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Dual Citizen & Residency or Not

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MrsVannelli
1/20/2020 13:05 EST

I've been reading through old posts here and on the Americans Living in Italy FB group, trying to find out some information for when we have more time to spend at our holiday home. I apologize for the long question, but better to have it in one place and there is a wealth of experience with this group! We won't retire from teaching for about 7 years, but will have a home there now and hopefully dual citizenship by the time we retire. My sincere thanks for any clarification anyone can share about my questions!!!

1. DH is working on JS. Once acknowledged, I can begin the JM application. If we are both dual citizens, are we required to notify the comune of our presence if we are just staying in our own home for an extended vacation LESS than 183 days? The only thing I've read that would make registering as a resident important is for the purchase of a car. I'm not worried about the medical benefit right now.

2. As we would be registered in AIRE, we don't want to have to register as a resident at the comune, then unregister when we head back to the US if we are staying less than 183 days per year. I don't think it makes sense to go back and forth like with residency. It sounds like registering with the comune cancels your AIRE registration, and we would have to reregister again with AIRE upon our return to the US.

3. I have read that as citizens we can register our home as a primary home in Italy though AIRE, which would reduce our IMU. Anyone have experience with this? Can this be done if only one homeowner has citizenship, or do we need to wait until the JM process is complete (which I know can take up to 4 years)?

4. If we decided to stay longer, and haven't registered, how does the Italian government know of our presence if we aren't residents? We are NOT planning to cheat the system, but how would they track us? It seems from what I've read that whether or not we are registered residents, the 183 day rule would apply.

5. I know that if DH is not a registered resident, I would not be allowed to stay longer than 90 days until the JM process is complete and I have an Italian passport, correct?

6. If we decided to declare residency and stay longer than 183 days, we are subject to income tax on our teacher pensions as citizens of Italy, (but as foreign residents that particular pension is not taxable), our withdrawals from our 403b accounts, and a tax foreign bank accounts. I think we would need to ay a wealth tax on our home in California, but I'm unclear if there is a difference on this wealth tax if we are foreign residents or citizen residents. What is the tax rate for foreign held real estate? Are the property taxes paid on our home in California deductible from the wealth tax we would pay in Italy? We might sell, but the wealth tax on the value our home near San Francisco could be affect our decision to keep our home or not.

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rsetzer99
1/21/2020 03:28 EST

There is another stay window you are missing. 90 Days. The 183 Day Stay is Tax Resident. 90 Days is the standard Schengen Visa, or tourist, stay. To stay more than 90 days, you need to either be dual citizen (or declaring you intend to achieve such) or have one of the various visas. If, when you arrive, you intend to stay more than 90 days, you must go to the comune within 8 days of arrival (more or less, they are not running a countdown clock) and declare your presence. (This process is done by non dual citizens, or non-seeking to become dual, by the permesso di sigorno process) ---- When you buy a home, you declare at that time whether you intend to make it a primary residence or not and pay the appropriate tax. If, within 18 months, you are clearly not full time (more than 183 days) residents, they will ding you will the difference. This is for everyone legal residing in Italy and has little, if anything to do with AIRE. ----- 183 days is the magic number for all taxes. The only difference is how items are treated differently if you are a citizen or not. --- You have some other questions specific to AIRE, and I don't want to speculate so will not reply to those. However to your question "How does the commune know we are there if there is not staying as residents?" That answer is your rental. The owners typically collect passport information and have to report who and how long is staying. --- Lastly, to restate, your place to focus is the 90 days. Under 90, your a tourist and nothing you need to mess about with. Over 90, triggers the need to take a number of additional steps.

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Shtinky
1/21/2020 03:54 EST

Rsetzer99, Excellent reply. Very clear and succinct.

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whidden39
1/21/2020 10:54 EST

The Situation: Dual citizen (US/Italy), retired. No Italian sourced income.

Aim: Not to be a tax resident in Italy, wanting to stay in Italy May- October but less than 183 days as a renter with a long term lease.

I believe staying continuously for 182 days would be OK due to my Italian citizenship. That should keep me out of income/wealth tax liability in Italy. Are there issues with the comune or landlord when seeking a 3/2 lease but only occupying the premises for 182 days each year? I would be paying for the entire rental term however whether or not I occupy the premises each year. Would I have to notify the comune or AIRE of my whereabouts under this plan? One pitfall — Under this arrangement I would not be able to own my own car. Just assessing alternative options for the future.

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MrsVannelli
1/21/2020 11:39 EST

Thank you rsetzergg. We know about the 90 days and the need to register
if we were applying for a PdS. We aren't worried about the 90 day rule because by the time we need to stay longer than the summer, we will have dual citizenship.

We will own our own home, as a second home, so there is one else who will be reporting our presence to the authorities. I've read that on a tourist visa, the stamp receive in our US passport upon entering the Schengen zone is adequate to inform the government of our presence. However, once we begin using an Italian passport, it might be a different story.

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MrsVannelli
1/21/2020 11:41 EST

Thank you NULL. That will be our situation, except we will have our own house. The car issue is one we're also considering, but leasing is an option.

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almare2
1/21/2020 12:20 EST

The thing is that as long as you are a tourist, the government wants to know not just that you are in the country but where. If you are staying in a hotel or tourist rental, the proprietor does the registering for you (hence why you have to show your passport when you check in). Otherwise you must register yourself.

