To Be or Not To Be: The Residency Conundrum

When you look at the taxes on a property purchase, you immediately notice that a big variable is your residency status. If you are an Italian resident (and it’s your “first home”, apparently meaning you have no others nearby), you are taxed at significantly reduced rates on purchase and construction costs. (I estimated we might be talking about €30,000 in our case.)

(I don’t have an official source on this, but for these purposes it seems that “are an Italian resident” means you intend to become one within 18 months. But it gets murkier, because, as I explain below, you can’t get “permanent residency status” in less than 5 years.)

flag_of_the_united_states_and_italySo, what can we and should we do? Become residents or not?

For now, let’s assume that we can. I’ve read a number of places that it can be done, with some saying, “it’s easy.” That I don’t believe, but it would be easier if Anne or I had a parent or grandparent who was an Italian citizen. I’m not finding it in the family tree.

Should We Become Elective Residents?

On the “should” questions, there are financial, practical, and emotional pluses and minuses to weigh.

I mentioned the purchase/construction tax benefit. Unknown is the impact on our income taxes. Will our total taxes, US and Italy, go up? I’m in touch with a couple of accountants, one here and one in Italy, who I hope can sort this out. If the income tax burden is higher, the residency question may resolve itself.

A big plus to being a resident is eligibility for the Italian health system. This would eliminate our need for health insurance while in Italy. From what I’ve read, the level of care in Italy is high. From my experience last year when I had to replace stolen medications, I’d agree. And I also learned that medications are dramatically cheaper.

One thing you can’t do in Italy as a non-resident is buy a car. Go figure. You can buy a house but not a car. That might be fine if we’re not there full time. I just looked at AutoEurope and they offer longer term rentals and the rates aren’t outrageous. Three months, starting this September as an example, is about $2000-$2200 for the smaller car that we’d want. (I will need to look into car insurance for an extended rental.)

Emotionally? We’re Americans. We love Italy, but what does it really mean to be a “resident of Italy”?

Can We?

Well, it’s not clear from what I can find online. Some of the confusion is caused by terminology.

I’m going to cite the official site poliziadistato.it which I have in sight right now. (Sorry. Couldn’t resist. Sigh) I’m using the English version of their site, which I’m sure is only “partially official”.

To stay more than 90 days, a non-European Union citizen needs to have a “residency permit.” (Is that 90 days in one trip or per year? Not sure.)

To get this permit, in addition to some paperwork and fees, you need a visa. This visa can only be issued outside of Italy. You need to go to the Italian embassy or a consulate in your home country to get it. (If you’re already in Italy and want to stay past 90 days, sorry. Leave, get the visa, come back.)

You can get the visa and permit for up to 2 years, if you are “self-employed.” (Does my online teaching count? How about teaching Italians English for very low rates?)

To get “permanent resident status”, you need to be “continuously resident for 5 years.” What does “resident” in this context mean? Have the “residency permit” continuously for 5 years? Be living in Italy for 5 years? And what about “continuous”? No trips out of Italy? Being there more than half the year?)

At minimum we’ll need to a trip downtown to the Italian Consulate in Chicago. More likely, we’ll need an Italian legal specialist.

I’ll keep you posted.

Image source: By Flag_of_United_States.svg: Dbenbenn, Zscout370, Jacobolus, Indolences, Technion. Flag_of_Italy.svg: see below derivative work: AwOc (Flag_of_United_States.svg Flag_of_Italy.svg) [GFDL (http://www.gnu.org/copyleft/fdl.html) or CC-BY-SA-3.0 (http://creativecommons.org/licenses/by-sa/3.0/)], via Wikimedia Commons

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