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Residency requirements and taxes

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glorirz
8/9/2019 00:04 EST

I've been following this forum for at least a year now, and I imagine this question has been asked, so I ask forgiveness for asking again. I'm investigating buying an apartment in Italy. Until I retire I won't be able to spend more than a couple months a year there. But some day I hope to spend much more time in Italy- probably in about 5 years. I would consider, at that time, applying for elective residency. I understand all the requirements. Here's my question. At what point do we have to pay taxes in Italy? Did I read somewhere that 183 days in the country is a cutoff for paying taxes?
Thanks so much!!
Glori

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glorirz
8/9/2019 00:20 EST

I should add: I'm an American.

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glorirz
8/9/2019 00:20 EST

I should add: I'm an American.

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Shtinky
8/9/2019 02:34 EST

You are correct. It is your physical presence that determines where you are a tax resident and if you are here 183 days or more you’ll owe income tax here in Italy. You will pay property tax on your apartment if it isn’t your primary residence. Once you make it your primary residence you won’t owe property tax on it. HTH

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glorirz
8/9/2019 04:23 EST

Thanks for confirming Shtinky. What allows me to claim the apartment as my primary residence? And if I did, would I then have to pay taxes? I think I will be better off staying in the US tax system.

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rsetzer99
8/9/2019 04:45 EST

To claim your Italian apartment as your primary residence you have to be here more than half the year (IE the 183 days) and be a resident. There is a large difference in the amount of tax you pay when you purchase the apartment as well. If you declare it will be your primary residence you pay only 3% tax. If it is going to be a vacation home you pay 9% tax. -------You should also sit down and do an in depth look at your real tax burden. Add up your Federal, State, Property. Then factor in what you are paying for your health insurance and health out of pocket. You might be rather surprised as to how it compares.

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glorirz
8/9/2019 04:50 EST

Got it, thanks!!

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Shtinky
8/9/2019 05:30 EST

If you wish to remain a US tax resident and pay taxes there, and you have a residence there, then that would be your primary residence. The Italian place would be a 2nd home or vacation home.

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rsetzer99
8/9/2019 05:35 EST

As a final cautionary note, you will have to renew your permesso on a yearly or bi yearly basis, and it could end up being different to juggle things as you need to be here to apply, interview and pick up.

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glorirz
8/9/2019 05:51 EST

Isn’t the permesso for residency?

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Shtinky
8/9/2019 09:11 EST

Lots of different terms. First, you must obtain a Visa before leaving the US. Then, when you arrive in Italy, within 8 days you must apply for your Permesso di Soggiorn at the Poste . You will be given an appointment with the Questura for fingerprints and photos. Then you wait for the Permesso card. Once you’ve picked it up, you go to the Anagrafe in your Comune to apply for Rezidenza. Take your Permesso and proof of your address. Then you wait for a visit from the police. Then you can get your Carta d’Identito. This proves you are a resident. Then you could could buy a car. Clear? All different steps for different things. You must renew your Permesso before it expires every year (or 2 depending on duration of the card). Do NOT let it expire without applying. To renew you’d have to be here for appointments as Rsezter said.

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glorirz
8/9/2019 18:34 EST

Thanks! I understand, that’s for the future when I choose to be a resident!
I have an archive for these emails for the future.

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Umbertomar
8/13/2019 11:26 EST

You must take a look at the tax treaty between the US and Italy. You can be a resident of the US and of Italy and a tax resident of only the US or Italy. It depends on how you arrange your life. Residence in Italy is over 183 days. Residence in the US is based on individual state law, Tax residence is determined by the treaty. This becomes somewhat complex, but a good international tax lawyer can answer your questions and help you set up your life.
Here is the link to the treaty docs
https://www.irs.gov/businesses/international-businesses/italy-tax-treaty-documents
Article 4 of the 1999 treaty lays it out

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