'Residential' versus 'fiscal' residenza

Short answer is yes I'm afraid.

Slightly longer answer is yes, if you are resident at the Anagrafe for more than 6 months in any tax year you are considered fiscally resident in Italy, even if you are considered ordinarily resident and therefore taxable also in the UK. So that means technically you are supposed to declare your worldwide income in both countries.

Funnily enough Rachel we are doing just the same as you next week, I wasn't going to rush in to residency etc.

I'd be interested to know how you get on and if anything  comes up which is worth knowing! I understand you don't need private medical insurance now but a card from the NHS whose name I can't remember.... Good luck!

The health thing ain't that simple sadly Rachel, Penny has posted some helpful info about this matter.

At the risk of taking issue with Charlotte - this is a grey area.  Elective residency is technically different to normal residency - (ie where you are physically and financially resident in Italy).  The 6 month rule is true, but - as with most things here - open to interpretation.  There was a ruling by the Court of Cassazione last year that said that having a prima casa and residency did not mean that you had to be fiscally resident in Italy  - ergo - residency and anagraphical residency are different things.    The problem is that noone in the comunes knows or understands any of it.  Most of them cant even grasp that being resident means 183 days a year in Italy and not in that particular house.... and so on----  In your particular case - I would pay my tax in the UK as there is the double tax treaty, but fill in a simple one line tax return in ITaly when it due to show you have not earned in ITaly - and tax has already been paid on your earnings from abroad. 

Oh! and Rachel you can get a form from HMRC which allows you to get your UK rent paid tax free and then fill in a self assessment tax return later on. Otherwise the agent will be legally obliged to deduct 20% automatically and hand it over to George Osborne .

A most interesting post for us, as well as we were wondering about the topic. Perhaps Charlotte could look into the matter, particularly the jurisprudence case mentioned by Ram. This type of residency applies in Spain. If your income originates in another country, you can choose where you pay your taxes, providing that the two countrees have agreements in place to avoid double taxation. On the other hand, it is advisable to lodge a nil return form to avoid problems.I guess that it should be the same case throughout the EU. I know quite a few UK pensioners who do that in Spain.

Another thing to consider is that you will need to pay the IMU equivalent (sorry I have forgotten it's proper name) on the property you own in the UK if you are fiscally resident here in Italy. It has to be paid at 0.76% of the value of your house each year. I don't know if Ram has seen any mre details on how this will be calculated, if you can deduct your council tax etc.....?

  This thread is proving VERY helpful - thanks tutti! Interesting Penny regarding IVIE (tax on foreign property held by an Italian resident) -I'd assumed I'd have to pay this even if not fully 'fiscally' resident just 'elective' as Ram points out. It'll be an intersting one for teh tax office to sort out though because our UK home is jointly owned by my partner who is a UK resident 100% so presumably it's only half of the value of the house I'll have to find the .76% on? Does anyone know yet also regarding IVIE whether it is going to be the case that the Italian authorities will accept the council tax banding valuations as the value  on which to base the IVIE owing and also whether they will allow any council tax paid by me, rather than tenants directly, to be an allowed deduction?  I must say the thought of a 'simple one line tax return' has put such a smile on my face...my biggest fear with my move to Italy is the endless unfathomable paperwork everyone moans about! Have a good weekend everyone!

That is a great answer...you are right that it is open to interpretation and I know that many people in this situation follow the simple route you outlined.. Or leave a blank space relating to income abroad..I wonder if there are any Italian commercialisti who actually know about the Cassazione judgement? Or what line the Agenzia delle Entrate take when stranieri ask for advice?

I also pay tax in UK and have no income in Italy, and understood that I did not pay tax here as the UK insist I pay it in UK. I have just had a look for the "simple form" on the Agenzia delle Entrate and their IRPEF 770 Semplificato is 16 pages, and not designed for the average Joe. They must have some agreement with the commercialisti. So what exactly is this simple Form?

From the horse's (Agenzia dell'Entrate) mouth: If resident in ITaly people with only a theoretical buildings income (ie people who only own a house and do not earn in Italy) can use a the modello UNICO MINI - as long as they dont want to ask for deductions, incentives, family discounts etc.   If  resident abroad they must use the form UNICO NON RESIDENTI If resident and receive a pension or such like from another country they should fill in the Modello UNICO and look at page 106 of Fascicolo 1 where it says 'Foreign pensions received by an Itlaian resident'.   Clear? as mud.....  It is simple inasmuch as you only have to fill in the first and last page! 

