Italian Taxes Explained for A US Retiree Living in Italy

hello I'm chip States and this is the Laughing retirement we're going to attack a tackle of thorny a thorny subject today something that everybody worries about but maybe there's a reason that you shouldn't and that's taxes in a foreign government now Italy is known for its bureaucracy we're not going to try to hide anything here um and at least tax rates are very different than in the United States but the Italian government has a special deal for people who want to move to the southern part of Italy and central part of Italy and it's the Italians called the earth earthquake zone or menza Jordan in the middle of the country and South and includes Sardinia and Sicily we'll get into that in a second but I want you to listen to this and what they're offering and then at the end we're going to consider what are the real taxes across the United States and what are you getting for the taxes you pay in Italy because they're very different so I'm going to start a screen share now and taxes Italian style or maybe it's not as bad as you think it is so let's take a look first at the Italian tax brackets now if you look at that you might notice a couple things number one there's no zero tax bracket number two the tax brackets are condensed much more in the United States and number three the brackets after 25 35 are actually higher now first of all Italians don't earn as much as we do in the United States there's not as broad an income bracket for most Italians without exception Italians earn Less on average than we do in the United States so you know also knows there's no zero bracket everything gets taxed 23 starts out from zero to fifteen thousand Euro so if you look at this you would say oh my God that's that's uh that's a lot well first of all the United States has taxed for you with Italy you can't be double taxed so that's the first thing not to worry about doesn't mean that you can't pay more taxes but it does mean that you can't be double taxed but when you pay taxes here in Italy you're getting more then when you pay taxes in the U.S and we're going to talk about that too so there are advantages to living in Italy and being a foreigner let's keep going he called the seven percent solution it's uh it's not exactly new it's been changed a couple times over the last couple years but the idea is to promote living in Italy in the Italian lifestyle to people who are interested in moving here and to give them an incentive to move to the southern part of Italy in What's called the earthquake zone in the central part of Italy we live in the central part of Italy and the parts called the earthquake zone we've been here for six years or so we haven't had a problem now this incentive is a flat seven percent tax for 10 years to foreigners now what income is taxed well very simply if you have income it's taxed your pension income interest income dividend income royalty income uh rental capital gains any kind of several anything that you get in the giving year that you are taxed that you are submitting your taxes on you're taxed on income inside IRAs would not be considered because you are not in receipt of that income now requirements for becoming a seven percent beneficiary number one you have not been an Italian resident for the last five years you draw a pension from outside Italy your pension comes or you're a resident of a country that has a tax treaty with Italy and you move to an area designated in the tax code now that's pretty simple because that area is kind of broad as a matter of fact if you want a list of the towns and the areas all you have to do is email me info at the laughingretirement.com and I'll send you the list so again what are the requirements for getting this seven percent tax beneficiary one you haven't been an Italian resident for the last five years too you draw a pension from outside Italy three you're from a country that has a tax treaty with Italy and number four you move to an area designated in the tax code where can you live under the seven percent agreement well Cecily sardini Calabria compania Basilica and one of my favorites Puglia plus 15 cities in Umbria about 85 cities in La Marque and 13 cities in Lazio we live in an area outside rietti in Lazio now does rietti and Lazio qualify no it doesn't because it's got more than twenty thousand people does you want it to move to Puglia and you say I want to move to Berea well Bree has over 340 000 people or 325 000 people so that's not going to apply you have to live in an area or in town that has less than 20 000 people so how to qualify in those areas anytime you move to must have an official population of less than twenty thousand people who it doesn't qualify it and I just use the example if you want to move to Puglia but you want to move to Berea it's not going to qualify because Buri has 325 000 people if you want the list you can go to the National Institute for statistics or you can email me at info at the Laughing retirement and ask for the list and I will send you a list of the provinces and towns within other provinces that apply or are applicable for the seven percent um incentive what am I missing here are there any catches is there anything that we hadn't thought of well you must apply in the year after you become a tax Italian tax resident so if you become if you've been here 183 days as an Italian tax resident you have to apply in the next year you must pay all the taxes due in the deadlines and taxes there are two different tax deadlines here in Italy no deductions apply seven percent is a flat tax it's to your income period not a discussion the only catch to that rule is that if you have sources of income from multiple different countries and one of those countries is not or does not have a tax treaty with Italy that income won't apply so that income will be subject to the normal tax rates well the other income with tax treaties is subject to the seven percent not too difficult not hard to understand what are the other tax considerations well I've already mentioned that the crossover point is 883 days of residency in Italy now that's a little bit different than in the than the U.S because the U.S is one of the few countries in the world the