to hold an Italian passport, am I then an Italian national and, if I had a UK CS pension, would I be obliged to declare my nationality and be taxed in Italy? Hmm! Hot towels needed for this one.

[quote]An interesting question occurs (! OK: for some of us! :laughs:) as I write this as one whom is entitled to hold either an Italian or UK passport. If I have exercised my 'entitlement' to hold an Italian passport, am I then an Italian national and, if I had a UK CS pension, would I be obliged to declare my nationality and be taxed in Italy? Hmm! Hot towels needed for this one. __________________[/quote]I have/had the right to both, or either, UK and Italian Passports. When I married in Milano in 1966 I was entitled to automatic Italian citizenship. I was resident in Italy and my son was born in Milano and was Italian.

In the mid 70's we moved to the UK and we registered with the Italian Consulate in London. I registered as a British Citizen - I had never renounced OR taken an Italian passport.

Last year when I did my '730' tax return of 'Italian Income' I declared my UK (private) pension which is taxed there but sent to my bank here every month PLUS the small widows pension paid to me on my late husbands INPS contributions. The Agenzia delle Entrate didn't check their files properly as I had deposited my declaration of Foreign Income taxable elsewhere in the EU. But they told INPS to deduct my outstanding tax bill from 2005 to 2008 from the small pesion they paid me. So they did... they just stopped paying it. My returns are always done by the local CAF office and they took the case up wiht both INPS and the Agezia Dell Entrate, who - after four months - gave this ruling:

"Any income derived from another EU state, of which the Italian resident is still a citizen, and which is taxed in that state, may not have that income taxed in Italy.

[B]BUT[/B] - had I been using an Italian Passport and citizenship then I would have all income paid into Italy from any source taxed here... Well not at their rates, thank you very much!

What saved me was the fact that I was still a British subject and hald a British passport. Just before Christmas all 'illegal' deductions/stoppages were repaid by INPS and the Agenzia expects only my small INPS pension to be taxed...

Carole B

[I][B]This (below) from 'Your Europe' - can be found on this link...[/B]
[URL="http://ec.europa.eu/youreurope/nav/en/citizens/living/social-security/pension/index_en.html#186_5"]European Commission - Your Europe - Citizens - Worker's pensions[/URL]
[/I][B][I] General rules[/I][/B]

[LIST]
[*][I][B]Aggregation[/B]: if the period during which you have been insured in a Member State is not long enough to qualify for a pension in this country, account will be taken of any periods of insurance which you completed in other Member States.[/I]
[*][I][COLOR=Red][B]Residence or stay abroad[/B]: your old-age pension will be paid to you regardless of where you stay or reside within the European Union or the European Economic Area [U]without any reduction, modification or suspension.[/U][/COLOR][/I]
[/LIST]
[B][I] You have been insured in one single Member State[/I][/B]

[I]In this case, the amount of your pension will be calculated in accordance with the legislation of that Member State in exactly the same way as for its own nationals. It does not matter, whether or not you reside in that country when you reached pensionable age.[/I]
[B][I] You have been insured in more than one Member State.[/I][/B]

[I]You will get a pension from every State where you were insured for at least one year. These pensions will correspond to the insured periods completed in each of the States concerned.[/I]

[quote=mammamia;109187]My husband receives a pension from his company in England. [B]We were asked whether he wanted to pay tax in the UK or in Italy[/B]. We went to a commercialista in Italy and he told us that we would be better off with UK tax. We took that option. It is taxed first then paid into our bank account in Italy in Euros. He worked for a bank in the UK so it is not a government pension.[/quote]

Asked by whom? The key for those in receipt of private pensions is where is fiscal residency deemed to be -(or would it be deemed to be, if ever a claim was made). The key factors in a simple cases are where is the main house and whether more than 183 days are spent in one country or another.

[quote=Ghianda;109233]Asked by whom? The key for those in receipt of private pensions is where is fiscal residency deemed to be -(or would it be deemed to be, if ever a claim was made). The key factors in a simple cases are where is the main house and whether more than 183 days are spent in one country or another.[/quote]From all of my recent investigations I would agree with you. I believe that those of you who are having private pensions taxed in the UK, whilst resident in Italy, nice though it is for you it is the wrong interpretation of the Treaty.

I wonder what will happen if/when the Italian authorities who are accepting this situation realise they should have been getting the tax all along. I suspect that is what happened in CaroleB's case, but somehow someone managed to persuade them otherwise.

We were asked by my husbands employer, and we also informed the tax office that we were resident in Italy and were choosing to pay tax in the UK. They were happy with this, and said that everyone can choose as far as they are concerned.

[quote=mammamia;109402]We were asked by my husbands employer, and we also informed the tax office that we were resident in Italy and were choosing to pay tax in the UK. They were happy with this, and said that everyone can choose as far as they are concerned.[/quote]Well,we just received a letter from HMRC, sending a copy of the form "Form DT/Individual". In the letter it says "Please note that the double taxation arrangements do not allow you to choose the country to which you pay tax on your pension" - so that seems definite enough to me.