# Buying a new motorcycle in Italy and then moving to Portugal



## John and Cecil (Dec 22, 2019)

Hi, I am currently a dual citizen of both USA and Italy and staying in Italy temporarily (a few months only). I just arrived from the USA with my dog. We also have a large e-bike that we currently use for transportation. I love Italy but the income taxes here would be very high on my retirement savings (4 times as much as they would be in the USA) so I am considering becoming a resident in Portugal and applying for NHR status (provided that they don't terminate the program). 

It is difficult to get around with both a large e-bike and a dog (he weighs 10kg and rides on the back of the bike). He is too heavy to fly in cabin with any airline. It is possible to take the bike apart and take several trains and a ferry and possible some buses to get from Italy to Portugal but it will take several days and we want to get a motorcycle eventually anyway. The motorcycle I want is an inexpensive one (Malaguti 125cc, euro4, 59g/km emissions). I am not a tax resident of Italy but I have found out that I can buy a new motorcycle here from a dealer and register and insure the motorcycle for one year with an "EE" temporary plate. The motorcycle is 3000 Euros including VAT and 1 year of registration is included. 

This seemed to be a good idea since I will have a full year to establish residency somewhere in the EU and then re-register it there. If we like Portugal I can register it there, otherwise I can always return to Italy and register it here before the 1 year registration expires. 

The problem is that I have read that there are extreme vehicle taxes in PT, and it also states if you buy a vehicle you must be a resident of and own the vehicle in the last country for at least 6 months to avoid the taxes and that would not be the case for me. I would be buying the vehicle and traveling to PT perhaps only a month after the purchase, and since it is a new vehicle I would be paying the VAT tax for the purchase in Italy. I could skip buying it in Italy and buy a motorcycle in PT instead (after I get a lease to stay there) but that would make getting from Italy to PT very difficult and it would make me wait a couple extra months. I am wondering how much I would have to pay in taxes to register the motorcycle in PT if I purchase it in Italy and how difficult the paperwork process will be. One would think it would be simple since the vehicle is almost brand new (2020 model year) and purchased from a EU dealer, but that does not appear to be the case. Does anyone have any experience with this situation and can offer some advice? Thank you.


----------



## John and Cecil (Dec 22, 2019)

I have been researching this some more. It seems one of the problems is VAT. Even though I pay VAT in Italy when I purchase the new motorcycle they will force me to pay VAT in Portugal too since the vehicle will be less than 6 months old and under 6000km. 

Is it legal to purchase in Italy and then travel around the EU for 6 months and 6000+ kms before going to PT so I can avoid the double taxation. I won't have proof of residence in Italy for the 6 months as I will be traveling and living month to month in various countries and areas. We really want to go to Madeira anyway and apparently the first ferry only starts going there in July.


----------



## RichardHenshall (Jul 26, 2009)

While I believe it can be possible to buy in one EU country for immediate export (and immediate import to a destination country) and only pay VAT (& other registration/purchase taxes) in the destination country, more normally VAT (& other registration/purchase taxes) is paid in the country of origin on first purchase. If it's done right the secondhand vehicle can be subsequently moved to another EU country without paying the same taxes again.

Are you sure that you will be paying VAT in both countries?


----------



## John and Cecil (Dec 22, 2019)

RichardHenshall said:


> While I believe it can be possible to buy in one EU country for immediate export (and immediate import to a destination country) and only pay VAT (& other registration/purchase taxes) in the destination country, more normally VAT (& other registration/purchase taxes) is paid in the country of origin on first purchase. If it's done right the secondhand vehicle can be subsequently moved to another EU country without paying the same taxes again.
> 
> Are you sure that you will be paying VAT in both countries?


I am not sure of anything, that is why I am posting here  From what I have been reading if you own the vehicle less than 6 months and then try to transfer the registration to Portugal then you have to pay VAT in Portugal. It appears then you would have to go back to the dealer or the first country and try to get a refund for the VAT paid there (good luck). 

I also read that if you live in the 1st country and own the vehicle for over 6 months you won't have to pay the VAT to Portugal again, but I believe it said that you need proof of residency in the country of origin or something for those 6 months too and that the vehicle must have over 6000km when the transfer is requested. I would be purchasing the new vehicle as a non resident with EE plates.