taxes by citizenship if you're a citizen of the United States you paid taxes there in Europe and Italy and most of the world you pay taxes based on whether or not you're a resident and in Italy the qualification for a resident is that you've been here 100 over 183 days a year there you have it what else is taxed now I'm making you aware of this not because it's part of the tax of the seven percent but because it exists and one of the advantages of the seven percent rule is that it will allow you to prepare your assets for the RW series and you have 10 years to do that you've got plenty of time the RW form series is a form that asks you about all of your assets all of them your houses where are they how many of you have your financial assets your uh do you own stocks do you have a brokerage account if you own real estate assets they're taxed annually at 0.76 percent on the purchase price not on the value today but on the purchase price for example uh supposing you had a home that you bought five years ago and you bought it for a hundred thousand dollars and today it's worth 185 well it's taxed on the hundred thousand now suppose you had a stock brokerage account in the brokerage account will be taxed as 0.2 percent now those taxes aren't onerous and they do not apply to you if you have the seven percent tax for a decade so now you can find ways to lower those taxes to do other things with the money that are not taxed in the same way in other words you've got some time the US and Canada have tax trees with Italy that forbid double taxation as I understand it the U.S Social Security and government pensions from both Canada and the US are not taxed now I've read two different things I read that they are I've been told by my tax attorney they are not the seven percent rule means that the only thing you will pay on is seven percent of your income that's all nothing else you don't have to worry about the RW series or the real estate tax at 0.76 percent or the financial tax is 0.2 percent so this makes life very easy for a decade you've got a decade to figure out the things you can do to mitigate taxes in Italy and there are some things now finally there are two other very important considerations number one listen to this carefully please because when you looked at those that that initial tax bracket list from Italy that looked awful High 43 after 50 000 of income is a lot but in Italy one of the benefits our living here since 1978 is Universal Health Care if you're a citizen of Italy you don't pay for it if you're an expat like we are my wife and I together pay a total of 64.50 a month that's it that's all we pay we have been in and out of hospitals we've been to the ER as a matter of fact one of us spent five hours in an ER had intravenous fluids saw three doctors had three sets of x-rays um I got intravenous medicine went home with prescriptions and the charge was three dollars and twenty cents true story so one of the things you have to do to compare U.S taxes and Italian taxes is to take all the money you spend on your insurance all the cost of your deductible all the cost of your co-pays all of your out-of-pockets anything that insurance didn't pay and add that into your taxes and that would compare to the total taxes you pay in Italy and you're liable to find out it's not too much that that seven percent tax is a darn good deal because once you've been here for six months you qualify for the Italian tax code system and once you get your charges for excuse me you qualify for the Italian Health Care system and once you qualify for that Health Care System your expenses on an annual basis are fixed at least ours are here in Alaska that's what we pay 64.50 a month that's it period end of sentence for both me and Shauna in the United States we were paying sixteen hundred and fifty dollars a month plus a high deductible plus our copays plus our out-of-pockets plus the medicines huge difference number two I'm not a tax expert I have been told by tax lawyers that my social security is not taxable I have been told I've seen I have read things that say it is I have been told by commercial leases that it isn't I have also read that the seven percent tax rule applies for nine years 10 years and five years in the United States is it's the same I worked with two CPAs for years and I can tell you that if you give information to one CPA about your taxes and information to another CPA about your taxes and you ask them to do your taxes for the current year you're going to come out with two different numbers it's the same thing here it's no different so what you need to do is to confirm consult a Bonafide tax expert specializing in foreigners taxes or a commercial lease done is what they're called here and I'm working on getting a couple names so that I can send you some people that are reputable and know what they're doing now if you like this video I'd like you to subscribe to the Laughing retirement if you're interested in finances and you have some concerns about how much you can take out of your finances that will last for the rest of your life we can explain that to you as well and I can show you exactly how to do it not only that but I have classes on how to do that so we have Finance information we have tax information we have moving to Italy information and we have information on how to create the best time in your life in the Laughing retirement so we have our Facebook Community called The Laughing retirement we have this YouTube channel I hope you'll subscribe and I hope you'll join us and if you have questions about your finances send me an email and info at the Laughing retirement I always offer a free 20-minute no obligation no pressure to talk with me and to learn more about how to create the best time in your life I'm chip steitz and it's great to have you here

Channel: The Laughing Retirement

Views: 33,065

Keywords: The laughing retirement, chip stites, retire to italy, retiree living in the us, italian taxes, expat taxes, retiree living in italy, us retiree, Italian taxes explained, italian taxes explained for a US retiree, retire italy, expat italy, taxes for a retiree in italy, us retiree living in italy

Id: M4tB8zfQY08

Length: 16min 0sec (960 seconds)

Published: Sun Aug 13 2023