Ram - you are a star! So, to make sure I've understood, whilst my only income is letting out he UK house but am an Italian resident, I can just fill in the modello UNICO MINI but can't have any discounts for my child. It is probably worth sacrificing any childrens' discounts on IMU etc just to save the extra tax form filling-in and need to employ a commercialista! Thanks so much for the help!

Great comment, Sprostoni. I totally agree. Bravo, Ram and Charlotte, most useful points; however, I must confess that it all sounds like a nightmare where everything is left up to interpretation... I am getting a headache....

I'd keep a low profile Rachel. Don't volunteer for taxes would be my advice. A different kettle of fish if you were in Italy full time for ever..

Rachel, the theoretical rental income RAM refers to is not actual rental income from renting your house out but a calculated figure based on the cadastral value of your Italian house. You will also have the income from renting you UK house out so the simplified form won't apply to you I'm afraid, unless you decide to follow Bunterboy's advice of course.

Oh...just when it was looking like something might be simple! Sounds like I should go into our local Agenzia dell'Entrate with the various options and see whch they think fits the bill. O joy...yet more queues! Will post my results to keep us all up to speed! Rx

Hi Rachel, if I were you I would ask around for a good local accountant and get them to sort it all out for you. I have lived here quite a while and would not attempt to fill out a full tax return myself. There are various unions who can help you too. They usually help people with their tax returns (or do them for them) for a lower fee than an accountant. Ask your nieghbours who they would recommend. In my experience tax in Italy is not a DIY thing :-)

I don't know here you are but I have never paid that much! Mine cost between €500 and €1200 depedning on what we were doing (ie running a business or not).

Our Italian accountant charges nothing for the initial visit, has saved us money and worry and has many ex-pat clients so is up to date on their needs, we would never attempt to do our own submission, hopefully there is one in Lazio that can do the same for you. 

Having a look at Fascicolo 1 page 106 as you suggested RAM, and it states under Argentina, UK, Spain, USA and Venezuela. State pensions are only liable for Italian tax if one has Italian nationality...... I can sleep peacefully now

I looked at this a while back when someone else was questioning the tax on pensions. You cannot be resident for tax purposes in both the UK and Italy - the Double Tax Agreement includes a tie- breaker which means that for tax purposes you can only be resident in one of the countries. If you are Italian Tax Resident then any UK source income remains liable to UK tax (subject to some exemptions) and relief is given by setting the UK tax against any Italian Tax on the same income. Rental income from UK property remains taxable by the UK even if you are non UK resident for tax purposes and would also be liable to Italian tax as an Italian tax resident - with relief for the UK tax. Nil Italian tax if, and only if, the UK tax on the rental income equals or exceeds the Italian tax otherwise payable. This will not necessarily be the case as there are expenses that are allowed for UK tax purposes that may not be allowable for Italian Tax purposes. So far as pensions are concerned, pensions from the state, which means from employment by the state and does NOT include the usual old age retirement pension that everyone gets, are exempt from Italian tax unless received by an Italian National. The UK old age pension paid by the UK government is therefore taxable in Italy if Italian tax resident. Whilst I have knowledge of the UK tax rules I have very limited knowledge of the Italian Tax rules (merely what I have picked up from the published information and dealing with the Italian tax on my Italian rental income) and as others have advised - get a commercialista to advise on the Italian Tax position as it can get confusing and complex.

Examples include Civil Service pensions and Armed forces pensions HMRC manuals contain the following comments: A pension of an individual who is, or was, directly employed in central, regional or local government service is paid to him by the other state for services rendered to that state. Members of armed forces or teachers employed by a local authority (or by the board of governors of a public sector school) are also regarded as paid by the state for services rendered to that state. A pension paid by a government etc to the widow or dependants of an individual who rendered services to that government etc is similarly regarded as being paid to the pensioner by the other state for services rendered to that state. Employment with a statutory body set up by a state etc. is not usually regarded as involving payment by, or the rendering of services to, that state etc., even if the body is set up and funded by the state etc. Employees in nationalised industries are also not regarded as coming within the government services Article, nor are employees of privatised industries With regard to the UK/Italian Double Tax Treaty, pensions from the following are apparently also accepted as paid by the UK state the Commonwealth War Graves Commission the British Council the British School of Rome the British Institute of Florence If anyone is unsure they should check with HMRC for a ruling. Hope that helps

