Are US pensions taxed in Italy?
Are you a retired person from the US and you start to live in Italy? Are you an American retired and you spend some months of the year in Italy?
Read this article and figure out if your US pension is taxable in Italy.
In case you are not an official resident
Therefore, if you are residing in Italy for 3 months or less, you are not deemed as a tax resident, thus you do not have to worry about paying taxes on your American pension in Italy.
Be aware that, according to the US state department, American citizens staying in Italy for more than 3 months per year, are considered tax resident overseas.
From a legal point of view, if you do not hold a EU passport and you plan to stay in Italy longer than 90 days, you are required to obtain a VISA to enter the country and then apply for a residence permit (or “permesso di soggiorno” in Italian). This procedure is administered by various entities, such as the immigration office, the Italian foreign embassy and, at some point, your local post office.
They will give you an application kit to fill. After giving it back to your local post office, they will address you to a local police station to present your official demand which is scrutinized and, hopefully, approved.
Upon being granted your residence permit and owning or leasing a residential property, as an American citizen, you can finally apply for residency at your local Comune. You will then obtain your certificate of residency (“certificato di residenza”) from the local Vital Statistics Bureau (or Anagrafe) and you can enroll under the Universal Health Care system of Italy.
In case you are a resident in Italy
We can divide foreign pensions in two categories:
- Pensions for public functions paid by a foreign country (or by one of its political or administrative subdivisions), for services and work carried out on behalf of these entities;
- Private pensions paid by entities, institutions or insurance organizations of foreign countries appointed to handle the pension payments related to the termination of employment in the private sector
The first ones are normally ONLY taxable in the US, therefore no disclosure is required in the Italian tax return, whereas the second ones are taxable in Italy.
We recommend for more information, to check the double treaty agreements between the US and Italy.
If you find them hard to read or you do not know where to look, check out our video below about how to read them and how to find relevant information.
In case of Italian Nationality
In this case your American pension will be counted as a foreign income, therefore you must declare it in your income tax return and pay tax on it.
What about other sources of income?
In case you have other sources of income, besides your pension, you will be subject to pay Italian taxes on these earnings, unless there is an exclusion as provided by the Double Tax Treaty.
For more info about this check out our article about income tax rate in Italy.
2019’s 7% Tax regime for pensioners
However, you must acquire residency in a town with a small population (less than 20.000 inhabitants) located in the southern regions and Abruzzo as well, and receive a public or private pension at the time of relocation.
This tax regime lasts for 10 years, and it has been introduced as a response to many other Mediterranean countries launching similar programs, as well as repopulating Southern towns.
For more info check our video below.
If you are looking for a reliable partner to provide a full range of relocation service, please check our partner’s website Retire2Italy.
Do you need help in filing your annual income statement? Write to us.