# Residenza electiva v. 183 day tax rule



## bmac355 (Jul 15, 2016)

Hi - As a retiree with 'only' social security and a NJ/US pension, I'm trying to figure out how to stay for 180 days and to avoid paying income tax in Italy. For the tax question, it seems like I would be subject to high Italian rates were I to stay 183+ days. I couldn't afford those rates, so:

1. How do I stay up to 180 days?
2. If by Residenza Electiva, does that permit make me subject to Italian taxes even though I would stay less than 183 days?

Thanks so much.

Bob H


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## rsetzer99 (Feb 20, 2014)

Stay for 90 days on tourist visa, go back to US for 90, lather, rinse, repeat. If you go through all the trouble of an ER visa, and then end up having you permesso expire while on a tax avoidance sojurn in the US, you may find yourself locked out.


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## Bevdeforges (Nov 16, 2007)

Just a further detail - in order to avoid US taxes on your US social security, you must be both resident in Italy AND an Italian national. I don't know how or if Italy would tax your SS benefits if you only are merely resident there - but apparently the US would be looking for their share, too. (Check the US-Italy tax treaty just to be sure.)


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## NickZ (Jun 26, 2009)

The US consulate in Rome used to and still might have a chart showing how the tax and reporting differs between US citizen,Italian citizen and dual on their website. I'm not sure if it's the tax treaty or the social security treaty that provides the exemption. For Canadians it's the social security treaty that provides relief up to 10K on withholdings.

Having residence isn't something you give up by leaving the country. You actually have to go to the trouble of revoking it. You'd actually have to give up your ties. In other words get rid of your home,car and even furniture. 

When I travel outside of the country I'm still resident here. That means the days towards 183 are still churning. 

But unless you're willing to give up all ties the centre of life test can get you.


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## PauloPievese (Nov 2, 2012)

Well, nobody has referenced this but I think it's still true (if it ever was). My understanding is that Italy and the U.S. have a treaty whereby neither taxes the other's retirement benefits. I summarized my findings here:
https://www.expatforum.com/expats/i...425482-italian-income-taxes-u-s-retirees.html

Keep in mind this you're reading this on the Internet which, as Abraham Lincoln noted, may tend to be unreliable.
:flypig:


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## rsetzer99 (Feb 20, 2014)

While Article 18 does indeed say that Social Security is taxed only in the country of residence, the pesky Savings Clause overrides this. This clause basically says...We don't care what the treaty language is, we reserve the right to tax whatever we darn well please......So if you are an American full time resident, and do not hold a Italian passport as well, then your Social Security is first reported on your Italian Tax return and then you take a credit for tax paid to Italy on your US return. You will end up paying more to Italy even without taking the higher rates into consideration as you may recall that on your US return some, or even all in some cases, of your Social Security is exempt from tax. This is not the case in Italy. So, for all practical purposes, your Social Security is in practice just taxed by Italy, but you may end up paying a fat fee having a US return prepared for you to state a zero liability. 

There is pretty much universal agreement that the treaties need updating as they are silent on most of the modern individual retirement products and the default fallback ends up being, tax it all. However this author feels that the chance of that happening in our lifetimes is akin to snowballs chance in hell.


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## NickZ (Jun 26, 2009)

The treaty was updated I guess 15 years ago. The US senate never got around to voting on the update so it lapsed. But updating the treaty isn't a huge issue. I think the UK one has been updated and some of the other ones. Getting the US senate to come off vacation and vote? I can't promise that.


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## Bevdeforges (Nov 16, 2007)

However, from IRS Publication 915:



> U.S. citizens residing abroad.
> U.S. citizens who are residents of the following countries are exempt from U.S. tax on their benefits.
> 
> Canada.
> ...


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## PauloPievese (Nov 2, 2012)

*Caspita!*



PauloPievese said:


> My understanding is that Italy and the U.S. have a treaty whereby neither taxes the other's retirement benefits


So, I'm now in the position of having two accountants specializing in expat tax issues agree vice the opinions I'm getting here on the Internet. I think that the correct thing to do is to not pay the tax and, if this becomes problematic, flee to Argentina.
:flypig:


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## tomandmaje (Sep 26, 2019)

bmac355 said:


> Hi - As a retiree with 'only' social security and a NJ/US pension, I'm trying to figure out how to stay for 180 days and to avoid paying income tax in Italy. For the tax question, it seems like I would be subject to high Italian rates were I to stay 183+ days. I couldn't afford those rates, so:
> 
> 1. How do I stay up to 180 days?
> 2. If by Residenza Electiva, does that permit make me subject to Italian taxes even though I would stay less than 183 days?
> ...


The quick answer is no because of a treaty, but I think you already received the answer. We're Army, so I looked into the matter. 

Maje


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