It would work like this: 10,000 GBP rental income converted into EUR = 12,000 (guestimate) 21% due on EUR 12,000 = EUR 2,520 tax due in Italy Already paid tax in UK of GBP 1,000 (5,000 x 20% - guestimate) converted to EUR = 1,200 So tax due in Italy = EUR 2,520 - EUR 1,200 (paid in the UK) = EUR 1,320 That is a very simplistic example and the 21% deduction menioned above is an Italian tax regime you have to choose which does not permit you to offset expenses but taxes you at a lower rate. I don't know if it applies to foreign property or not. You really do need an Italian accountant to work out if there is a better scheme in Italy for you. The higher tax might not make it worth your while offsetting the expenses as different expenses will be allowed in Italy that might be less generous.

Penny Your example may be simplistic but it is basically correct. The Italian calculation of how the overseas taxable income is calculated should be checked with a commercialista as there may be some differences to how it is calculated for Italian properties. If it is the same a Italian properties then from what I have gleaned the expenses for rented property are limited and restricted to 15% of the rent, although I have seen comment that expenses up to 30% may apply. As with other areas of taxation in Italy it is complex and I would strongly recommend using a suitably experienced commercialista to sort out the Italian Tax side. The Italian authorities are I believe cracking down hard on tax evasion and the penalties etc, even for simple errors, can be large. Rachel68 Taxation is frequently illogical and at times unfair. The double tax relief rules and treaties aim to prevent a double tax charge on the same income source but the actual amount of tax in each country is calculated by reference to the rules in each country's tax code. What this effectively means is that between the 2 countries involved you end up paying tax equal to the tax in whichever country has the highest effective rate after deducting whatever reliefs/allowances are available in that country. This is then paid to both countries with the first slice going, in the case of let property, to the country where the property is, the amount being based on the tax due under that country's rules. The balance (if any) is then paid to the other country.

Retirement Pension (oddly enough normally known as "state pension") based on your National Insurance payments (previous quote aboput everyone getting it is not quite correct) is taxed in the UK. Not directly, if you have other income it will be taxed by reduction in your tax code allowance. It is all as complex as hell and I doubt ANY comercial tax company can advise on both tax systems, but they may take liability, then again try getting them to pay if you run into trouble...

Steve is correct OAP (ha) is taxed in the UK if other government pensions are also taxed there through a reduction in the tax code. My commercialista took advice from his ruling body on this point and it is acknowledged in Italy that this is the case. 

