# Tax/Residency Telecommuting



## Muenchkin

Ciao!

I have some questions about obtaining residency and paying taxes in Italy (or France or Spain).

First, I'm an American citizen who's been working in Germany for 6 years. If my firm agrees, I'm considering moving to Italy (or France or Spain).and keeping my German job by telecommuting.

I assume that obtaining Italian residency would not be too difficult as long I have a steady income, but if anyone thinks there would be any problems, please let me know.

The main questions are about taxation. If I were to keep my German job, would I still pay income tax to Germany instead of Italy? Also, would I be able to keep my German health insurance and pension payments, or would I have to switch everything over to Italy and pay there instead? My firm has no presence in Italy.

I should note that, as far as I'm concerned, keeping all taxation (income/health/pension) as the status quo in Germany is my preference, mainly because it would be easier to convince my firm to cooperate if it didn't complicate their accounting and paperwork. Or has anyone done this and found that the accounting/paperwork is not a problem?

Grazie mille!

David


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## Muenchkin

BBCWatcher said:


> I think you've got problems with that part of the plan unless you've got an EC Long Term Residence Permit or unless you naturalize as a German citizen. You are eligible for the former since you have 5 years of legal continuous residence in Germany, so get one now. You may be eligible for the latter, though you might want to consider staying on in Germany for one or two more years to obtain German citizenship if you cannot apply now. (Germany requires 6 to 8 years depending on your level of "integration.")
> 
> Italy is definitely going to consider you tax resident if you live there. What you may want to consider in the alternative are extended working vacations in Italy (but limited if according to German citizenship requirements if you're working toward that). If you keep your base in Germany but, for example, take two working vacations in Italy per year of up to 90 days each, that should hit all the marks with the possible exception of time in Germany for German citizenship purposes.


Hey Watcher,

Thanks for the reply. I would need to pass the German language test for the long-term residency permit, which I'm prepared to do within a reasonable amount of time. One of the major reasons for leaving Germany, though, is that I was originally prepared to give up my US citizenship, until my father got sick. He's doing fine now, but this made me worry about not having my US citizenship in case I ever need an extended stay there. Germany will not allow dual citizenship. Italy will. That's a big advantage of living in Italy, even if it takes 10 years. But that would require actual residency in Italy, not extended vacations.

Again, I'm not as concerned about working out residency in one place or another. I'm more concerned about any tax complications of telecommuting from one country to another for my firm (I'm don't care if it's complicated for me - I can get an accountant), as this might sway any decision they'd make to allow this to happen.

Thanks again!
David


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## Muenchkin

BBCWatcher said:


> I'd do it as quickly as you can. Without that EC Long Term Residence Permit it'll probably be rather difficult to relocate to Italy or to other European countries. (The U.K., Ireland, and Denmark do not accept EC LTRPs, so skip those.)
> 
> 
> That is correct. Italy will want 10 years of continuous legal residence (3 if you have documentation of a parent or grandparent who could have been recognized as an Italian citizen at birth -- check the family tree) in order to naturalize as an Italian citizen, excusing up to 10 months' total absence from Italy of which up to 6 months can be one trip.
> 
> Some other European citizenships are available with shorter terms of residence. France requires 5 years, for example. Spain is even less if you have particular types of family ancestry.
> 
> 
> Well, in the case of Italy you'd definitely be tax resident if you move there. It'll get complicated, yes: you'll have three countries involved. I think the way it works is that your German source income will get taxed in Germany, so you'll file there. Your worldwide income and wealth will be taxed in Italy (where you'll also file), but you'll be able to deduct your German tax. Note that Italy has a small wealth tax for real estate and for financial assets held outside Italy. Don't forget to file Italy's financial account disclosure form, too (called Form RW) -- miss that and you're in a world of hurt.
> 
> If that's not enough yet, since you're a U.S. citizen you'll have U.S. tax-related filings ("1040" and FBAR), but you probably won't end up owing U.S. tax thanks to the Foreign Earned Income Exclusion (FEIE) -- though run the numbers with the Foreign Tax Credit (FTC) also to see if you do better. You very well might since Germany/Italy are fairly high tax countries. If running the U.S. calculations with both the FEIE and FTC (only) results in the same zero U.S. tax owed, you then should look to see whether the FEIE path or the FTC path results in more excess FTCs. Excess FTCs can be applied to past and future U.S. tax years (with time limits), so those are nice to accumulate in greater quantities.
> 
> I'm not sure what the arrangement is between Italy and Germany for national insurance (Social Security) and how that works, but you'll be in one or the other (not both). You probably won't be in the U.S. Social Security system. (If you aren't now, it's extremely unlikely moving to Italy and keeping the same employer would change that.) The Italian Social Security system is pretty expensive relative to benefits, so my guess is the German system will be better if you have a choice, especially since you may already have some years in that system. I believe the U.S. and Germany have a Social Security treaty -- I know the U.S. and Italy do -- so if you need to count contribution credits in one country to qualify for benefits in another, you can. (Sometimes that happens when you're jumping around from place to place. The U.S. requires 10 years of contributions at a minimum level to qualify for Social Security retirement benefits, but if you don't have that you can count contributions in any treaty country in order to qualify, and vice versa.)
> 
> EC Long Term Residence Permit holders resident in Italy are typically allowed to enroll in the Italian public health system without cost, but you might have a hurdle if your employer is in Germany. If you're in Germany's system get an EHIC (European Health Insurance Card) before you move to get some basic coverage in the Italian public system for at least some period of time.
> 
> Hope that helps.


Watcher,

I'm a typical American mutt, but unfortunately, all of the old kennels were located in Northern Europe and more than one generation away. I've looked into the ancestry claims in many countries, and Lithuania is the only one that could have possibly worked, but I ran into impossible task of locating birth records, and I was back to the issue of dual residency not being allowed.

Generally, I assume that the US tax system is out of the equation, except for filing. My worldwide income is below the taxable threshold in the US, and with the tax treaties, I'm not taxed twice in Germany and wouldn't be in Italy, France, Spain or Portugal, either.

Again, the feasibility comes down to complexity. I have not doubt it's all possible in theory, but most employers will not be willing to make a substantial effort if they can avoid it.

Thanks again!
David


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