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MrsVannelli
1/21/2020 12:48 EST

almare2, that's what I'm wondering about. So even though we enter on our US passport, if we are staying at our home, we need to fill out something at the comune telling them where and how long we are staying? Can you share what for/how? This will be new this summer, as prior years we've rented. Tired of renting!

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almare2
1/21/2020 14:28 EST

I'm not really sure, as I have always stayed in a hotel or Airbnb. Maybe one of the other forum members can help you with that. I do know that in Avezzano, which I visit frequently, as a tourist one has to register at the questura (police headquarters), not the comune.

Also, if you own a home, you are going to have to pay certain taxes, such a trash tax and property tax. And of course utilities. If you have a friend in the area who can go along to the various offices with you, all the better. I own a house in Italy that I am going to be renovating and later on living in part-time, and although I speak Italian very well, if I hadn't had the help of a local friend, I would have been tearing my hair out over the bureaucracy! (Even the Italians do, haha!)

Another thing: if you are a tax resident of Italy, both the United States and Italy tax you on income no matter where it is derived, including pensions. There is a tax treaty in effect that allows you to offset the one against the other, which generally means that in total you will end up paying the Italian tax percentage as the US tax percentage is usually lower.

As for the tax on your home in California, there is information at https://home.kpmg/xx/en/home/insights/2014/04/italy-thinking-beyond-borders.html under "Wealth taxes." "A wealth tax on foreign real estate properties (IVIE) is due by all individuals who qualify as tax resident of Italy and own real estate properties located abroad. Tax is calculated on the purchase cost of the property, with some exceptions, at a general rate of 0.76 percent." (I love "with some exceptions"--whatever that's supposed to mean!)

Hope this helps, and good luck!

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MrsVannelli
1/21/2020 14:29 EST

from the US Embassy in Rome:

"As of May 28, 2007, under Italian law ( http://www.camera.it/parlam/leggi/07068l.htm ), all non-residents are required to complete a dichiarazione di presenza (declaration of presence). Tourists arriving from a non-Schengen-country (e.g. the United States) should obtain a stamp in their passport at the airport on the day of arrival. This stamp is considered the equivalent of the declaration of presence. Tourists arriving from a Schengen-country (e.g. France) must request the declaration of presence form from a local police office (commissariato di zona), police headquarters (questura) or their place of stay (e.g hotel, hostel, campgrounds) and submit the form to the police or to their place of stay within eight business days of arrival. It is important that applicants keep a copy of the receipt issued by the Italian authorities. Failure to complete a declaration of presence is punishable by expulsion from Italy. Additional information may be obtained from the Ministry of Foreign Affairs and the Polizia di Stato"

So it all depends on where your arrive in the Schengen zone...

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MrsVannelli
1/21/2020 14:46 EST

almare2 - Thank you - especially for the real estate link! A wealth tax on the purchase price is much better than current market value!!

The taxes and process to pay will be new to us, so we'll find a friend or ask a cousin to help. Hiring a property manager at least for the first year, so they can help as well. Experienced expat local.

The taxes...the biggest issue we will consider when we retire. He have 7 more years to research. As CA residents, our taxes are higher than many other expats, but not as high as Italy. However, if we factor in health care, I wonder how close we'll come to breaking even. Will probably move our state residence to Nevada, sell our CA house and buy a condo there.

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almare2
1/21/2020 15:06 EST

I had always understood that everyone who stayed in the country for more than eight days had to register with the police, but perhaps that is wrong. I know that whichever hotel or Airbnb I stay in always requires a passport so I can be registered with the local police. Maybe if one is a property owner, that does not apply. Interesting!

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MrsVannelli
1/21/2020 15:06 EST

Looks like my CA real estate tax is 3X what I would pay in Italy for the wealth tax on the property, and 'may in principle' take a deduction for my CA property taxes. Lots of homework ahead and a consultation with a commercialista.

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Sergios
1/22/2020 01:37 EST

I don't know if this was mentioned, but if you are a public school teacher, under the treaty you don't pay taxes in italy on your government pension. You do on SS however.

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JacksterJam
1/22/2020 06:56 EST

Hi Sergios.

It depends on whether one is an Italian citizen.

If one is a resident of Italy but not an Italian citizen, it is not taxed.

If one is both an Italian citizen and a resident of Italy, one loses the tax treaty protection and Italy will fully tax that pension.

If I recall correctly, that's addressed in section 2 of Article 19 of the tax treaty.

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Sergios
1/22/2020 11:13 EST

JacksterJam
As usual you are correct.

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MrsVannelli
1/22/2020 11:41 EST

Thank you Sergios and JacksterJam! You two have shared a lot of words of wisdom on this forum. I spent time reviewing back posts when I joined, which helped me immensely. Part of our decision for residency will be the pension issue. My husband and children will go through the JS process. I have an option to JM or not to JM. Still need to review the benefits of dual citizenship vs permesso for spouse against the tax burden for myself. Lots to think about for the future. For now, we just want to enjoy our summers without running afoul of the law!

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Sergios
1/22/2020 12:56 EST

My wife is a retired teacher and her pension is the larger portion of our income. She has several reasons not to become an Italian citizen. She has no intention of staying in europe should I bug out. She does not want to take the Italian language test. And she does not want to get killed on our taxes. Considering that we use private healthcare for the most part and that we are bringing close to 100K a year into the Italian economy, it's not such a bad thing to stand on line forever every few years to get another Permesso di Soggiorno.

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MrsVannelli
1/22/2020 13:32 EST

Makes sense, Sergios! The tax analysis is one of our projects. Many factors to consider. One way or the other, someone gets our $$!

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