I cannot comment on the advice given to Angie and Robert by their Commercialista as there may be a special concession or something. However, at first sight it does not accord with the usual UK tax rules or the way the Double Tax Agreement works, and I do not see how it can apply only to those old age pensions where other state pensions are received unless the individual has only ever worked for the state, or possibly the only pensions received are from employment by the state. In that case it might be that it is accepted that the old age pension (or part of it) is payable in respect of services to the state and therefore only taxable in the UK. I have found nothing which gives any kind of ruling on this and it would require details of a specific situation to be submitted by (or on behalf of) an individual to HMRC to get a ruling. Where the individual has not been employed by the state etc then I do not see how it can be argued that the Pension of someone who is tax resident in Italy and not the UK is liable to UK tax on their old age pension. The following may be of assistance to understanding the question of where someone is tax resident if they would otherwise be tax resident in the UK and Italy (under their respective tax residence rules - note that the UK rules on tax residence are currently being formalised - which may make it easier to determine if you are UK tax resident under those rules and that the new rules are currently proposed to apply from 6 April 2013) as well as the specific provisions applying to pensions. Extracts from the UK/Italy Double Tax Agreement (Convention of 21 October 1988: SI 1990/2590 Article 4Fiscal domicile 1)     For the purposes of this Convention, the term “resident of a Contracting State” means any person who, under the laws of that State, is liable to taxation therein by reason of his domicile, residence, place of management or any other criterion of a similar nature. But this term does not include any person who is liable to tax in that Contracting State only if he derives income from sources therein. (2)     Where by reason of the provisions of paragraph (1) of this Article an individual is a resident of both Contracting States, then his status shall be determined in accordance with the following rules:        (a)     he shall be deemed to be a resident of the Contracting State in which he has a permanent home available to him. If he has a permanent home available to him in both Contracting States, he shall be deemed to be a resident of the Contracting State with which his personal and economic relations are closer (centre of vital interests);           (b)     if the Contracting State in which he has his centre of vital interests cannot be determined, or if he has no permanent home available to him in either Contracting State, he shall be deemed to be a resident of the State in which he has an habitual abode;           (c)     if he has an habitual abode in both Contracting States or in neither of them, he shall be deemed to be a resident of the Contracting State of which he is a national;           (d)     if he is a national of both Contracting States or of neither of them, the competent authorities of the Contracting States shall settle the question by mutual agreement.   (3)     Where by reason of the provisions of paragraph (1) of this Article a person other than an individual is a resident of both Contracting States, then it shall be deemed to be a resident of the Contracting State in which its place of effective management is situated   Article 18Pensions (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. (2)     The term “annuity” means a stated sum payable periodically at stated times during life or during a specified or ascertainable period of time under an obligation to make the payments in return for adequate and full consideration in money or money's worth. Article 19Government service (1)     —        (a)     Remuneration, other than a pension, paid by a Contracting State or a political or an administrative subdivision or a local authority thereof to any individual in respect of services rendered to that State or subdivision or local authority thereof shall be taxable only in that State.           (b)     Notwithstanding the provisions of sub-paragraph (1)(a) of this Article, such remuneration shall be taxable only in the other Contracting State if the services are rendered in that State and the recipient is a resident of that other Contracting State who:                   (i)     is a national of that State not being a national of the first-mentioned State; or                   (ii)     not being a national of the first-mentioned State did not become a resident of that other State solely for the purpose of performing the services. (2)     —          (a)     Any pension paid by, or out of funds created by, a Contracting State or a political or an administrative subdivision or a local authority thereof to any individual in respect of services rendered to that State or subdivision or local authority thereof shall be taxable only in that State.           (b)     Notwithstanding the provisions of sub-paragraph (2)(a) of this Article, such pension shall be taxable only in the other Contracting State if the individual is a national of and a resident of that State. (3)     The provisions of Articles 15, 16 and 18 of this Convention shall apply to remuneration or pensions in respect of services rendered in connection with any trade or business carried on by one of the Contracting States or a political or an administrative subdivision or a local authority thereof  

Only ever worked for the state Panner....Civil service (Inland Revenue) and Local government, so one assumes in my case this rule applies, otherwise my commercialista and I will be paying a visit to the G di F!.It is a complex affair this tax and whilst one does ones own research, ultimately I leave it to the guy who is paid to deal with it on my behalf.

... as far as I can see it is saying a pension derived from employment in that state (NI contributions) and paid by that state is taxable by that state... Also that Article 19 specifically states pension derived from Government work will be paid by that state and taxable there. This I believe was mainly to cover diplomatic Civil Servants working abroad, but seems to also cover local government pensions for some reason (likely because they are government paid). As to  the full list of who is covered I would guess there is not one and you are correct that HMRC would likely advise OR your pension administrator. I know for a fact Civil Service pensions are taxed at source no matter where you live, don't know what would happen if you were living abroad and the other country did not have an agreement on this, but suspect most do....

Angie & Robert Sounds right and I agree, even though I am involved in UK tax advisory work I leave the Italian end to my Commercialista. Steve Not sure what you mean by your first paragraph. Article 18 (1) is about residence at the time the pension is paid, not when it was earned. Without the provision it would be taxable in the UK (source) and Italy (country of tax residence). The provision means that (unless from state employment) it is taxable only in the country of tax residence. Regarding second para. Have undertaken quite a bit of research I cannot find a list of precisely what is included within the "pension for employment by the state". Best I could find is contained in my earlier posts. Whilst not relevant to taly, if a civil service pension is received in a country which has no agreement or similar domestic rules it would also be taxable under that country's domestic rules!

Steve The key words are highlighted in bold below: 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 Whlst the language of the treaty can appear to be somewhat convoluted, in the context of the treaty and what it is aiming to do and on ordinary UK  principles of interpretatiom it means that if you are a tax resident of Italy at the time you receive the pension payment that payment will be taxed in Italy under their normal Italian tax rules of taxing tax residents on their worldwide income. The treaty then exempts you from tax in the UK (otherwise it would also be taxable in the UK under the normal UK tax rules as its source is the UK). All of course subject to the provisions relating to pensions from employment with the State. Hope that clarifies it.

I think they are refering to the State of Panic.....