Foreign pensions and 1 euro houses in Italy

Foreign pensions received by residents in Italy are taxable under Article 3 of the TUIR. Foreign pensions must be declared in 730 in Section I of picture C. The following article discusses this issue in more detail and explains how they work and what the criteria are for foreign pensions received by residents in Italy.

1 euro houses: benefits for retired foreign residents

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You can buy a house for one euro in Italy and see your pension increase, as the Italian state has provided tax incentives.

In fact, the Decreto Sostegni Ter, stipulates that individuals who receive pension income from foreign entities and who transfer their tax residence to Italy, benefit from an Irpef substitute tax at a rate of 7 per cent on any category of income produced abroad.

It is possible to benefit from this optional tax regime only if one has tax residence in municipalities in the south of Italy with a population not exceeding 20,000 inhabitants.

Foreign pensions received by Italian residents: how do they work?

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It is necessary to distinguish which subjects are tax residents in Italy and which are not, in order to understand the criteria underlying the taxation of income from foreign pensions.

For tax residents in Italy, the territoriality criteria for the taxation of foreign pensions paid to Italian residents are dictated by:

• 3, 23 and 49 of the TUIR: they impose the taxation in Italy of foreign pensions as income comparable to employment income;
• 18 and Article 19 of the OECD Model Convention against double taxation: sets different territoriality criteria depending on whether they are private or public pensions.

Usually, income from foreign pensions, acquired by a resident, may be subject to taxation either in the state of the source of the income or in the state of tax residence.

Criteria for establishing residence in Italy

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Article 2 TUIR recognises tax residence when, the person fulfils at least one of these requirements, for more than 183 days per year:

• registered in the resident population register;
• domicile, i.e. the vital centre of one's business and moral interests, is fixed in Italy;
• residence, i.e. the permanent abode is in Italy.

These criteria are alternative, so the fulfilment of only one criterion is sufficient to determine tax residence. In the event that individuals decide to expatriate to non-cooperative territories or are resident and emigrate to States with a privileged tax regime, they continue to be tax resident in Italy. Finally, the identification of tax residence is more streamlined for a pensioner than for those who are still working.

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To apply for a foreign pension you need to send your application to the Inps foreign pensions office or via an online portal.

Taxation of foreign pensions in Italy: what you need to know

Article 3 of the Consolidated Income Tax Act (TUIR) provides that foreign pensions received by Italian residents are taxable. In addition to the domestic provisions, there are also bilateral double taxation conventions.

Foreign private and public pensions: the criteria for identifying them

It is necessary to understand whether the foreign pension obtained is private or public. When it is private, it means that the pensions are taxable only in the country of residence of the beneficiary and are pensions paid by institutions, institutes and social security bodies of foreign countries.

Conversely, if the pension is public, it means that the pensions are only taxable in the country from which they originate and are pensions paid by a state or local authority.

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The way foreign pensions are taxed may be public or private, but the rules may depend on the double taxation treaties concluded with foreign countries, the main ones being:

Country	Taxation of public pensions	Taxation of private pensions
Argentina, United Kingdom, Spain, United States, Venezuela	Taxation only in Italy if the taxpayer has Italian nationality.	Taxation only in Italy.
Belgium, Germany	Taxation only in Italy if the taxpayer has Italian nationality.	Taxation only in Italy.
France	Taxed only in France. If the taxpayer has Italian nationality and not French, they are only taxed in Italy.	Taxation only in Italy, but there may be exceptions.
Australia	Taxed only in Italy	Taxation only in Italy.
Canada	They are only taxable in Italy if the amount does not exceed 12,000 Canadian dollars or the equivalent in euros. If the limit is exceeded, the pensions are taxable in both Italy and Canada.	Taxable only in Italy if the amount does not exceed 12,000 Canadian dollars or the equivalent in euros. If the limit is exceeded, the pensions are taxable in both Italy and Canada.
Switzerland	They are only taxed in Switzerland if the taxpayer has Swiss nationality.	Taxed only in Italy.

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Which foreign pensions do not have to be declared in Italy?

Pensions that do not have to be declared in Italy because they are subject to withholding tax at source concern Swiss Old Age and Survivors' Insurance.

However, in the event of an undeclared foreign pension there are penalties, usually administrative sanctions ranging from 120% to 240% of the tax due and not paid.

Pensions in Italy FAQs

• Which foreign pensions have to be declared in Italy? Generally, all foreign pensions received by Italian residents, regardless of their public or private nature, or origin, must be declared and taxed;
• How is a foreign pension taxed in Italy? Income from foreign pensions received by a resident may be taxed both in the State of the source of the income and in the State of residence;
• What happens if the foreign pension is not declared? If a foreign pension that should have been registered is not declared, there is an administrative penalty ranging from 120% to 240% of the tax due and not paid.