Here are some questions and answers from the American tax attorney in Rome that I have corresponding with. I thought this might be of use to others.
1. Will we be liable for income taxes for 2017 in Italy from September 2017 through December 2017? If so, when do taxes need to be paid by and the return sent?
"You will be subject to Italian taxation on your Italian-sourced income, regardless of when it was earned. The first tax payment is due by June 30th of the following year and the return by September 30th. "
Thanks so much for getting back to me. I would just like to clarify, if we do not work in Italy during 2017 and maintain all of our investments in the US, we will not be subject to Italian income tax and thus will not need to file Italian taxes for 2017. Is this correct? We would have no Italian sourced income. We will just have a small bank account in Italy.
"It is correct that you would have no Italian filing obligation for 2017 if you are not resident. As U.S. citizens, you would always have to file a resident return."
We will become residents in Italy shortly after we arrive in September 2017. We will be registering in the comune right away so we can get health insurance and buy a car. I know we will always have to file a US tax return but am now confused on whether or not we will need to file Italian tax return for 2017, assuming we have no Italian sourced income? Sorry to have so many questions. I just want to understand our situation as clearly as possible and make no mistakes.
"Italian law does not allow for tax residency for part of the year so in 2017 you will be non-resident for the entire year. Therefore, if you have no Italian-sourced income in 2017, you won’t owe any Italian taxes nor will you have to file a return."
2. Is the wealth tax on our existing IRA’s? Someone from a forum I am on said that he has been told by several commercialistas that they are not subject to the wealth tax.
"No, there is no wealth tax due on the IRAs."
3. Are assets in a revocable trust subject to the wealth tax?
"This would require a specific research."
4. As dual citizens, whom do we pay for our dividend/interest and eventual IRA income? Italy first and then get credited on our US tax return or the other way round?
"Likely both countries with a foreign tax credit."
5. Are social security payments taxed in Italy only, versus the US, once we draw them?
"Under the terms of the treaty, social security is taxed only in Italy."
6. If our house hasn’t sold before we move over, can we claim the property taxes against any type of Italian ones? They are about $8400 per year.
"You can claim real estate taxes against the wealth tax."
6. After 2017, even if we still own our house, do we change residency status with the State of VT in order not to pay any further taxes there?
"This would require research. I am not familiar with VT law so it might be better for you to contact someone locally."
7. We would also like to maintain our driver’s licenses in the US as well as our US accounts. We are thinking of using our daughter’s address. She currently lives in MA. Would having a driver’s license subject us to that State’s income taxes?
"This would require research. I am not familiar with MA law so it might be better for you to contact someone locally."
8. Our US will is currently for the State of VT. As the bulk of our money will reside in the US, I would assume that we would just have our will in the States. I don’t know, though, how this works once you don’t have a US address, unless we use our daughter’s, if that is possible? I spoke with a notaio in Boston, who recommended not having an Italian will. She thought it would just complicate things and that we would have our house in our US will. She said that the Italian law would follow inheritance protocol.
"You would need to speak with an estate lawyer with international experience. I know someone in Rome who does this if you would like a referral."
1. Will we be liable for income taxes for 2017 in Italy from September 2017 through December 2017? If so, when do taxes need to be paid by and the return sent?
"You will be subject to Italian taxation on your Italian-sourced income, regardless of when it was earned. The first tax payment is due by June 30th of the following year and the return by September 30th. "
Thanks so much for getting back to me. I would just like to clarify, if we do not work in Italy during 2017 and maintain all of our investments in the US, we will not be subject to Italian income tax and thus will not need to file Italian taxes for 2017. Is this correct? We would have no Italian sourced income. We will just have a small bank account in Italy.
"It is correct that you would have no Italian filing obligation for 2017 if you are not resident. As U.S. citizens, you would always have to file a resident return."
We will become residents in Italy shortly after we arrive in September 2017. We will be registering in the comune right away so we can get health insurance and buy a car. I know we will always have to file a US tax return but am now confused on whether or not we will need to file Italian tax return for 2017, assuming we have no Italian sourced income? Sorry to have so many questions. I just want to understand our situation as clearly as possible and make no mistakes.
"Italian law does not allow for tax residency for part of the year so in 2017 you will be non-resident for the entire year. Therefore, if you have no Italian-sourced income in 2017, you won’t owe any Italian taxes nor will you have to file a return."
2. Is the wealth tax on our existing IRA’s? Someone from a forum I am on said that he has been told by several commercialistas that they are not subject to the wealth tax.
"No, there is no wealth tax due on the IRAs."
3. Are assets in a revocable trust subject to the wealth tax?
"This would require a specific research."
4. As dual citizens, whom do we pay for our dividend/interest and eventual IRA income? Italy first and then get credited on our US tax return or the other way round?
"Likely both countries with a foreign tax credit."
5. Are social security payments taxed in Italy only, versus the US, once we draw them?
"Under the terms of the treaty, social security is taxed only in Italy."
6. If our house hasn’t sold before we move over, can we claim the property taxes against any type of Italian ones? They are about $8400 per year.
"You can claim real estate taxes against the wealth tax."
6. After 2017, even if we still own our house, do we change residency status with the State of VT in order not to pay any further taxes there?
"This would require research. I am not familiar with VT law so it might be better for you to contact someone locally."
7. We would also like to maintain our driver’s licenses in the US as well as our US accounts. We are thinking of using our daughter’s address. She currently lives in MA. Would having a driver’s license subject us to that State’s income taxes?
"This would require research. I am not familiar with MA law so it might be better for you to contact someone locally."
8. Our US will is currently for the State of VT. As the bulk of our money will reside in the US, I would assume that we would just have our will in the States. I don’t know, though, how this works once you don’t have a US address, unless we use our daughter’s, if that is possible? I spoke with a notaio in Boston, who recommended not having an Italian will. She thought it would just complicate things and that we would have our house in our US will. She said that the Italian law would follow inheritance protocol.
"You would need to speak with an estate lawyer with international experience. I know someone in Rome who does this if you would like a referral."