----------



## NickZ (Jun 26, 2009)

Where are you getting insurance? 

https://europa.eu/youreurope/citizens/vehicles/cars/buying-leasing-car-abroad/germany/index_en.htm

That's Germany but the rules should be more or less equal. You shouldn't pay Italian VAT on the export. Note what the link mentions that assumes a real export.

What happens if you don't manage to secure residence in the twelve months? You'd have to stick the car on a boat outside the EU or come back to Italy and pay the VAT . But not being resident you won't be able to register the car


----------



## John and Cecil (Dec 22, 2019)

NickZ said:


> Where are you getting insurance?
> 
> That's Germany but the rules should be more or less equal. You shouldn't pay Italian VAT on the export. Note what the link mentions that assumes a real export.
> 
> What happens if you don't manage to secure residence in the twelve months? You'd have to stick the car on a boat outside the EU or come back to Italy and pay the VAT . But not being resident you won't be able to register the car


The dealer can get me insurance for a year when I purchase the motorcycle. I am not buying it as an export, I am buying it in Italy as a non resident and it will come with 1 year Italian registration and EE plates which are not renewable after a year. If I do not establish residency somewhere within a year I am screwed, but I assume I can just sell the motorcycle in that case. I do have an address in Italy now, but I am not staying for 6 months nor becoming a tax resident here. I am just here for less than 6 months. I am a tax resident in the USA.


----------



## John and Cecil (Dec 22, 2019)

I guess that is another option though, if I can buy it with temp plates as an export to Portugal but without having an address in PT that might be difficult too. I am hopeful I will be moving to PT but I really have to see the place first, plus if they decide to scrap or change the NHR for foreign interest and dividends then I probably won't be living in Portugal. I really like Italy but the taxes are outrageous, more than 4 times the amount I pay in the USA.


----------



## NickZ (Jun 26, 2009)

No you're buying it for export. That's what the EE plates mean. 

http://www.up.aci.it/milano/IMG/pdf/RIEPILOGO_schede_in_inglese.pdf


----------



## NickZ (Jun 26, 2009)

John and Cecil said:


> foreign interest and dividends then I probably won't be living in Portugal. I really like Italy but the taxes are outrageous, more than 4 times the amount I pay in the USA.


Dividends are 26%. Interest depends on the source but max out at 26% Just the federal rate on qualified US dividends starts at 15%. For this you still need to pay for health care etc. Plus state and local


----------



## John and Cecil (Dec 22, 2019)

NickZ said:


> Dividends are 26%. Interest depends on the source but max out at 26% Just the federal rate on qualified US dividends starts at 15%. For this you still need to pay for health care etc. Plus state and local


Thank you for the link to the vehicle info, I will probably have to wait until I am a resident somewhere to buy a vehicle I guess. It is very confusing.

As for income taxes I read that there is currently no income tax in PT for foreign earned interest and dividends for the first 10 years of residency when applying for NHR status. I pay income tax on interest and dividends in the USA whether or not I live there, US income taxes are based on citizenship and not residency.


----------



## NickZ (Jun 26, 2009)

That's not exactly true. 

There is the double tax treaty which means you'd get an offset if the income is taxable by the US. 

If you go over and ask in the tax forum there are plenty who will explain you your liabilities to the US.


----------



## John and Cecil (Dec 22, 2019)

Yes I understand the double tax treaty. I should have stated that you must pay taxes to the US unless you pay equal or more income tax on the same income to another jurisdiction whereas it is covered by a double tax treaty. Most countries only tax someone if they are considered a tax resident but when you are a US citizen maintaining US residency makes no difference. The only thing that will reduce or eliminate your US income taxes are paying income tax to another country, short of denouncing citizenship anyway.

Italy taxes are so ridiculously high it does not even matter that much about the dual tax treaty. The tax rate itself might not seem extreme but when you factor in that there is no $12,200 standard deduction as well a .20% wealth tax (interest rates are now only paying 2-2.5% so this wealth tax alone is the equivalent to another 8-10% tax added to all earned interest). For a US citizen earning 15k/yr from savings accounts earning 2.5% moving to Italy would mean their income taxes would be almost 20 times higher than in the US.


----------

