'residenza' versus 'resident for tax purposes'

[lupo]

There have been so many interesting and useful posts on this topic (e.g. Pigro and C M J Oliver) but I'm still just as confused as ever - partly because many of the posts were about prima casa purchase tax issues which don't apply to us, since we bought our property, as non residents, over two years ago. In two or three months we will move in to our Umbrian property - in order to complete its restoration as well as spend some time enjoying Italy. We will both be retired, with my wife on her state/work pension and me, initially, on my work pension. We want to apply for 'residenza' primarily because we want to buy a car in Italy, but also in order to benefit from cheaper utilities and bank charges. However, we don't, yet, want to become resident for tax purposes, unless we really have to. Can anyone tell us whether we can apply for Certificato di Residenza without, eventually, becoming subject to the complications of an Italian income tax return?

[pigro]

I'll leave your big question for those more qualified than me to answer.

Unfortunately though, you're ALREADY subject to the complications of an Italian tax return as you are currently non-resident and you own an Italian home which you 'have use of', and which you don't rent out. This is the 'notional rental value' that the italian tax system treats as real income in such circumstances, and which as a non-resident you no longer have a tax free allowance to shelter behind - therefore requiring the notional sum to be declared and tax paid on it.

Of course, if you get the residenza you would qualify for prima casa, which would make that 'notional rental value' income dissapear ongoing ... but you're then back at your big question of whether the residenza would oblige you to start declaring other (non-italian) income etc. on an Italian tax return.

One thing though - if you do get residenza, check your potential exemption from filing an Italian tax return if you'll be a pensioner whose only income is their pension and it is taxed at source - I believe (sure someone will correct me if I'm wrong, guess it hinges upon whether a UK pension is considered identical to an Italian one in this context) that you may be exempt in that case, so all your problems may dissapear?

see:
Italy Accountants - Notes on Italian income tax. Italy income tax. Income tax Italy.
Italy Guide: Income Tax Returns, Filing and payment The tax year in Italy is the same as the calendar year. If
for more info.

[pigro]

incidently, the second site I linked to above says:

A married couple may file a joint tax return (both must sign) but are taxed separately, although payment is joint. .... A couple can use form 730 if their income is earned solely from land and/or property and the total amount is less than €2,840.51. Otherwise, they must use the Unico form.

I hadn't known that previously and it goes against all previous advice here (and from the commercialista I spoke to in Italy) - which said that separate tax returns are required. I wonder if the quote above is still accurate (there is no date on the web page) and if so, whether the joint declaration option is specific to the 730 rather than the Modelo Unico? If so, using the 730 could minimise the cost for a holiday home owner - by only having to pay a commercialista's fee for one return rather than for two?

[IRITALIA]

Well I now have my residenza and had the prima casa benefits, etc, that come along with it.
I am still under the illusion (probably wrongly) that I can have double residency and only pay tax in the country where I work full time which at present is Germany.
Therefore I can technically not be in Italy for the necessary 183 days in which one is considered to be a 'full time' resident although I have residenza with the comune.
It is a puzzle which may only be answered by one of us being carted off to prison, which will probably be me.

[lupo]

Very many thanks for such pertinent responses Pigro and Iritalia; Sorry if they have provoked me into a further set of questions, but perhaps this thread might be useful to others like us.
We are taxed at source and have no other income. Perhaps the tax return is only triggered, in circumstances where having more than just pension income in the UK means the completion of a self assessment UK tax return - which then triggers the requirement for an Italian return under the dual taxation treaty. If we do end up completing Italian returns, will we pay tax at the Italian or English rate? It sounds like the Italian rate if we're to get the prima casa allowance. I had no idea that, as a non resident, I am subject, to tax on the notional rental value (I do hope this is currently classed as zero as we don't yet have doors, windows, or plumbing completed!). How is this tax calculated? Is it based on the catastal value (another can of worms?). From what you are both saying, it sounds like we should go ahead with our application for residenza; after all, when we're retired, and living half way up the mountain, filling in an Italian tax return should help to pass the time... Now I'll check the sites you have kindly pointed to and will see what I can find.

[NickZ]

Tax residence is covered by the tax treaty. Having pension income sort of complicates/simplfies it because pensions can have special treatment often covered under a different treat. For example military and some other government pensions are often given "special" treatment.

A third issue is pensioners have a higher no tax zone in Italy. So between that and any other tax write offs you might have no Italian taxes to pay. Home improvements and even appliance upgrades can be covered.

[pigro]

Lupo, there is no "trigger" for Italy - all tax returns are on a "self assessment" basis, i.e. they don't send you a form, you have to decide if you are required to complete one, and go get it yourself.

Regarding who you pay tax to - well, all you have is pensions, and they have already been taxed in UK. Worst case would be that Italy viewed you as tax resident and taxed your pensions, in which case you're right and the Double Taxation treaty would apply (I thought you'd be able to set the UK tax against the Italian one, but See State Pension for Britons living abroad : Directgov - Money, tax and benefits ... which says that you'd get your pension gross and pay Italaian tax on it.

The notional value thing is indeed based on rendita catastale. See this thread http://www.italymag.co.uk/forums/leg...html#post65834
for more info (but I'd advise having a mug of hot coffee on hand to keep you awake!). There are also other, newer threads concerning it but that one has both the explanation of why it is chargeable, and the formula used to calculate it.

Regarding whether the notional value is taxable whilst the building is not habitable, the concensus appears to be 'no' - see http://www.italymag.co.uk/forums/pro...declare-4.html

bet you're looking forward to retirement and an end to all these non-resident/holiday home nuicances ... I know I am (pity I'm only 44)

[lupo]

Just been to the very helpful websites suggested by Pigro, which seem to confirm that where all taxable income from employment, or pensions, in England is deducted at source, there is no need to complete an italian tax return. I take this to mean, in effect, that it's possible, in a range of circumstances, to have residenza status in Italy without necessarily becoming involved in Italian taxation procedures

[lupo]

All superbly helpful Pigro many thanks for this additional info and I am feeling considerably less anxious. Yes, we are looking forward to it immensely, although my Italian builder/friend/mentor did say I'd have to be 'born again' to complete the work on the house by myself (quite a perceptive comment, but I think he's come to depend on this project and doesn't want it to finish). Anyway I might re open the "before and after thread' soon and post a couple of pictures.

[pigro]

Originally Posted by lupo

Just been to the very helpful websites suggested by Pigro, which seem to confirm that where all taxable income from employment, or pensions, in England is deducted at source, there is no need to complete an italian tax return. I take this to mean, in effect, that it's possible, in a range of circumstances, to have residenza status in Italy without necessarily becoming involved in Italian taxation procedures

please use these forums & web links only as a "starter for 10" on potentially complex stuff like this (particularly from amateurs like myself!)... it's so dependant on the two countries respective judgements on where you are domiciled and resident. Note also that, while all in English, some of the websites I linked to are providing info mainly from the perspective of a tax payer resident in Italy - important to keep the context of the articles in mind.

Even if reading this stuff has cheered you up a bit, I'd stll try to consult the UK revenue AND an italian commercialista - OR, if you have the cash, a cross border tax specialist - before actually moving. The trick is in choosing the best domicile for your needs (and then convincing all concerned to accept it).