Moving to… Italy

Quite a few Americans can track one or more members of their family back to Italy. And there are specific processes for those who can to claim Italian citizenship. But if you haven’t got an Italian nonna, you can still move to Italy relatively easily with the right plan. Here are some visa options for Americans who want to move to Italy:

Elective Residence Visa (Residenza Elettiva)

This visa is the usual route for retirees who want to live in Italy, but it is available to anyone who has passive income. You must show that you have income of at least 31,000 euro(or 38,000 euro for a married couple) to support yourself without working. You should increase that number by 20% for each dependent you bring with you.

You also need to prove that you have procured qualifying health insurance for while you are in Italy and have arranged lodging, either through a rental or a property purchase.

Elective visas may be issued for one or two years and they can be renewed. Someone on an elective visa may apply for Italian citizenship after five years of residency in the country.

Self-Employment or Freelance Visa

As the name suggests, this visa allows a foreign national to move to italy to start a business or to work for her or himself. To acquire the visa, you need to obtain a document (the Nulla Osta) certifying that you have whatever qualifications might be necessary to pursue your career in Italy (i.e. licenses, degrees, etc…). 

You can renew a Self-employment visa and can apply for Italian citizenship after 5 years of residency.

Digital Nomad visa

Like many countries, Italy has introduced a Digital Nomad visa for those who intend to work but whose source of earnings will remain abroad. This visa can cover remote-working employees or freelancers, consultants, etc… so long as they are working for clients outside of Italy.

There are a couple of requirements that make this visa more difficult than the Self-employment visa. First, the applicant must provide evidence of a minimum annual income of 24,789 euro. 

This visa is also reserved for “highly-qualified workers,” which means you should be able to show a high level of professional qualification, often through at least a 3-year advanced degree, professional licensing or significant professional experience.

Investor Visa

Italy’s version of the Golden Visa, the Investor visa currently requires one of the investment levels and types below. You apply for it only after submitting your financial details in an application directly to the Italian Ministry of Economic Development. If you receive the visa, your residency permit lasts for two years and is renewable thereafter if you maintain your investments.

The qualifying investments for a Golden Visa are any one of the following:

• a 2 million euro investment in Italian government bonds.

• a 500,000 euro investment in an Italian company or a 250,000 euro investment in an “innovative” Italian startup.

• a 1 million euro donation to an Italian philanthropic initiative.

In addition, you must prove that you have at least 100,000 euro per year of income, though this can be investment income. This income requirement drops to only 35,000 euro per year if you have bought a “substantial” Italian property.

Foreign nationals can apply for Italian citizenship after 10 years of residency in the country, rather than the 5 required for other visas. 

In any of these cases, you do not need to renounce your US citizenship to naturalize as an Italian.

Taxes and social charges for Americans in Italy

If you are applying for a long-stay visa, you are probably intending to make the country your primary home, at least temporarily (though see the Golden Visa minimum stay option above).

Once you have established a primary home, you are a tax resident and are generally taxed on all sources of income, regardless of their source. In addition, you will be participating in social services, from health care to public transportation and other social benefits. So, you are going to pay social charges if you are working.

Your US citizenship puts you in a slightly odd position. Unlike the citizens of just about every other country in the world, you must report and theoretically pay taxes in the US on all income you receive, regardless of what country it comes from and regardless of whether you are even living in the US. You also might be paying into the US social services programs (minimal though they are) in the form of local taxes and payroll taxes.

Fortunately, there are mechanisms to protect you from having to pay taxes twice on the same source of income.

The tax treaty between Italy and the US sets out, for each type of income you receive, whether you should be paying the tax in the US or in Italy. The US’s standard “savings clause” in its treaties actually allow it to tax its citizens on ALL income, but you can then use the FTC or the FEIE to get a credit for the taxes you paid in Italy or to eliminate from your taxable income salary or wages earned abroad. 

If you are working, and therefore subject to social charges on payroll, you can file a form notifying the US government that you will be contributing in Italy and not in the US system. If you end up with credit in both the US social security system and the Italian pension system, the totalization agreement signed by the two countries assures that you get all of the benefits you are entitled to in either or both nations.

Regular income tax rates

In Italy, the tax brackets (in euros) for 2024 are:

Up to 28,000 EUR 23%

28,001 to 50,000 EUR 35%

Above 50,000 EUR 43%

Italy does provide certain tax breaks to induce people to settle there. If you are no longer working and plan on moving to the south of Italy, you might qualify for a flat 7% tax regime on all of your foreign-earned income. This applies only in certain regions and municipalities in the south of the country but does cover everything from pensions to foreign rental income. It will apply for the first 10 years of a new resident’s life in Italy.

If you have a very high income and are moving to Italy for the first time, you might qualify for the flat tax of 200,000 euro on foreign income (this was just increased from the earlier 100,000 flat tax rate), which you can opt-in to if you would otherwise be paying more in income tax.  

The US-Italy tax treaty is unique in its provisions for taxing retirement plans, social security and pensions. You can find the explanation from the IRS here on page 61. The explanation provides the definitions for what counts as a retirement plan for purposes of the treaty and why your US social security might only be taxed in Italy instead of the US.

Other taxes

Italian residents also pay regional taxes of 1.23% to 3.33% depending on the region where you live. Municipalities also sometimes tax residents at rates from 0% to 0.9%. So you should check the place you have chosen to live in Italy for these additional tax rates. 

Personal capital gains and other investment income in Italy generally are taxed at a flat rate of 26%. Again, you will likely take a credit for such taxes paid to Italy or those paid to the US, depending on how and where you received those gains.

Italy, like other European nations, has a value-added tax (VAT) on consumer transactions. This is 22% on many services and products but is significantly reduced for essentials like food, heating and health services.

Italy does have a wealth tax of .2% on many assets, including investments, insurance policies, cryptocurrency, stock options and more.

Any analysis you do should also take into account health care costs, education costs, transportation costs and other financial benefits that are included in the Italian system but not the US system.

Residency in Italy will likely increase your annual tax bill over and above what you pay in the US. The actual amount, however, will vary significantly depending on how much you earn, what type of income and other factors having to do with your household and deductions.

If you are interested in financial planning in anticipation of a move, contact us.